Feeder cattle review: Supply drying up fast, feeders higher

Compared to last week, feeder cattle sold 3.00-6.00 higher while calves over 550 lbs traded firm to 5.00 higher.  Lightweight calves under 550 lbs and all weights of true stocker cattle in a thin-fleshed and hard-weaned condition sold 5.00-15.00 higher.  All the insurmountable pressure that plagued feeder markets over the last two weeks from lower futures, shrinking corn stockpiles, and heavy marketings turned around this past week.  CME cattle futures opened the week sharply higher in response to last Friday’s bullish cattle-on-feed report that showed 5.6 percent fewer headcounts on feed and December placements that were surprisingly less than a year ago, marking 10 months in 2012 that less cattle were put into feeding facilities than the previous year. 

The announcement was also made that Japan will ease import restriction on US beef from 20 months-of-age to 30 months; however this has not been a limiting factor to their purchase volume.  The largest contributor to the current increase in feeder cattle demand is the fact that availability is drying-up just as fast or maybe even faster than most folks thought it would. 

Auction receipts continue to plummet and are running 20 percent lighter than last year.  The push is already becoming frantic for grass cattle and the most activity is being seen on lightweights under 450 lbs, but heavier stocker cattle are also seeing a boost.  In Philip, SD on Tuesday a load of thin-fleshed 606 lb steers brought 175.00 with another load weighing 654 lbs yielding 170.00, trumped by a big-load of 713 lb steers flagged as fancy selling for 164.00.  Summer grazers will likely take these kinds of cattle to unprecedentedly large weights on pasture to avoid high feed costs while enjoying cheap interest and no penalty for being over 20 months. 

The Cattle Inventory report showed total headcounts down 2 percent as expected, beef cows were down 3 percent but surprisingly beef replacements were up 2 percent.  If moisture levels allow for the additional keeping of heifers this will only exacerbate the limited availability of feeder cattle.  It is now evident that the numbers of market-ready finished cattle will steadily decline for the foreseeable future as fund investors and speculators who dominate the long-side of the CME Live Cattle futures are now pulling the market along. 

Fed cattle sold 3.00 higher early in the week in the Southern feedyards at 125.00 while the Northern feedlot area traded mostly on Friday at 202.00 dressed, which was 4.00 higher.  The tide may have started to turn on the persistent drought through the midsection of the country.  Snow and rain moved from New Mexico to the Midwest this week, including a 2-3 inch downpour across the majority of Missouri which ran to the ponds, giving relief to producers who have been hauling water since late summer.  This week’s reported auction volume included 57 percent over 600 lbs and 44 percent heifers.

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