Last week saw the markets holding their breath for something that didn’t come. At least by close of trade Thursday, anyway.
Not even 3,300 head of negotiated cash fed cattle had been confirmed sold by Thursday last week. Prices were $116 live on steers on Wednesday, and $112.31 live for heifers and $180 dressed for steers on Thursday.
The volume was insufficient for an accurate market trend, but it was in keeping with analysts’ earlier predictions of $2-3 higher than the prior week’s averages of $110.64 and $177.76 dressed.
Still, Cassie Fish of the Beef Report said many wanted to “see it to believe it.”
“Widespread bids at steady with last week have been noted,” she said on Thursday afternoon.
“Still, it all boils down to math. Slaughter schedules are set, beef has been sold and shipments are being made, all at the highest level in seven years. To keep the machine running, cattle are a requirement, regardless of the fact that supplies are large. In fact, it is partly because supplies are large that is incentivizing retailers and packers to leverage that volume to pile up profits.”
As of last week, packer margin estimates stood in the low $290s per head, according to Hedgers Edge. This was in spite of slight cutout declines last week. Choice barely lost a dollar over the course of the week to close at $226.41, and Select closed at $203.41, down a net $1.39 for the week.
Analyst optimism on what the cash market might do also came from a lot of good performance in the near-term futures. Over the course of the week, the June live contract gained about $3.50 to settle at $108.37 on Thursday. The August contract gained a net 53 cents for the week with a settlement of $104.15.
Troy Vetterkind, of Vetterkind Cattle Brokerage, also observed that fundamentals with packers and beef orders suggested a stronger cash cattle market would develop.
“After the last two weeks of light negotiated cash cattle trade, packers need to replenish inventory that they are going to need to cover a large forward sold beef position and export orders,” he said Thursday morning.
“Granted they have ample supplies of committed cattle they can and have been calling on, but they also need negotiated supplies to fill ramped up slaughter schedules of 650,000 head-plus per week for the next several weeks. While spot boxed beef sales have been a little sluggish post-Memorial Day, out-front beef business and export business is huge.”
The CME Daily Livestock Report quantified “huge” as 10 percent more beef exported in April (most recent complete data) at 23 percent more money than the same time last year.
Feeder cattle
Demand and prices for feeder cattle was improved across the surveyed auctions last week, in some cases, by a lot. Averages on medium and large #1-framed steers weighing between 700-800 lbs. remained in the upper-$140s to lower-$150s. Volumes and demand markers were generally up.
Kansas: The Winter Livestock Auction of Dodge City sold mid- to heavyweight feeders up $2-4 on a light test. Calves were called steady to weak. A total of nine head of benchmark yearling steers sold between $141-150.
Missouri: The Joplin Regional Stockyards sold over 10,500 head last week. Yearling feeders were steady to up $3 while calves were steady to up $5. Number 1, 7-weight steers ranged from $136-150 with calves setting the low end of the range.
New Mexico: Feeder steers were called mostly steady at the Clovis Livestock Auction last week, with the exception of 3-weights, which were down $5. Heifers were steady to up $3 with the same issue on 3-weights. Seventy-three head of #1, 7-weight yearling steers sold for $141.
Oklahoma: The OKC West-El Reno sale really outdid itself last week, selling over 15,300 head of feeders. Steers were up $3-5 and heifers were up $2-4. Calves of both sexes were up $2-6. Demand was called good on the plain-to-attractive offering. Prices on benchmark steers ranged from $141-153, inclusive of calves.
South Dakota: The Hub City Livestock Auction had few comparable market tests due to having no sale the week of Memorial Day. On those heavy lots that were comparable, steers were up $8-9 and heifers were $4-9 higher. Two lots of #1, 7-weight yearling steers sold, with the 717-lb. lot bringing an average of $164.53, and the 790-lb. lot bringing $154.62.
“The August feeder cattle range appears to be $144-149 for now until the cash index catches up to the futures price, which it’s doing pretty fast,” commented Vetterkind on Thursday.
When taken over the course of the week, near-term feeder futures didn’t do much. The August contract lost a net 25 cents to settle at $146.07, and the September contract gained a net 95 cents with $147.55.
“While the gap between spot August and the cash index has been narrowing, the board still commands a 650-point premium over the index.” — Kerry Halladay, WLJ editor
