Last week saw the cash fed cattle market buck the recent trend. Instead of waiting until the last minute on Friday to trade cattle, a considerable bulk of last week’s trade occurred on Wednesday, with roughly 60,000 head sold on that day alone.
“It is a strange week,” said Andrew Gottschalk of Hedgers Edge, speaking about the early-week trade. Prices on Wednesday ranged from $105-106 (average $105.99) live and $168-170 ($169.16) dressed.
“Any trade the balance of this week will be challenged to hold yesterday’s trading range,” he continued on Thursday morning. The trade on Thursday did indeed hold onto Wednesday’s prices, but just barely. Roughly 12,000 head more negotiated cash fed cattle sold Thursday at an average of $105.97 live and $169.18 dressed.
“A shorter production schedule this week and a holiday-shortened production schedule next week may set the stage for packers to be a bit short of inventory when post July-4th full weekly production schedules are resumed. There is a historical pattern for some packers to misstep during the aforementioned production schedule. Any price reprieve from such a condition would be short-lived, followed by a fairly rapid decline in fed cattle and product values. A rapid price break (a flush) is not uncommon during the ‘dog-days’ of summer.”
The near-term live cattle futures struggled last week with a near-limit down day on Monday. The board never quite recovered the lost ground, but it made a decent effort of trying. By close of trade on Thursday, the June contract settled at $108.20, a net loss of 7 cents over the course of the week. The August contract was not so successful, settling at $103.72, a net loss of $2.18 from the June 22 settlement.
“Futures, which sold off sharply in March in anticipation of the [fed cattle] supply bulge, are having to look harder for new bearish news,” said Cassie Fish of the Beef Report on Thursday.
“Instead, the futures market is playing the game of time versus price as the physical side of the market searches for its seasonal low.
“The distribution of fed cattle supply in 2018 is quite different than in the past three years and reminiscent of a more normal pattern historically, with supply peaking in June, tapering off a little in July then declining through the remainder of the year. Of course, that assumes slaughter will continue at an adequate pace, and given excellent demand and record profits for packers and retailers, there is no reason to expect otherwise.”
The June live cattle contract’s final settlement happened on June 29, making the October live cattle contract the new on-deck contract. It settled at $107.02 on Thursday, down over $2 from its June 22 settlement.
The beef prices continued to leak lower last week, with the Choice cutout having lost about $4 over the course of the week by Thursday’s close at $213.24. The Select cutout was also down about $1.50 at $200.66.
“Carcass weight data released today had steer weights up 5 pounds from the prior week, 1 pound above a year ago and 4 pounds below the five-year average, indicating the industry is current while marketing through the large supplies,” Fish reported.
“I suspect the cash beef market will continue to work lower past the 4th of July as spot demand softens going into the July/August timeframe,” commented Troy Vetterkind of Vetterkind Cattle Brokerage. Estimates have placed the next level of support at $210 Choice.
The feeder cattle markets were mixed last week with most auctions seeing more cattle trade than in recent weeks. Prices were mixed across feeder cattle classes, but medium and large #1 steers weighing between 700-800 lbs. were generally steady with or up from last week’s prices.
California: Everything was lower at the Cattlemen’s Livestock Market in Galt. Light feeder cattle were called down $2-4 while those over 600 lbs. were called down $5. Benchmark steers sold for $130-145.
Kansas: The Winter Livestock Auction sold almost twice the volume of cattle last week compared to the week before. Prices were steady to up $3 on both feeder steers and heifers where comparable sales existed. There were too few calf sales for a market trend, but a firmer undertone was noted. Number 1, 7-weight steers sold between $144.75-154.
Montana: The Public Auction Yards sold almost four times the volume of cattle last week as it did during the prior sale. As such, there were too few comparable sales for a market test, but undertones were said to be firm. Demand was called moderate to good and quality of the offering was called average to attractive. There were no #1, 7-weight steers, but an eight-head lot of #1, 809-lb. yearlings averaged $139 and a load-lot of #1, 633-lb. calves averaged $157.25.
Nebraska: The Bassett Livestock Auction Market similarly had nothing recent with which to compare last week’s prices. Demand was called good. Prices on benchmark steers ranged from $158-177.50.
New Mexico: Volumes were up slightly at the Clovis Livestock Auction but prices were down. Feeders under 600 lbs. were down $4-6. Heavier feeders were down even more with discounts ranging from $10-13. The exception was 6-weights, which were only down $3. Three small lots of #1, 7-weight steers sold between $130-138.
Oklahoma: The OKC West-El Reno sale sold over 10,500 head of feeders last week. Steers were mostly steady with firmer undertones for heavier steers while heifers were down $3-5. Calves were down $2-4. Number 1, 7-weight steers sold between $138-150 with calves setting the base.
South Dakota: The Hub City Livestock Auction saw steady sales volumes last week compared to the week before. The best test was on 9-weight steers, which were down $1-4. Despite this, there was good demand. Two lots of benchmark steers sold; the 22-head lot of #1, 790-lb. steers averaged $136.98 while the 132-head lot of #1, 727-lb. steers averaged $158.62.
Wyoming: Compared to two weeks prior, the Riverton Livestock Auction had too few feeder cattle sales for an accurate market trend, but demand was called moderate to good. The only lot of #1 steers sold was a 30-head lot of 683-lb. yearlings. They averaged $153.34.
Like live cattle futures, the near-term feeder cattle contracts did not recover from the near limit-down losses on June 25. Across the week, the August feeder contract lost about $2.50 with $146.82 and the September contract, at $147.37 on Thursday, lost a net $2.45.
John Harrington, livestock analyst at DTN, acknowledged the $1 gains made during Thursday’s trade last week. However, he added that “there’s little here to suggest that the market is set to break out of a lateral trading range anytime soon.” — Kerry Halladay, WLJ editor