Friday’s Cattle on Feed report looked like a Godsend to cattle producers, with the three main numbers all friendlier than analysts were expecting, but by the time trading resumed on Monday the goodwill was gone and a sense of gloom was taking over the livestock markets. USDA reported that feedlots had marketed two percent more cattle in December than in December of 2007, which was 2.5 percent higher than pre-report estimates. Similarly, placements of feeder cattle during December were at 97 percent of the previous year and three points lower than expected and total cattle on feed on Jan. 1 were 7 percent lower than last year and one percent lower than expected.
But traders chose to either ignore the numbers or only see the black cloud inside a big silver lining. February Live Cattle futures finished the two week period ended Tuesday down $2.80, with the April contract down$3.17 and June off $3.70. Cash fed cattle seem likely to trade lower again this week after trading at mostly $82 last week and $83 the week before. Boxed beef cutout values were mixed, with the Choice down $1.85 in two weeks, while the Select gained 61 cents, narrowing the spread to less than five dollars on Tuesday.
Feeder Cattle futures also dropped, with the January contract down $2.25 in two weeks, while the March contract lost $4.62 and October was off $3.45. Part of the black cloud that traders were looking for was the limited placement of feeders during the past eight months. The theory goes that if placements are down, then there must be more cattle lined up on the road waiting to get into feedlots, so prices of feeders should go down. The actual evidence of that happening seems to be pretty thin, but if you’re looking for a reason to sell, it’s as good as any. After the collapse of the market on Monday and Tuesday, cash feeder auctions were mostly lower, although some sales last week were near steady.
Hog packers continued to pay less for more hogs, as supplies of hogs were adequate and demand was lackluster at best. February Lean Hog futures were down $5.70 in two weeks, with the April off $6.57. Prices for cash butchers in Sioux Falls were as low as $38 on Tuesday, down a couple of bucks in two weeks.
Grain prices are mostly higher compared to two weeks ago, but were trending lower in the past few days. Corn futures prices in the March contract are up 15 cents compared to two weeks ago, with May also up about 15 and new-crop December up 16. Prices were as much as 40 cents higher as recently as Monday on what appeared to be improved economic news and the need to keep prices high enough to “buy” acres away from soybeans. However the economic news and lower oil prices in the past few days, along with poor export numbers, were enough to make corn give up much of its recent gains.
Wheat prices were also higher over the two week period, with wheat holding more of its gains than corn. Although winter wheat growing conditions and demand are generally neutral to slightly bearish, spring wheat is still in short supply and is supporting prices of winter wheat. Exports of wheat are also holding up well. For the two week period ended Tuesday, March and May Wheat futures in Chicago were up 14 cents. In Kansas City, old-crop March and May gained about 18, with the new-crop July contract up 19.
Soybean futures prices are near unchanged from two weeks ago, but had been sharply higher until Tuesday’s trade. Along with spillover weakness from the corn pit, improved moisture conditions in parts of South America and concerns about Chinese demand contributed to the downdraft in soybean values. For the two week period, March Soybean futures gained about four cents, with May up three. However, new-crop November was down 27 cents in the same time frame.
This Friday, USDA releases its semi-annual cattle inventory report, with analysts widely expecting the smallest cowherd since 1952. Whether the results of that report have any effect on the market depends primarily on what’s going on in the outside markets on that day.
La Junta, Colo. —
