You should get your holiday prime rib bought soon because they are going higher. Boxed beef markets seem to have found a new floor at $280, which is about $50 higher than last year. Markets are responding to shorter supplies of fed cattle coming to slaughter.
Packers have also picked up kill levels, preparing to fill holiday orders. Fed cattle markets were about $2 higher in the five-state feeding region. This last Cattle on Feed report was considered bullish by most observers. Futures markets turned higher on the news, but cautiously.
Negotiated fed cattle trade started early last week; by Thursday morning, 95,685 head were traded, with a range of $125-128 for live steers and a weighted average of $199.90 for dressed steers. Packers are needing more cattle. Slaughter levels are pushing 660,000 head at this point in time. Packer margins are still in record territory for this time of year.
Feeder cattle markets also turned higher; auction markets were reporting yearling steers $3-5 higher and weaned calves close to $4-7 higher. I emphasize weaned calves with shots because bawling calves will get hit hard, perhaps to the tune of $15/cwt. I know it takes time and money to wean your calves properly, but leaving $75 per head on the table is also costly. Healthy feeder cattle are in high demand.
Trucking has been a problem and may be costing the market to some degree. The big calf runs are in full swing. Many northcentral markets are offering between 5,000-8,000 head a week, and buyers have no trucks to get them out of the markets’ pens. Weaned light calves are in good demand, but if you can’t transport them, you can’t buy them. Have your trucks lined out before purchase.
The Cattle on Feed report shows we have 2.5 percent fewer fed cattle in feedlots than last year. Last year we had a record number of cattle on feed, so we still have plenty of fed cattle. September placements of feeder cattle were also down 3 percent from last year. Marketings were a disappointment: also down 3 percent with the same number of marketing days. Packer slowdowns due to labor and maintenance issues played a role.
As a result of not producing enough beef, average beef prices set a new retail record of $7.87 per pound for Choice beef in September. Ironically, ribs are leading the cutout value at $472.87, which was $20 higher than a week ago. Beef in cold storage was also down 6 percent from last September. Beef exports were another high spot, setting new records for volume and price. Consumer demand has been great and shows little sign of slowing down.
We all know the national herd is shrinking—there are more heifers in feedlots, and cow slaughter is running 7,000 head a week higher than a year ago. According to Hedgersedge.com, 34 percent of the cattle inventory is in regions that are reporting varying degrees of drought. The next calf crop will be much smaller.
The feeder cattle futures markets are having a hard time getting above $160, which appears to be the current resistance level. Corn values have been climbing this past week to around $5.50 a bushel. We should have a good handle on the total size of the corn crop in a month or so; it will still be a record or close to record crop. So far, feed costs have not been a real barrier to advancing feeder calf prices. Analysts are claiming that over the next three years, cow-calf producers will have the leverage to push the market higher.
Our friends on the West Coast finally received moisture. Unfortunately, they received about one-third of their annual moisture in 24 hours. This kind of rain extinguished any remaining wildfires but also created mud and rock slides off burnt areas. I’m sure most aggies in the West are pleased to get any kind of moisture at this point.
We’ve heard reports of 4 to 10 inches of rain falling in 24 hours, and up to 30 inches of wet snow fell in the mountains. California is just starting its grass season, and this kind of rain should have stocker operators excited about the prospects for a good native grass season. Markets in that area are reporting better demand for light calves. I suppose we’ll keep on praying for rain—it seems to be working so far. — PETE CROW
