Fed cattle trade was at a standstill this week as recent storms have made buying cattle a miserable endeavor. Winter storms have caused problems for both packers, who don’t want to deal with mud and low yields, and feeders, who want to get cattle out before they lose too much weight, but not give them away.
CME Live cattle futures were strong over the past two weeks but took a major correction Thursday as the market is considered overbought. February live cattle were trading at $127.10 Thursday and no cash trade has been reported. The market trend remains higher. Market analysts expect trade to be $1 higher than the prior week’s average of $123; cattle feeders are looking for $125 for the week.
Packers, on the other hand, are looking at declining margins. The Choice cutout was $212.54 and the Select was only $4.60 behind that. The packer margin index showed they are only making $28 per head, which is the lowest margin they have seen in a long time. However, packers aren’t losing any leverage; this is temporary and seasonal at best.
Packers will more than likely start to reduce slaughter levels to regain margins. Last week’s estimate was at 618,000 head and expected to be lower this week. Packers are calling on contract cattle to fill the line but will need to go to the cash market to fill their needs.
Cassie Fish, analyst at Consolidated Beef, reported Thursday morning, “In the country, packer bids are virtually non-existent as packers schedule as many formula and contracted cattle as possible. Cattle feeders in Kansas continue to be eager to get cattle gone and out of muddy pens. Still expectations are for cash to trade $2 to $3 higher this week. Yields are running 1 percent to 3 percent below normal as the short days of January coupled with too much moisture take their toll on cattle.
“Snowfall amounts currently don’t look like they’ll be heavy in feedlot country this weekend,” she adds, “but some form of unwelcome moisture—rain, freezing rain, snow (or all three)—will still cover much of Kansas and Nebraska. Then temperatures will drop to the lowest of the season.”
Feeder cattle
Post-holiday feeder cattle trade volume is picking up. Feeder cattle receipts last week were 586,300 head where a week earlier they were 109,900. Andy Gottschalk at HedgersEdge pointed out that these receipts were “the largest since the summer runs in July of 2018. Prices for feeders were uneven; $1 cwt higher to $4 cwt lower.” Benchmark steers weighing 700-800 lbs. traded at $143.61 in the Northern Plains, almost dead even to the CME January feeder contract, which broke $2.30 Thursday to $141.42.
The trajectory for the CME cattle futures is live cattle have been moving higher for the past month while feeder cattle have been moving down. Cattle feeders are buying for the June through August fed cattle markets. The deferred futures contracts are trading at the $114 level so expect cattle feeders to buy replacements accordingly. 2018 wasn’t a great year for cattle feeders and it looks like they are getting a little leverage over feeder cattle traders and getting a little leverage with the packers.
The general trend at the auction markets last week showed light calves to go on grass were $3-8 higher. The 700-800-lb. feeder steers were steady to a couple dollars lower. Feed yards aren’t eager to accept replacements with all the mud and cold weather. Corn markets have moved higher, adding some pressure to feeder cattle markets as well. March corn was at $3.80, up 6 cents on Thursday.
The surveyed feeder cattle auctions last week were as follows:
Colorado: The Winter Livestock auction of La Junta sold over 6,800 head of cattle last week, 80 percent of them being feeders. Steer calves under 650 lbs. were steady to down $5, while heavier steer calves were only down $2-3. The trend was reversed on heifer calves, with light calves being discounted $3-5, while heavier heifer calves were down $5-8. Yearling heifers and 7-weight yearling steers were down $1-3, while heavier yearling steers were down $3-5. A pair of large lots of #1, 7-weight yearling steers sold between $138-145.
Iowa: Demand was called moderate at the Denison Feeder Cattle Auction, where 1,566 head of feeders sold, down from the week before. Prices were called steady, particularly for 6-weight steers with lower undertones on other classes of feeders when compared to the prior week’s special pre-conditioned sale. Two large lots of benchmark yearling steers sold between $139-148.75.
Kansas: The Winter Livestock Auction sold just over half of what it sold the week before. Most steers over 700 lbs. were down $3-8 while heifers were steady to down $5 on limited offerings. There were too few calves for a market test. Number 1, 7-weight yearling steers sold between $135-144.
Missouri: The Joplin Regional Stockyards sold over 6,800 head of feeders last week. Prices were steady on feeders under 600 lbs. while those over were down $2-5. Demand was called moderate on the moderate to heavy supply. The weather has dampened buyers’ interest in owning cattle if they are just going to go to muddy, wet pens. The benchmark steers that sold were split by both lot size and age. There were two large lots of yearling steers that ranged from $133-143.50, and there were two small lots of steer calves that ranged from $128-131.
Montana: The Miles City Livestock Commission sold over 2,500 head of cattle last week, almost half of what sold the week before. Comparable sales were hard to come by, but where they existed (5- and 6-weight steer) prices were mostly $3-5 higher. All other weights were too lightly tested for an accurate market trend. One 46-head lot of #1 steer calves weighing 723 lbs. averaged $143.77.
Nebraska: Almost 5,000 head of cattle sold last week at the Huss Platte Valley Auction. Feeders sold unevenly steady to down $2. Demand was called moderate to good with mostly order buyers in the seats. Poor pen conditions due to weather was again dissuading other types of buyers. Prices on #1, 7-weight steers ranged from $135.75 for a smallish lot of heavy, fleshy yearlings, to $160 on a half-load of light, thin-fleshed yearlings.
New Mexico: Over 3,600 head of cattle sold last week at the Clovis Livestock Auction, roughly steady with the last sale. Steers were mostly $3-4 lower regardless of age, with the exception of value-added 4-weights, which were up $5. Heifers were down $1-3 except for 5-weights, which were up $3. Trade was called active on moderate demand. Number 1, 7-weight steers sold between $125.25-141.
Oklahoma: Over 9,850 head sold at the National Stockyards last week, and another 14,000 head sold at the OKC West Livestock Market of El Reno. At the National Stockyards, prices on feeder steers were down $2-6 while heifers were called steady to up $3 for the most part. Steer calves were unevenly steady and heifer calves were down $1-6. Demand was called moderate on the plain-to-attractive offering. Numerous lots of benchmark steers sold, ranging from $130-147.50. At the OKC West sale, feeder steers were trading down $6-12 and heifers were down $3-5. Demand was called light to moderate, mostly blamed on the muddy conditions and bad pen space as a result of reoccurring storms. Some calves traded steady to up $2, but those were long-weaned, pre-conditions calves. Benchmark steers ranged from $132-142.50.
South Dakota: The sales volume was quite down at the Hub City Livestock Auction at 4,411 head compared to the prior week’s 7,228 head. Midweight steers were called mostly steady with some heavier steers trading steady to down $3. Heifers were called steady. Best demand was seen on calves suitable for going to grass. There were only two lots of #1, 7-weight steers, but they were large, amounting to almost 600 head total. Prices ranged from $139.50-158.
Wyoming: The Torrington Livestock Commission sold about 1,000 head fewer cattle last week than the week before. Steer calves were called steady to up $6 on lighter calves. Yearlings and heavier calves were down $3-8. Heifers were steady to down $6 with discounts going to heavier animals. Two lots of benchmark yearling steers sold between $140-148. — Pete Crow, WLJ publisher, and Kerry Halladay, WLJ editor
