Feeder Cattle Review: Market optimistic
Compared to last week, the bulk of the calves traded mostly 5.00-15.00 lower with yearlings selling 5.00-10.00 lower. There were instances throughout the trade areas mostly in the Northern Plains and Midwest where 500-750 lb steers and yearlings over 800 lbs sold steady, with a few auctions even reporting a higher market; but overall the majority of the markets reported lower prices. Demand was moderate to good this week as cattle feeders are trading cautiously as they are still faced with losses on outgoing cattle.
Market was pretty optimistic in Ogallala, NE on Thursday selling over 7000 head of top quality feeders with over 525 head of 500-550 lbs steers averaging 528 lbs sold with a weighted average price of 212.24; with 475 head of their bigger brothers averaging 619 lbs sold with a weighted average price of 187.06. A three day weekend might have been what the doctor ordered after last Friday's collapsed in the cattle futures with limit losses. Tuesday found the coast clear with cattle futures closing with triple-digit gains, this support seemed to bring some stability back to the markets. But, on Wednesday the Stock Market fell hard with global economic jitters as crude oil fell to a 12 year low.
This spilled over into the commodity markets with cattle futures closing with triple-digit losses but bouncing back off their early extreme lows. It has been hard to ignore Wall Street starting the year with major losses as outside markets will continue to be a wildcard. The extreme up and down shifts in the cattle futures continued on Thursday as buying support entered back into the markets with limit to near limit gains for cattle futures. The uptrend continued into Friday as many markets are looking to close higher on the week after the markets appeared to be on the ropes at midweek as cattle futures closed with sharp triple digit gains on Friday. The Stock Market also received a reprieve from this week's rout closing with solid gains on Thursday and Friday.
Price risk is hard to determine and a difficult job these days with world markets staying in a volatile mood. The cave-in in crude oil prices could have a negative impact for a number of countries and banks. There is many unknown variables at this point and how situations may or will unfold leaving much uneasiness in the markets. One of the concerns with the global economic unease, will it continue to affect US beef exports and how will it impact demand? Packer margins are in good shape as boxed-beef has had a good run and hopefully with decent packer margins this will keep fed cattle moving.
Boxed-beef prices seem to have topped out and headed lower going into mid-winter. The price surge since December 21st is starting to pull back with Friday's close for Choice 2.84 lower at 224.83 compared to last Friday's close at 232.47. Cattle on Feed Report was released Friday afternoon looking neutral to slightly bearish. Cattle on feed came in at 99.5 percent; Placements at 99.2 percent and Marketings at 101 percent. December placements were a little larger than the average estimates and marketings falling a little below the average trade estimate. Auction volume included 57 percent over 600 lbs and 38 percent heifers.
