The handful of cattle selling in the weekly Fed Cattle Exchange auction on Wednesday traded at the lower level that trickled into the country a day earlier. Only 518 head sold out of 1,659 offered, at a weighted average price of $115.04/cwt., which was 96¢ lower than the previous week. Specifically, cattle selling for delivery at 1-9 days brought $115.28; $114.50 for delivery at 1-17 days; $114 for delivery at 17-30 days.
Country trade followed even lower.
Negotiated cash fed cattle prices were $1-$4 less than the previous week at $114-$116/cwt. ($115 in the Southern Plains and Colorado). Dressed trade was $2-$5 less at $183 (Iowa-Minnesota) to $185 (Nebraska).
So, bears found all the reasons they were looking for to take Feeder Cattle futures down the limit and Live Cattle sharply lower: lower cash fed cattle prices, softer wholesale beef values, less open and non-commercial interest and lower outside markets pressured by mounting tensions with North Korea.
Live Cattle futures closed an average of $2.39 lower ($1.85 to $2.85 lower).
Feeder Cattle futures closed mostly limit-down $4.50.
Choice boxed beef cutout value was 59¢ lower Wednesday afternoon at $201.66/cwt. Select was 25¢ lower at $196.61. Drop value was 47¢ lower week to week at $10.88, which was the lowest since March of last year.
******************************
Although major U.S. financial indices bounced back from session lows on Wednesday, rising tensions with North Korea helped push them to a lower close.
The Dow Jones Industrial Average closed down 36 points. The S&P 500 closed fractionally lower. The NASDAQ closed 18 points lower.
******************************
The pace of fed cattle marketing through August and September will determine market price dynamics from October through the remainder of the year, says Stephen Koontz, agricultural economist at Colorado State University.
“Calculations of the inventory of cattle on feed more than 90 days and more than 120 days show the volume coming and what the market will have to address this late summer and early fall,” Koontz explains in the most recent issue of In the Cattle Markets. “Both of these calculated inventories are well below last year, communicating that marketings have been timely to aggressive through summer. This will continue to hold some strength in fed cattle prices. However, the inventory of animals on feed more than 120 days dropped sharply while the inventory on feed more than 90 days increased sharply. Show lists are clean but very big numbers are coming.”
Those looming numbers explain much of the bearish sentiment driving cattle futures prices in recent days.
With continued strong fed cattle marketings, Koontz says prices will soften through the fall. Otherwise, if marketings slow and show lists get heavy, he expects prices to decline sharply.
On the plus side, Koontz explains, “The seasonal increase in slaughter weights is underway, albeit starting, luckily, 20-30 lbs. behind last year. Current carcass weights are 12-13 lbs., or about 1.5%, behind last year.
For the more technically inclined, Koontz says, “Resistance was established in early May for all summer and fall contracts. This resistance was tested and held in early June and then again in mid-July. Any up trend that you can identify from the spring moves is broken. Thus, seasonal weakness into the fall is in the cards on the charts.”