Thomas Elwood: Early livestock comments
Cash cattle traded $3.00-$4.00 lower last week on a live basis. Prices were $113.00 to mostly $114.00 in Kansas and $113.00 in Texas. Dressed trade in Nebraska was mostly $185. Asking prices this week likely will start out at $114.00-$115.00. Packer margins are extremely wide right now, and they can certainly afford to pay at least steady for cattle. The big question is: will they have to? If the board collapses again for, whatever reason, it could encourage hedged feedlots to sell cattle lower. This would be especially true if the beef follows through with Friday afternoon's weakness.
The choice cutout was down $0.28 at $187.51 Friday night, with the select down $1.18 at $185.49. Spot trade volume was only 614 loads, the smallest weekly total since the two weeks ahead of Labor Day last year when the market made a peak in pricing. Packers cut back on slaughter sharply this week in a bid to support beef prices. The kill totaled only 618,000 head, down 19,000 head from last week. This was down just slightly from last year; the first weekly decline since early February. Retail beef sales for the first weekend of Lent were down substantially from the week before. That is not too surprising, but retailers will be watching sales this past weekend closely to see if sales recover any. Prices are very high for consumers already paying up at the gas pump.
Friday's USDA Cattle on Feed Report was mostly neutral for the cattle market. Placements were about 1% larger than the average estimate, but well within the range. Marketings were slightly above expectations, but again, were well within the range of estimates. Only calf placements were larger than last year. The 600 lb and up category showed a 25% increase. The largest decline of 12% was in the 800 lb and up category.
Early hog calls are mostly steady. Packers are fairly well supplied for the week. Some packers continue to be concerned that pork trade to Japan will be disrupted at some point, even if just for a short time. They seem reluctant to actually chase hogs even though margins are good.
The pork cutout gained $0.50 Friday night. We tried hard last Monday to find any disruption in pork trade to Japan, but couldn't. By Thursday, reports of "normal" orders from Japan trickled into the news and most traders were cautiously optimistic. There was some discounting of loins and butts during the week, but both items reportedly ended the week in pretty good balance. Hams continued to grind higher on increasing Easter demand. They may run into some resistance again over 80 cents, but should generally remain firm into early April. Bellies were quoted a nickel higher for the week. We hear of some product showing up from Canada, but supplies are still extremely tight.