Extreme Drought Introduced in West, Futures Markets Struggle

Extreme Drought Introduced in West, Futures Markets Struggle

Drought Monitor Update July 9

Montana Drought Monitor Update, July 7, 2015. Click image to learn more.

Most of the region was warm during the last week with temperatures 9-13 degrees above normal in the Pacific Northwest and 3-4 degrees above normal over most of the rest of the region. Idaho, Utah, Washington, Oregon, and California all had their warmest June ever (121 years of data) while Nevada had their second warmest, Wyoming their fourth warmest, and Montana their fifth warmest.

In Montana, D3 was introduced in the west while D2 expanded to the east. In the north central portions of Montana, D1 and D0 were expanded slightly. These changes were mainly in response to the rapid short-term degradation and the impact to agriculture in Montana.

View the most current Montana conditions from the U.S. Drought Monitor.

Montana Weekly Auction Summary for Week Ending July 10

Market: Billings Livestock, Public Auction Yards, Miles City

Receipts: 1,679; Last Week NA; Last Year NA

Compared to last week: Due to no coverage of sales in recent weeks a market trend is not available. Feeder cattle receipts were limited this week, however attractive quality feeder cattle continue to sell with very good demand.

CME futures contract prices have struggled throughout the week. August contracts closed down 5.225 at 211.75 and September closed down 5.345 to close at 210.225 as of Thursday night’s settlement. However, the CME feeder cattle index hasn’t budged this week. The current index value is pegged at 220.39 as of Wednesday’s sales, which is a strong premium to the August CME contract.

A heavy offering of Bulls was seen this week as many ranchers are beginning to bring cull bulls to town after breeding season. With plenty of grass in central Montana many bulls were in light to moderate flesh, however eastern Montana has been very dry and with less grass to forage on many bulls in that part of the state were in very light to light flesh. A large portion of lightly fleshed bulls were being purchased to put on feed, this created an active market and good demand as feeding buyers and packer buyers sparred over offerings.

Buyers searching for breeding stock purchased 2 year olds to young age cows on light demand this week. Heiferettes and young age cows were of mostly average quality giving buyers no reason to bid aggressively. Cow/calf pairs sold on good to very good demand this week. Quality was mostly attractive with very large calves at cows sides and several offerings already exposed to bulls.

Read more from USDA’s latest Montana Weekly Auction Summary.

National Feeder & Stocker Cattle Summary – July 10

Receipts This Week:  Total 205,900 – 98,000 (Auctions); 48,800 (Direct); 59,100 (Video/Internet)

Compared to last week: a light test of feeder cattle did not quite produce the “ooohs and ahhhs” heard immediately after the 4th of July fireworks with yearling feeders trading mostly steady to instances 3.00 lower. There has been significant volatility throughout the markets over last week and this week. Cattle futures have mixed underlying fundamentals and traded with sharp triple-digit losses on Wednesday as feeder cattle contracts traded over 3.00 lower. Superior Video’s Week in the Rockies this week featured 260,000 head of calves and yearlings being sold with the final results to be out on Monday.

We are starting to see an increase in volatility in the markets which is a pretty good sign that they want to move from their current levels especially in the grains. Grains are looking to move higher as excessive amounts of moisture through the Midwest and eastern Cornbelt have in some areas seen crop conditions deteriorate over the last several weeks. No doubt the debate will start over grain numbers; how widely varying crop conditions have developed throughout many important production areas.

The cattle complex seems to want to move lower and keeps testing some overhead resistance, but last week packers scrambled to secure inventory paying higher prices and building on that support seen last week to buy fed cattle this week mostly steady on live prices ranging mostly from 150.00-152.00.

• Auction Receipts: 98,000; Last Week: 67,000; Last Year: 190,700
  • Montana 1,700. 87% over 600 lbs. 20% heifers. Steers: Medium and Large 1 700-750 lbs (707) 244.77.
    • Direct receipts 4,000. 100% over 600 lbs. 19% heifers.

Read more from the USDA’s latest National Feeder & Stocker Cattle Summary.

Weekly Montana Hay Report – July 10

Compared to last week: Most every part of the state has first cutting down and many have it in the stack. Hay quality has been less than impressive with most struggling to break 155 RFV. Very little dairy quality hay has been put up as a result. This has put heavy supplies of feeding hay on the local market and many are struggling to find a selling point. Many farmers have decided to hold on to supplies to see how dry conditions in Western and far Eastern parts of the state play out in the future. Very few reported sales were made this week as a result.

• Alfalfa:
  • Supreme: Small squares, 200.00-210.00
  • Good: Large squares, 150.00
  • Fair: Large squares, 110.00-115.00
• Grass:
  • Good: Large Rounds, 90.00-100.00
  • Large Squares, 100.00
  • Timothy Grass: Premium: Small Squares, 180.00.
• Straw:
  • Large Squares and Rounds, 35.00-40.00.

Read more from the USDA’s latest Weekly Montana Hay Report.