Supply-driven rally faces feed, water shortages

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Feeder cattle and calves sold firm to $4 per hundredweight higher last week in what is likely to be the last full test of the market during 2012. Feeder cattle prices were supported by strengthening feeder cattle futures markets and the growing concern that supplies are at historically tight levels.

America’s gripping two-year drought continues to influence nearly every decision in cattle country, from grazing strategies to feeding enterprises. The drought has driven cattle placement patterns, and the December data – due this Friday – will likely show more of the same. Dry pastures force cattlemen to act, and the cattle usually head to feedyards earlier and lighter than anticipated. That scenario exacerbates the ever-tightening supply of feeder cattle and may shrink 2013 feedlot placements to record lows.

“The lack of feed and drinking water continues to be the primary concern, but significantly tighter supplies of feeder cattle should appear early next year as many of the producers that typically sell in January and February have already sold,” USDA Market News Reporter Corbitt Wall said.

“Most salebarns have been holding receipts within shouting distance of year ago levels by selling open and older cows, which will only exacerbate the situation down the line.  Lightweight calf supplies are sure to be lighter as the majority of the US herd calves in the spring.  However, feeder cattle demand is best for heavier weights that don’t need a lot of roughage that feedlots are having a hard time scraping together,” Wall said.

Last week’s auction receipts totaled 249,500, compared to 305,700 the previous week and 288,700 last year. Direct sales of stocker and feeder cattle totaled 39,700 with video/Internet sales at 2,500. The weekly total was 291,700, compared to 333,400 last year.

Slaughter cattle were lightly tested and packer demand was called moderate. The light trade occurred at $124.50 per hundredweight, $0.50 higher than last week. Dressed sales occurred at $196 to $198 per hundredweight.

Boxed beef prices traded higher for the week. Choice boxed beef traded Friday at $194.69, up $1.74 from the previous Friday. Select boxed beef traded at $175.34, up $2.95 from the week before. The Choice-Select spread finished the week at $19.35.

Slaughter cows and bulls sold steady to $3 per hundredweight lower. USDA's Cutter cow carcass cut-out value Friday morning was $160.67, down 82 cents from the previous Friday. Omaha cash corn on Friday was quoted at $7.46, down 31 cents from the previous week.



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