Winter storms closed some auction markets and kept buyers out of the market last week. By the end of the week, though, expected declines in fed cattle tonnage due to the storms added some some support to the markets.
When you’re up to your Wrangler patch in snow, trading cattle comes a ways down the list of priorities. That explains much of the doldrums that pervaded many auction markets through the gut of the country last week.
Though feeder and cattle markets were not fully tested in the Southern Plains and Midwest, direct trade and auction sales in areas of the Northern Plains that dodged the storms were steady to $3 lower, according to the Agricultural Marketing Service (AMS) Friday.
“Southeastern calf markets were weak to $8 lower with western interests unable to take delivery and many major arteries closed due to the weather,” explain AMS analysts. “The Texas Panhandle and western Oklahoma were probably the hardest hit, with high winds and up to 20 in. of snow building mountainous drifts and allowing cattle to simply walk over fences. The storm then pummeled Kansas and Missouri again, with many auction markets forced to close or operate under extremely reduced receipts and sharply lower market undertones. There were reports of significant death loss on lightweight cattle that were not yet acclimated, but most feedlots reportedly weathered the storms fairly well.”
By late in the week, sharply higher cash fed cattle trade added some firmness to auction markets.
Live cash fed cattle sales ($127-$129/cwt.) and dressed sales ($202-$204/cwt.) moved $3-$6/cwt. higher compared to the previous week. Interest increased as boxed-beef cutout values finally gained some traction. Week-to-week, Choice boxed-beef cutout value was $5.21/cwt. higher. Select cutout value moved $5.62/cwt. higher week-to-week. Various analysts chalk up increased beef buyer demand to slower packer harvest rates as well as optimism for an early spring.
The sliver lining to the aforementioned storms was the moisture received across a wide swath of drought-stricken country.
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Futures markets were also a beneficiary as the storm’s location will likely take some tonnage out of the market via increased death loss and slower performance than expected.
In the Texas Panhandle, for instance, hurricane-force winds were accompanied by up to 19 in. of snow, leaving behind drifts as high as 10 ft. Analysts with the Texas Cattle Feeders Association (TCFA) explained Friday, “Impact ranged widely, depending on location, amount of snow and wind speeds. Reports from consulting veterinarians indicate that losses increased 0.2-0.4% total for the area. The impact could continue for the next several weeks as cattle and production costs adjust for the blizzard.”
Other than $1.72 higher in spot April and unchanged at the back, Live Cattle futures closed an average of 46¢ higher week-to-week.
Feeder Cattle futures eked out an average gain of 27¢ across the board week-to-week, though the CME Feeder Cattle Index ($138.87) lost another $1.75 on the week.
Keep in mind related commodities were under pressure, too. For instance, crude oil futures (WTI-ICE) were down an average of $2.41/bbl. week-to-week (front six contracts), making for an average decline of $5.76/bbl. over the last two weeks. That’s the lowest so far this year. Perhaps it’s no coincidence that the futures Dollar Index (DX-ICE) also closed at its highest point so far this year and since last August.
Going forward, AMS analysts point out, “The lack of cattle movement over the past two weeks and the sheer limited availability of feeders have put dwindling nationwide auction receipts 21% behind year-ago levels. Warmer weather should spur demand for both stockers and feeders with newfound interest in early grazing and the need for heavily populated areas to find their way back to restaurants and patio grills.”
Incidentally, other than the lingering uncertainty, sequestration – those mandated federal spending cuts – began Friday with no visible market impact. In part, that may because of the notice federal workers must receive in advance of a furlough. According to the TCFA folks Friday, “Starting next week, federal employees and government contractors could receive furlough notices. However, their contracts require at least 30 days’ notice and a seven-day appeals process before furloughs can be implemented. Some contracts require at least 120 days’ notice. The earliest impacts will likely be felt in early April, if Congress and the president do not reach a compromise between now and then.”