Cattle markets started the week with an abrupt downturn in the April live cattle contract, losing $2.50 on Tuesday to settle at $126.65. Severe winter weather covered a large part of the Northern and Central Plains cattle feeding country, causing a near shutdown in cattle trade. Normally this kind of weather would add a buck or two to the cash fed market, but the opposite occurred as cattle feeders started trading Wednesday at a dollar lower than the prior week $127 live and $202 dressed. Winter weather has frustrated cattle producers for the last two months with excessive mud and low cattle performance.
At press time, USDA Mandatory Market Reporting posted 67,792 head sold on the cash market averaging $126.88 live and $203.85 dressed.
The market trend is still bullish for fed cattle, however many market analysts are claiming that there isn’t much top side left in the winter fed market. Packers are watching their production levels closely to maintain a positive cutout value. Choice traded at $227.70 last Thursday and Select was $218.76. Slaughter volumes have been around the 610,000 range the past few weeks and could end up much lower last week, allowing packers to maintain strong margins, currently around $105 per head.
Cassie Fish at Consolidated Beef Producers pointed out that “some traders are convinced this severe weather will catapult cash cattle prices to new highs yet this spring. They view today’s futures action as bullish. It is accurate that the tough weather will likely push cattle back, though that could also be viewed as bearish, since fed cattle supplies balloon in May going forward through the summer.
“Thus far, the packer has made his point that bad winter weather does not translate to sharply higher cash cattle prices as it has done in years past. That in itself is sobering. The packer is content to maintain inventory, buying both cattle with time and time itself, until the ample supply will make it easy to pressure cattle prices sharply lower.”
Andy Gottschalk at HedgersEdge said that “product values struggle to grind higher, which may be the beginning of the end to the current advance, while falling short of our objective at $233. Seasonally weak demand during March may be extended, given a late Easter this year. Cutout values have been supported by reduced production, not by improved beef demand. The recent collapse in futures has allowed an ‘oversold’ condition to develop. This may lead to a short-term rebound, which is likely to encounter stepped-up selling.”
Gottschalk is also seeing signs of a stronger summer market, referring to the Cattle on Feed report released last Friday. His estimates for the March 1 COF were: 99 percent on feed from same period a year ago, placements down 8 percent and marketings at 1.3 percent higher than a year ago.” This report should show the first year-over-year decline in total cattle on feed numbers since December 2016. It is also projected to show a decline in front-end fed cattle supplies by Aug. 1.
The late summer and fall price outlook is becoming increasingly positive, provided orderly marketings are maintained.
Feeder cattle markets were mixed. Northern auction markets were calling the market $3-5 higher on lower offerings and moderately good demand. With the weather being a factor, many buyers turned to the internet auction feature that most country markets offer.
There is strong demand for the flyweight steer calves, under 500 pounds going to grass. It’s been a tough winter but there should be good ground moisture for spring grass and grass fever always lights up the calf market. There should be good demand for feeder cattle and calves soon.
March feeder cattle futures reflect the lowest of the contracts going forward at $141.10. All the summer contracts for feeder cattle are over $150. March is just a bad time to place feeder cattle against the summer fed market, but with the outlook improving for summer fed cattle we may see a little less pressure on feeder cattle going forward.
Benchmark feeder steers weighing 750 pounds were in a tight trading range throughout the country. Ogallala, NE reported benchmark steers at $149.77, $3-5 higher than the previous week. Colorado markets reported benchmark steers at $146.79. Joplin, MO reported 8,645 head sold with benchmark steers trading at $143.57. The CME feeder cattle index was at $139.08, slightly down from a week earlier.
Gottschalk points out that “Feeder cattle receipts last week were estimated at 304,300 versus 282,200 the prior week and 339,800 a year ago. Steers and heifers traded mostly steady to $5/cwt higher. Competition will be intense this spring, as grass demand competes with feedlot demand. Expect firm steady prices this week. North Central region 700-800-pound feeder steers traded at $146.62, up from $145.75 the previous week and down from $153.81 a year ago.
The South-Central region posted 700-800-pound feeder steers averaging $142.46, up from $140.67 the prior week and down from $147.63 a year ago. Adverse feeding conditions continue to limit feedlot placements to date during March. Managed money reduced their net short position in feeders to 2,222 contracts, down 526 from the prior week.” — Pete Crow, WLJ publisher
