March 10, 2014
Fed cattle, steady
Feeder cattle, higher
Lean hogs, steady to higher
Overnight stock futures were little changed. Slippage in corn futures overnight should provide lift to feeder cattle this morning.
Livestock producers will tune into today's USDA World Ag Supply and Demand Estimates for clues on feed price direction. A wild card is how unrest in Ukraine will affect grain exports from there and therefore prices. How traders assess feed costs going forward will impact livestock prices.
Cattle and hog futures have been approaching all-time highs on tight supplies and expectations crop production rebounds in 2013 from 2012's drought losses would keep pushing feed costs lower.
However, grains staying cheaper is no longer certain. Last week, summer corn futures topped $5 a bushel, 16% above their early January low. Summer soybean futures are up about 14% from their January levels.
Higher priced feed could slow beef and pork production growth by luring producers to sell market-ready animals at lower weights. Clearer signs that gains in feed prices so far this year will hold would put pressure on feeder livestock prices, particularly feeder cattle.
Cash fed cattle. On Friday USDA reported negotiated cash trade was mostly inactive on light demand in all feeding regions. Negotiated cash 5-Area week to date volumes per Mandatory Price Reporting. 2,038 in Texas, 9,065 in Kansas, 27,940 in Nebraska, 3,025 in Colorado and 12,266 in Iowa.
On Thursday in the Texas Panhandle live sales sold from $147 to $148. On Thursday in Kansas few live sales sold at $148. In the Northern Plains on Thursday live sales sold at $150, with dressed sales from $237 to $240 in Nebraska. In the Western Corn Belt on Thursday live sales sold at $148 with dressed sales ranging from $235 to $240.
Those prices were $2 lower on a live basis and dressed sales were steady to $3 lower in the meat from the previous week. CME cattle futures weakness pressured feedlot sales last week now that the board has some April breathing room, after February contracts had to hurry the previous week to converge with the cash market
Friday's morning choice cutout was up $1.30 at $236.88, with select up 27 cents at $233.27. Afternoon boxed beef cutout values were steady to firm on light to moderate demand and light offerings. Choice was up 44 cents at $236.02, with select down 13 cents at $232.87 on 82 loads.
USDA estimated Friday's cattle slaughter at 102,000, with Saturday at 4,000. Slaughter for the week of 548,000 is down 22,000 from the previous week and down 50,000 from last year. The 5.393 million cattle slaughtered so far this year are down 7.6% from last year.
The latest HedgersEdge packer margin index per head was minus $31.50 Thursday.
Cash feeder cattle. Compared to the previous week, last week's light test of feeder and stocker cattle sold steady to $4 higher. Once again, weather curtailed receipts throughout much of the major trading areas. Snow/ice storms moved across the mid-sections of the country the previous weekend and early last week, causing consignors to suspend selling their cattle until more suitable weather arrives.
As good as the market is, sellers don't want to take the chance on letting something as simple as the weather steal their chance on setting personal bests. Many auction markets were forced to close down entirely this past week, either due to dangerous road conditions or limited receipts.
However, wintry forecasts did not fully come to fruit in many areas, but fear of the worst had already affected early-week trading. Significantly reduced sales were reported in Oklahoma, Arkansas, Missouri and Kentucky where many stocker buyers go to fill their springtime orders. But, unlike school districts across the Midwest, sale barns do not have a lot of sessions to make up since producers in these areas are well ahead of their normal marketing schedule. In fact, many auction markets were more than happy to save on labor expense last week and plan on having only normal headcounts this week.
By midweek weather patterns had turned spring-like across much of the United States and despite already record-high price levels, grass fever is bound to be an epidemic for the balance of the month. The best demand, where tested, was for heavier stocker cattle weighing 600 to 750 lbs, which was just right for hard-wintered cattle coming off dry and short wheat pastures in the Southern Plains. Heavily supplemented feeders coming out of grow yards farther north were not as widely accepted, although still sold handsomely.
Cow/calf producers in the milder climates are still pushing the envelope to secure replacement quality heifers. In Pratt, KS on Thursday, a short load of fancy Red Angus open heifers weighing 923 lbs brought a whopping $200 or $1,846 per head.
The week's reported auction feeder volume included 60% over 600 lbs and 42% heifers.
Cattle futures. Cattle futures ended modestly higher, lifted by short-covering and a continued rise in wholesale beef prices. Analysts said traders were reluctant to push prices too far going into today's USDA supply and demand reports.
Cash and futures prices for cattle surged to new records week before last, as beef prices slowly advanced. Those gains pressured margins for beef processors, who offered lower prices last week in the cash markets as a result. Industry watchers said a tighter supply of available cattle has somewhat offset the pressure on prices from a sharp turn lower in live-Cattle futures.
Front-month April fed cattle rose 10 cents to settle at $143.25, down 5.7% from the previous Friday's close. Remaining contracts gained at least 15 cents.
March feeder cattle gained 97 cents to $172.37. April through November gained up to $1.25 as corn futures prices slipped.
Bottom line. Cash cattle slip on fears that stronger consumer push back will erode buying interest. Cutouts looking toppy suggest current bull is running out of steam. Rising feed costs have yet to slow feeder cattle gains.
Cash hogs. Market participants pushed Friday's live cash hog prices higher.
USDA's afternoon reports showed Friday's weighted-average:
* National base price up $1.54 at $105.80.
* Iowa-Minnesota up $1.41 at $107.38.
* Western Corn Belt up $3.04 at $105.76.
* Eastern Corn Belt was up $1.67 at $107.11.
Price changes are compared to USDA's afternoon report for Thursday.
USDA estimated Friday's hog slaughter at 416,000, with Saturday at 19,000. Slaughter for the week of 2.072 million is down 83,000 from the previous week and down 126,000 from last year. The 20.473 million hogs slaughtered so far this year are down 3.0% from last year.
Data USDA collected under Mandatory Reporting showed Friday's morning plant cutout up 95 cents at $111.09. Afternoon cutout values were:
FOB plant up $1.85 at $111.99.
FOB Omaha up $1.55 at $111.13.
Based on 258 total loads.
Based on the new cutout Dow Jones estimated Friday's packer margin index at plus $3.12 per head vs. plus $2.71 on Thursday.
On Thursday the CME two-day lean hog index advanced for a thirtieth day, rising $1.32 to $103.63, passing its September 2013 high of $102.56. It’s the highest price since August 2013 and 31.6% above a year ago. Its recent lows are $79.91 on Jan. 20, $79.23 on Dec. 23 and $80.83 on Nov. 25. Recent peaks are $81.05 on Jan.10, $82.91 on Dec. 4, $91.48 on Oct. 24, $98.25 on Sept. 20 and $102.56 on Aug. 15.
Hog futures. Hogs ended the session Friday at a fresh all-time closing high, fueled by signs of tightening supplies of market-ready animals for the weeks ahead.
Hog market participants responded to more aggressive packer-buying in cash hog markets with a flood of buying in the futures market. Signs that widespread porcine epidemic diarrhea virus outbreaks could pinch supplies more than previously expected are driving both surges.
Through March 1, the National Animal Health Laboratory Network reported the total number of positive tested cases for PEDV at 4,106, roughly double the number at the end of 2013.
But after a nearly $7 per cwt. surge in front-month futures over the past week--and bigger gains in deferred contracts--the upward momentum has moderated somewhat as traders book profits.
Some traders think hog futures may be overpriced compared to actual production losses that may come to pass. But bucking the uptrend is challenging.
April hogs rebounded 60 cents to $113.90, the fourth record closing high last week. That contract advanced 5.7% since over last week. June hogs rose $1.15 to $120.50, also a fresh peak.
Bottom line. Fears that intensifying PEDV death losses could trim summer slaughter 10% or more keep feeding the hog market bull. Some traders sense futures are starting to become overpriced.