The markets were performing a slow climb back up last week after the losses of Friday, Aug. 2 and last Monday when news of more tariffs on China and Chinese responses shook U.S. financials.
Overall, the only areas of the markets that saw week-to-week losses was the October live cattle contract, which lost a net $1.08 by close of trade Thursday with $106.75. The August live contract on the other hand gained a net 30 cents after a week of back-and-forth trade.
After highlighting the strong, anti-seasonal demand for beef, Cassie Fish of the Beef Report asked, “So why do futures act so tentative?”
“The trading range that has trapped the market is still intact and the bear drum is being beaten loudly by some,” she explained last Wednesday.
“The north is where supply is tightest and that is where the majority of fed cattle plants are located. That is where the story will be told over the next 60 days. If numbers continue to tighten, the north will pull the south higher and futures will rally. But this is a ‘show me’ market, as is the case with this market in its current state.”
Cash fed cattle trade last week was slower to develop than the week before. By Thursday, just under 17,400 head had been confirmed sold for the week, despite early-week projections for a larger cattle slaughter week.
“The most important fundamental fact this summer is the big fed kill—especially in July,” Fish expounded. She recapped the most recent actual slaughter data from USDA, which showed more fed cattle were killed during the week of July 27 than previously thought at 526,000 head. Steer carcass weights, while increasing seasonally, are still five pounds lower than the same time last year.
“This data, combined with the grading data released earlier this week confirm the cattle feeding industry is very current, more so than in years heading into fall,” she continued.
“Packers are aware of this fact too, just as they are also aware the last three years they have successfully backed cash prices down while cutout values have increased in August, widening their margins. This week packers are doing their best to heighten bearish rhetoric in an attempt to back cash prices off. After all, there are those within the cattle industry that are ignoring the facts above in favor of assumptions about oncoming supply.”
Negotiated cash fed cattle prices on Thursday ranged from $114-115 (avg. $114.10) live and $180-185 ($182.60) dressed. This was steady to slightly higher compared to the negotiated cash fed cattle prices seen Friday, Aug. 2, on track with early-week predictions.
Estimated packer margins have been growing steadily as the cutouts have been. Last Thursday, per-head packer margins were estimated at $150.50, up about $12 from the prior Friday’s estimate. The cutouts meanwhile gained about $2 over the course of the week with Choice closing last Thursday at $216.88 and Select closing at $192.37.
“Product values are firming, as aggressive Labor Day beef promotions are expected,” observed Andrew Gottschalk of Hedgers Edge.
“The lead ad in Denver from Safeway (Albertson’s) is Colorado Choice Angus T-bones at $5.77/lb. and Choice bone-in strips at $6.77/lb.,” he additionally reported on Wednesday.
“Retail margins remain positive, which should keep beef promotions at a high level.”
Demand for feeder cattle was mixed last week in the reports of the few feeder auctions that reported sales. For the most part, medium and large #1 steers weighing between 700-800 lbs. were averaging in the $140s; averages did reach as high as the lower $160s.
Kansas: The Winter Livestock auction of Pratt sold less than half the number of feeder cattle last week compared with the week before at the sale’s special feeder cattle auction. There were too few comparable steers sold last week for a market trend, though it was said to have a lower undertone. Seven-weight heifers were called steady to $3 higher. Demand was called good to very good on the average to attractive offering, most of which were green cattle off of grass. One 60-head lot of benchmark yearling steers sold, averaging $142.58.
Missouri: The sales volume at the Joplin Regional Stockyards was fairly steady last week with 4,722 head of feeders sold. Calves were called $2-5 lower, except 5-weights, which were down $5-8. The heat was cited as a sidelining factor for potential calf buyers, as well as the selloff in the futures that happened the week before. Yearlings were called steady to $3 lower. Number 1, 7-weight yearling steers sold between $138-147.
Nebraska: The Bassett Livestock Auction sold less than half the volume last week as it did the week before. The limited comparable offerings made for few market trends. The best comparable sales existed on 8-weight steers trading $6 higher. Demand was called good as the cooler weather and rain in the Sandhills area spurred bidding. One 150-head lot of #1, 7-weight yearling steers averaged $161.38.
New Mexico: The feeder cattle sales volume increased at the Clovis Livestock Auction last week. Light steer calves were down $5-10 while steer calves over 500 lbs. were steady to up $1. Heifer calves were up $1-2. Two lots of benchmark yearling steers sold between $135-137.50.
Oklahoma: The National Stockyards sold more feeder cattle last week as compared to the week before. Feeders were called $1-4 lower with the exception of 9-weight steers, which were up $3. Calves were called mostly steady to up $3. The heat was cited as a selling motivator. Benchmark yearling steers sold between $139-146, while one small lot of bawling calves sold at $135.
Feeder futures were still struggling to recover from the prior week’s triple-digit losses. While the near-term contracts made some gains, they weren’t sufficient to regain what was lost. The August contract settled Thursday at $139.85 (+30 cents compared to Aug. 2’s settlement) and the September contract settled at $139.88 (+$1.65).
“Late-day buying pushed feeder cattle futures to post moderate to firm gains despite the upward movement in grain trade,” commented DTN’s Rick Kment on Thursday afternoon.
“The ability of live cattle futures to move away from the narrowly mixed prices early in the session continued to spark underlying buying interest in nearby feeder cattle contracts. The most focus is on the October contract, although the lack of premium in all nearby trade is leaving traders unwilling to aggressively roll contract months at this point.” — Kerry Halladay, WLJ editor
