Cattle prices edge higher
Posted on 25 February 2017
Market optimism fed by cash prices
Cattle Market Weekly — Aggressive feedlot marketing and continued demand for calves aimed at grass turnout helped lift calf and feeder cattle prices this week.
Steers and heifers traded mostly steady to $4 per cwt higher, according to the Agricultural Marketing Service (AMS). Analysts there point out there were instances of $6-$10 higher in parts of the country where calves are headed south for grazing.
Demand remains good for calves and stocker cattle weighing 500-700 pounds, with the best demand for those that are long-time weaned with good weighing conditions, analysts say.
A surge in cash fed cattle prices underpinned market optimism.
Superior’s Fed Cattle Exchange set the stage for higher money early Wednesday with a weighted average of about $122 per cwt on more than 3,000 head. By the time country trade finished that day, live prices were $4-$5 higher in the Northern Plains and Southern Plains at $124-$125 ($123-$125 in Iowa-Minnesota). Dressed trade in Nebraska and the western Corn Belt was $6 higher at $196. Clean-up sales in Kansas and Colorado on Friday were steady with the top at $125.
“The positive basis gives cattle feeders a strong argument for moving cattle out of pens and onto a rail. A second strong argument to support moving cattle out of pens and into packers’ hands is the close to $8 discount from February to April Live Cattle,” explains Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “The million dollar question is if the current price level can be maintained or pushed higher. There is no doubt the April contract price and the cash price will converge to close some of the gap over the next couple of months, but which market will move the most?”
Choice boxed beef cutout value was $8.47 higher week to week at $190.49 per cwt on Friday. Select was $6.24 higher at $195.48; the highest since last July.
Domestic demand and resilient international trade (see “Beef exports gain momentum,”) are part of it. More than anything, though, feedlot currentness and snugger beef supplies seem to be the drivers. On the one hand, lower breakevens combined with relatively higher sale prices are encouraging feedlots to keep turning pens. Fewer days on feed beget lower average carcass weights.
The average dressed steer weight in January of 893 pounds was 7 pounds less than the same month a year earlier, according to the most recent USDA Livestock Slaughter report. The average dressed weight for heifers was also 7 pounds less at 828 pounds.
But, none of that erases the increasing cattle numbers associated with expansion.
Beef production in January (2.12 billion pounds) was 8% more than the previous year with one extra weekday in the month. Cattle slaughter (2.58 million head) for the month was 9% more than last year.
Despite the higher wholesale beef values and active cash trade, cattle futures moved sharply lower on Friday—led by Feeder Cattle futures (an average of $2.94 lower) and apparent fretting over the monthly Cattle on Feed report (see below). Instead of a repeat surprise of more placements than anticipated, the report was in line with expectations.
Except for marginally lower in the back two contracts, Feeder Cattle futures closed an average of $1.96 lower week to week on Friday ($1.25 to $2.65 lower).
Except for $5.82 higher in spot Feb, and fractionally higher in near Apr, Live Cattle futures were an average of 75¢ lower week to week on Friday (52¢ to $1.02 lower).
“Packers will continue to run quick chain speeds if the margins are positive. Moving cattle through quickly will keep feedlots current and should support cattle and beef prices in future months,” Griffith says. “There is no certainty consumer demand and exports market will hold the market or push it higher, but cash markets are indicating strength in the near term.”
Cattle on feed mirror pre-report estimates
Estimates in the monthly Cattle on Feed (COF) report issued by USDA on Friday were in lockstep with pre-report projections.
The on-feed inventory at the beginning of February (10.8 million head) was 1% more than a year earlier. Placements in January (1.98 million head) were 11% more than a year ago. Marketings in January (1.75 million head) were 10% more.
Beginning with this COF report, placement weight categories are expanded. The former category for cattle weighing more than 800 pounds was divided into: 800-899 pounds, 900-999 pounds and 1,000 pounds and greater.
The breakdown for February by weight and percentage of placements: less than 600 pounds (19.2%); 600-699 pounds (22.5%); 700-799 pounds (29.5%); 800-899 pounds (20.1%); 900-999 pounds (5.9%); 1,000 pounds and greater (2.2%).
Recently, Glynn Tonsor, agricultural economist at Kansas State University, shared these price projections from the Livestock Marketing Information Center (LMIC).
The average live steer price (five-market average) last year was $121 per cwt, which was 18.4% lower year over year, according to Tonsor. The estimated price this year is $111-$114, which would be 6.9% less than last year. The projected average encompasses a range from a high of $117-$118 in the first quarter to a low of $106-$110 in the third quarter. LMIC estimates the fourth-quarter average at $107-$112, which would be 1.7% more than last year.
LMIC projects the average live steer price for 2018 at $108-$111, which would be 2.7% lower than their projected average for this year.
Southern Plains prices for feeder steers (700-800 pounds) are projected by LMIC at an average of $128-$133, compared with last year’s average of $146. The estimated price for 2018 is $126-$132.
Southern Plains prices for steer calves (500-600 pounds) are projected at an average of $141-$148, compared with last year’s average of $166. The estimated price for 2018 is $136-$144.