This past week started out with bearish moods prevailing, after a week full of sharply lower prices (both cash and futures) and two bearish USDA reports (cattle-on-feed and inventory) that put fear into the long-term health of the cattle markets due to increased supplies. However, bottom-side support came out of nowhere with boxed beef cut-out values showing sure footing and packers showing signs of needing additional fed supplies despite chain speeds operating at a snail’s pace. It appears that cut-out values have seen their summer lows and perhaps now cash fed cattle have also seen their bottom. On the other hand, cash feeder cattle prices are struggling between outstanding demand for the physical product and very little confidence on the thinly traded CME futures contracts.
Early-week auction feeder cattle were sharply lower in an effort to catch up to last week’s late sales. Later in the week, price trends were uneven with some locations (especially in the Northern Plains) actually higher with local farmer feeders staring at a rapidly improving corn crop. New crop corn has dropped nearly 1.00/bushel in the last week as hot weather has perked yellow tinted wet spots from too much early rain. No doubt, feeder cattle values have lost fully 10.00-12.00 in the last two weeks (especially for weights over 800 lbs) but cattle feeders still demand cattle to fill empty pens and/or help eat up an abundance of grain. The problem is the huge basis that the Board maintains and the investment is large enough that lending institutions need a tool for cattle feeders to offset their risk. Especially for Northern Plains feeders, the CME contracts are so far behind cash values that the futures offer no protection. Benchmark 750 lb steers in that region routinely sell 10.00-20.00 over the Board as we move into the spot month. This week’s Superior Video Auction sold 210 head of current delivery 735 lb mixed colored and put together weaned steer calves off a growing yard ration for 225.00 (Friday’s August CME futures 210.72). Nevermind if these cattle had been one-iron yearling half-brothers coming off grass.
Lighter-weight calf prices were 2.00-5.00 lower this week, but have not sustained the losses that their old crop peers have seen. Abundant moisture across the eastern two-thirds of the country should allow for outstanding fall grazing and continued moderate grain prices will help guarantee demand will be there. Early sales of new crop spring born calves have been solid, especially for the few that are starting to show up in the major production areas. The Huss Platte Valley Market in Kearney, NE sold 50 head of tiny 213 lb steer calves for 950.00 per head (446.00 cwt) on Wednesday with similar heifers bringing 890.00-910.00 per head.
Hopes are high that last week’s 145.50 wtd avg (the lowest since May 2014) will be the summertime low and the low for the year. Despite massive reductions in slaughter (down 6.9% year-to-date) packers came out looking for cattle this week. Solid bids were offered by mid-week and on Friday a decent movement of cattle were sold 2.00-3.00 higher from 147.00-149.00 live and 234.00 in the beef. Packers need to replenish their stocks for the upcoming Labor Day grilling weekend and retailers may actually get to feature some beef cuts for the first time this summer. This past week’s slim harvest of 532,000 head (compared to 575,000 last year) will not help the fed market to keep momentum but a reminder by supermarkets that beef is not a luxury item should help clear the supermarket beef cases.

Source: Corbitt Wall, DV Auction