Bad news can sometimes be good for markets. That was the case last week.
Deadly weather in cattle country that limited supplies—either through dead cattle, cattle that couldn’t make it to slaughter, or much lighter cattle—propped up beef prices in what is historically the worst demand month for beef. Similarly, market mania in the hog futures following news of continued and worsening African swine flu in China spilled over into the cattle futures.
Week over week, the near-term live cattle futures gained a net 80 cents for April ($129.90) and almost $2 for June with a Thursday settlement of $123.90. Not only prices were up, but market activity was also a big deal.
“How big? Try 450,431 contracts as of yesterday,” commented Cassie Fish of the Beef Report on Thursday morning.
“Though options buying has been rabid in hogs it is gaining activity in [live cattle] as well. Spec funds are most interested in Oct [live cattle] on back. The strength has reinvigorated cattle bulls who are convinced a cash cattle market rally will occur over the next few weeks to the mid-$130s. Though it will require packers to instigate the rally, the belief is that lighter carcass weights and weather-hurt cattle supplies will force the packers’ hand.”
And cattle weights were indeed lighter, and weather is definitely causing hurt in cattle country.
“Moderating temperatures will only worsen feedlot conditions, given the level of frost in the ground, as well as subsoil moisture,” noted Andrew Gottschalk of Hedgers Edge.
“This should lead to an accelerated downturn in carcass weights in the coming weeks. Each eight-pound reduction in carcass weights reduces weekly beef production by approximately 1 percent. The latter would become a supportive force to fed cattle prices throughout the second quarter, by limiting seasonal weakness.”
There was no relevant negotiated cash fed trade that had occurred last week by press time. Expectations were for at least fully steady with the prior week’s trade at $127-131 (avg. $127.71) live and $203-207 ($204.98) dressed.
Beef cutouts were up week over week, with the Choice cutout gaining a net $2.32 to close Thursday at $229.31. The Select cutout gained slightly over $1 with $218.37.
“March is holding true to form, displaying the characteristics of the weakest demand month of the year,” said Gottschalk. Despite this, he also pointed out that “product values continue to be a grind up, in an effort to attain the next objective at $233 for the Choice beef cutout.”
Feeder cattle
Feeder cattle auctions across the country were surprisingly active and vibrant. Prices in general were up. Medium and large #1 class steers weighing between 700-800 lbs. sold in the $130s-160s, with most averages being in the $130s-140s.
Colorado: The Winter Livestock auction of La Junta sold a fraction of what it sold the week before, making price comparisons difficult. Feeders were called uneven with prices ranging from down $5 to up $2, discounts being largest for light animals. One 83-head lot of #1, 738-lb. yearling steers sold, averaging $145.44.
Kansas: The prices on feeders were up $3-4 at the Winter Livestock Auction, with instances of up $8 on 6-weight steers and $7 on 6-weight heifers. There were no comparable sales on lighter animals given the weather-restricted turnout of the prior week. Two large lots of benchmark steers sold between $138.50-155.
Missouri: The trade volume at the Joplin Regional Stockyards was slightly lower last week than the week before. Light steer calves were steady, 6- and 7-weight steers and heifer calves under 600 lbs. were steady to up $3, and heavier steers and heifers were steady to down $3. Several lots of benchmark steers sold between $132-155 with most averages being in the upper $130s.
Nebraska: No comparisons at the Ogallala Livestock Auction Market, due to no sale being held two weeks ago. Demand last week was called good on a nice selection of offered cattle. Benchmark steers traded between $147.50-166.
New Mexico: The Clovis Livestock Auction sold almost 1,000 head more cattle last week than the week before and prices were considerably higher. Calves under 600 lbs. were up $3-6 with instances of $8-9 higher on value-added offerings. Heavier feeder cattle were up $1-3 with preference going to 6-weight steers. Prices on benchmark steers ranged from $133-144.50, inclusive of calves.
Oklahoma: The OKC West-El Reno sale sold over 9,000 head last week. Though impressive, this was down considerably from the over 14,000 head sold the week before. Prices on feeder steers were up $7-9, up $3-5 on heifers, and up $6-9 on calves. Demand was called very good for feeder cattle, especially for those ready for grass turnout. Two large lots of benchmark yearling steers sold between $138-151.50.
South Dakota: The Hub City Livestock Auction sold over 6,000 head of cattle. Mid- to heavyweight steers sold up $3-6, with instances of up $7-10 on 8-weights. Heifers were lightly tested, with the best comparison being on 7- and 8-weights, which were up $2-4. Benchmark steers sold between $138-154.50.
Like live cattle futures, the feeder cattle futures were up. The March contract gained a net $1.45 to settle Thursday at $142.78, while the April contract gained a net $2 with $148.93. — Kerry Halladay, WLJ editor
