Feeder Cattle led the rout in Cattle futures on Wednesday, just a day after significant support. Other than eroding wholesale beef values and the step lower in early cash fed cattle trade, emotion, technicals and algorithms might offer some explanation as fundamentals remain unchanged.
There were only 1,184 head offered in the weekly Fed Cattle Exchange auction—mostly from the Southern Plains—and zero takers.
Though too few to trend, there were some dressed trades reported in Nebraska and Iowa-Minnesota on Wednesday at $175-$177/cwt. That’s sharply lower than the previous week, but steady to $2 higher than earlier-week sales.
Live Cattle futures closed an average of $1.24 lower across a broad range (42¢ to $2.07 lower).
Feeder Cattle futures closed an average of $3.31 lower ($2.80 to $3.62 lower), basically giving back everything gained in the previous session; yet, a little higher week to week.
Choice boxed beef cutout value was $1.44 lower Wednesday afternoon at $197.51/cwt. Select was 83¢ lower at $195.04.
******************************
Major U.S. financial indices closed higher on Wednesday, but far from session highs. Early on, minutes from the Federal Reserve, indicating they were standing pat on interest rates for the time being fueled strong gains. After President Trump disbanded his Strategic and Policy Forum and Manufacturing Council—due to the growing backlash from business leaders to recent remarks from the president—stocks came down. Softer oil prices and fewer housing starts than expected also added pressure.
The Dow Jones Industrial Average closed 25 points higher. The S&P 500 closed 3 points higher. The NASDAQ was up 12 points.
******************************
One wildcard in all of the chatter about increased fed cattle volume is the number of heifers to be retained or fed.
Through June, heifers in feedlots with 1,000-head or greater capacity were up 10.6% more than a year earlier, according to the Economic Research Service (ERS), in the latest monthly Livestock, Dairy and Poultry Outlook (LDPO). Heifer slaughter so far this year is running 4% more than last year.
“Although to some extent this likely reflects the large supply of heifers due to herd expansion, the number of heifers on feed as a percent of total on-feed numbers increased from 33.7% in 2016 to 35.6%,” say ERS analysts. “Although comparisons to 2016 are not possible, the Cattle report estimated that heifers retained for beef cow replacement were 2% below 2015. Replacement heifers represented 14.5% of the cow inventory, lower than 2014-2015 but above the percentages of 2007-2012, a period of relatively strong cow liquidation.”
In the meantime, according to the LDPO, net second-quarter placements, (feedlots with 1,000-head or greater capacity) of 5.5 million head were 10.5% more than the previous year, the second most since 2003.
“The larger than expected number of calves placed in feedlots increases the likelihood of greater steer and heifer marketings late in the third quarter and early in the fourth quarter,” explain ERS analysts. “As a result, the third-quarter price for 5-Area Choice steers is forecast lower to $113-$117/cwt. and to $110-$116 in the fourth quarter. Similarly, with more cattle outside feedlots, and lower fed cattle prices expected to pressure cattle feeders’ returns, the average price for feeder steers weighing 750-800 lbs. is forecast lower in the third and fourth quarters to $146-$150/cwt. and $141-$147, respectively.”