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Feeder Market A Runaway, Futures Chase Cash

15:40PM Jun 13, 2014
Kansas Stocker Cattle

Cattle futures traders finally said "We believe!" this week. Both live cattle futures and feeder futures posted sharp gains as the market focused on the tight supply situation. Even with steep advances, futures couldn’t keep up with a runaway cash feeder cattle market. Market reporters have simply run out of superlatives to describe the action.

"Just when we thought (feeder) prices couldn’t make another $5 jump, they jumped $10," says USDA Market News reporter Corbitt Wall.

Calves and yearlings throughout the Central Plains and in close proximity to the major grazing regions and the feeding hubs sold "fully $5 to $10" per cwt. higher, with the full advance on yearling feeders destined for the feedlot.

The $2 milestone for 8-weight steers reached last week was "no big deal by Wednesday." Wall says "all the 9-weight steers for late summer delivery off Flint Hills or Osage pastures now have asking prices that begin with a 2."

Cash fed cattle prices have traded at a steep premium to the futures markets this year, and as late as two weeks ago it appeared the cash market would come back to the futures. But the cash-led bull market showed its strength again this week, with $2 to $3 per cwt. advances on fed cattle and $1.01 per cwt. increase in the Choice cutout price.

Packers came into the week offering steady money, but feedyards held their cards until packers were forced to ante up. Cash prices ranged from $147 on a few cattle in the South to $150 per cwt. in the North. Cattle on a dressed basis sold at $236 to $237. Feedyards have marketed cattle in a timely manner all spring, and any ideas heavy supplies await this summer that would send the market back to the mid-$130s are fading.

Futures traders are still trying to catch up. Two weeks ago the June contract closed at $137.80. Last week it was at $140.12. This week it jumped to $147.50 at the close on Friday. That’s an average advance of $1 each trading day for two weeks, which doesn’t happen often.

If the futures markets are driven by fear and greed, the fear factor was never more evident than in feeder futures this week. All four remaining feeder futures contracts for 2014 closed Friday above $208.

Friday’s choice cutout closed at $231.87, with Select at $223.72. The Choice/Select spread was $8.15. Slaughter cows and bulls sold mostly $2 to $4 per cwt. higher. USDA’s Cutter cow carcass cut-out value Friday morning was $198.44, up $2.56 from last Friday.