Feeder cattle prices turned softer last week as feedlots continue trying to square runaway feed costs and breakevens with negative margins.
According to the Agricultural Marketing Service (AMS) Friday, yearlings as well as calves weighing more than 650 lbs. and destined for the feedlot, sold steady to $2 lower.
A Closer Look: Feedlots Face Uphill Battle
“Packers and feeders have been operating in the red for a while now, and it does not appear black ink will show up on the bottom line anytime soon,” says Andrew P. Griffith, University of Tennessee agricultural economist, in his weekly market comments. “The price of feed continues to put pressure on feeders and the only way to make up for the higher cost of feed is to either pay less for feeder animals or to sell fed cattle for a higher price to the packer.” Calf prices continued their regionally erratic trajectory from unevenly steady to sharply higher in the Southeast as stocker operators and backgrounders go shopping.
“Calf prices have been extremely volatile this fall, but regional weighted averages for 400-600-lb. calves are roughly only $2-$4 higher than they were late in the summer after rebounding from the July drought selloff,” AMS analysts say. “Most buyers have shown good demand and a general desire to take lightweights through the winter, but feed and water shortages along with health challenges have kept the market in check.”
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“Out-front premiums have dwindled until deliveries reach next spring,” said the market reporter at Thursday’s Joplin Regional Stockyards Video sale in Missouri.
Despite the seesaw choppiness of Feeder Cattle futures this week (front-end contracts were an average of $1.58 higher Tuesday and $1.69 lower Thursday), they settled an average of 46¢ lower in the front six contracts week-to-week. The CME Feeder Index was 22¢ lower at $144.70.
Live Cattle futures settled on either side of even week-to-week, after starting the week strong then ending with a whimper.
Plenty of uncertainty surrounded the near-term market, courtesy of Hurricane Sandy. That mammoth storm disrupted supply chains and appears to have hampered beef demand on the East Coast more than many analysts supposed at the beginning of the week.
Consequently, it was somewhat surprising to see cash fed cattle bolt out of the box Tuesday at steady money in the Southern Plains ($126-$127). By the end of the week, cash fed cattle trade in other parts of the country trended steady to $2 lower–$125-$127/cwt. in the Northern Plains on a live basis and $195-$198/cwt. in the beef.
By all accounts, wholesale beef trade was light last week and packers appear to be short-bought as they slowed production in an effort to boost prices. That along with East Coast retailers restocking could provide some bounce to beef prices during the coming week.
