Wintry weather and the Thanksgiving holiday disrupted normal cattle marketing this week.
“There were not enough sales of calves or yearlings for an adequate nationwide trend, but the few reported markets around the country were near steady in a light test,” said analysts with the Agricultural Marketing Service (AMS). Please keep that in mind when considering the weekly regional calf and feeder prices in this week’s BEEF Cattle Market Weekly. They reflect 112,900 head this week compared to 339,100 head last week.
Where calves and feeder cattle traded hands, though, demand remained robust, especially at special sales. For instance, steers weighing more than 700 lbs. sold $3-$5 higher at Green City Livestock Auction’s yearling special in Missouri Tuesday.
“With much cheaper feed compared to a year ago and finished cattle near the $130 mark, yearling cattle have been selling at all-time record highs this fall,” explained the AMS market reporter at Green City. “The 800-900 lbs. steers averaged $22-$24/cwt. higher than the yearling special from last year.”
Week-to-week, Feeder Cattle futures closed an average of $2.11 higher except for $1.40 and 65¢ higher at the back of the board.
Corn prices continue to erode beneath the weight of bumper yields and pressure from the Environmental Protection Agency (EPA) proposal to reduce the ethanol mandate.
“The bottom line is that the EPA refused to push ethanol mandates above the so-called blend wall of about 10% of the U.S. fuel supply or above production capacities for advanced biofuels,” analysts noted in the bi-weekly CME Group’s Ethanol Report this week. “The EPA's ruling was a victory for blenders and the food industry, but was disappointing for the ethanol industry since the reduced mandate may mean lower ethanol demand and investment.”
Week-to-week, spot Dec. corn futures were 7¢ lower and then 3¢-4¢ lower in the next five contracts.
Tight cattle supplies continue to underpin calf and feeder prices.
Even though last week’s Cattle on Feed report surprised some with more October placements than expected (up 9.8%), Derrell Peel, Oklahoma State University Extension livestock marketing specialist, offers some perspective.
“October placements were down 1% from the five-year average that includes last year, and were down 5.3% from the 2007-2011 five-year average,” Peel explains. “The latest October placement number was slightly smaller than the 2002 level and, with the exception of last year, was the smallest October placement since 1995. By any measure except last year’s record-low level, it is still a small October placement number. Seasonally, October is the largest placement month as feedlot inventories grow in the fall to a seasonal peak in December before declining to seasonal lows in August.”
Likewise, Darrell Mark, South Dakota State University adjunct agricultural economics professor, points out in his weekly Corn & Cattle Comments that the higher placement number in October was partly due to calves being placed earlier last year due to drought, which reduced 2012 October placements.
“This year, with improved pasture and range conditions in much of cow-calf country (except the western mountain states) and cheaper corn at harvest time, calf placements have followed a more traditional pattern of ramping up through October,” Mark explains. “In fact, monthly placements have increased 52% from June 2013 through October 2013 compared to an average increase in placements of 54% from June through October.”
Cattle supplies should get snugger, too, if producers follow through on herd expansion, which seems to be at the beginning stages, based on recent beef cow slaughter and feedlot heifer placement.
“The replacement heifer demand that has been very impressive the past month seems to be mostly done for now,” Peel says. “I expect breeding female demand to pick again next spring assuming forage conditions look favorable at that time.”
Markets this week also received a pre-Thanksgiving boost from wholesale beef prices and the cash fed cattle market.
Week-to-week, Choice wholesale boxed beef cutout value increased 3.96/cwt. Select was up $3.59.
“Fed cattle often rally seasonally into Thanksgiving and the days just beyond, but not necessarily as sharply as this week,” explained Penton analyst John Otte on Friday. “Beef often faces lackluster buying in early November as retailers feature ham and turkey.”
Increasing wholesale prices and the shorter week helped boost cash fed cattle prices. In Wednesday trade, live sales were $2-$3 higher at $132-$134/cwt. Dressed sales were $2-$3 higher at $209-$210/cwt. As of mid-day Friday, the only region that hadn’t reported trendable sales for the week was the Texas Panhandle.
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Live Cattle futures were up an average of $2.28 through the front three contracts week-to-week. They were up an average of $1.44 across the rest of the board.
“I expect cattle and beef markets to move mostly sideways for the remainder of the year, though boxed beef could rebound slightly in early December,” Peel says. “Continued decreases in cattle slaughter and beef production through the end of the year will help support prices near current levels for fed and feeder cattle.”
“There still does not seem to be anything to fear on the horizon that could knock these record cattle markets off their pedestal,” AMS analysts say.
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