Although some parts of the country are seeing increased interest in grass cattle, the overall market continues to be squeezed by anemic beef demand on one side of the equation and continued high feed costs on the other.
Western orders for stocker-weight cattle still haven’t hit their stride, analysts with the Agricultural Marketing Service (AMS) said Friday. They explain that most buyers are shying away from owning calves they may have to supplement before turn-out.
Calves and stockers traded unevenly steady last week. Regionally, steers weighing less than 600 lbs. sold an average of $2.10-$3.56/cwt. lower.
Feeder-weight cattle sold $2-$5/cwt. lower with the full decline on weights heavier than 800 lbs.
“Pressure continues on any class of cattle that requires grain as feed costs have eliminated the chance for most pens to break even,” AMS analysts say.
“Heavier feeder prices seem to have hit a ceiling until the fed market breaks through $130 or feed costs decline significantly,” explained the AMS reporter on hand for the weekly St. Joseph Stockyard auction in Missouri Wednesday where steers heavier than 650 lbs. sold $2-$3 lower.
At $137.19 Friday, the CME Feeder Cattle Index was at its lowest point since last August. Week-to-week, Feeder Cattle futures closed an average of $2.44 lower across the board.
“Plus, there is literally no support for a current cash cattle position from the CME cattle futures as the Ouija Board continues to free fall in the face of solid fundamentals,” AMS analysts say. “Investment funds are hanging 10 on the impressive stock market wave, leaving no one to take a long out-front cattle commodity position. Agriculture lenders have tightened and no longer want to risk another unprotected gamble on the future…”
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Though boxed beef cutout value retreated $1.52/cwt. and $1.00/cwt. (week-to-week) for Choice and Select, respectively, they’re significantly higher than price levels for much of the winter. But, the higher recent prices appear mostly related to weather-based trade disruptions. In other words, boxed beef volume remains stuck in low gear with too little trade to help spark prices higher in other segments.
Cash fed cattle sold $1-$3/cwt. lower last week at $124-$127/cwt. on a live basis. Dressed prices were down $2-$3/cwt. at $200-$201.
Live Cattle futures closed an average of $1.71 lower across the board week-to-week.
“Cattle on feed for more than 120 days (adjusted) are currently at the second-highest level since the series began in 1996. This suggests that there are still cattle that should come to market in sufficient numbers to exert downward pressure on fed cattle prices, and likely on wholesale cutout values as well,” say analysts with the USDA Economic Research Service (ERS) in the monthly Livestock, Dairy and Poultry Outlook released this week. “Cattle feeders have endured negative margins since March 2011. Even futures prices have not offered cattle feeders the possibility of positive margins, which are unlikely with cattle feeding costs in the mid $130 range that are expected to continue at least until anticipated lower new-crop corn prices begin to mitigate feed costs.”
If and when that occurs, ERS analysts say expected higher prices for feedlot replacement cattle, due to the tight supply, could offset lower feed costs. The crux would be continued cattle feeder losses in 2014.
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