Cattle futures closed mostly lower on Monday…early-week auction prices were mostly steady to higher for calves and feeder cattle…coming up on your Cattle Current Market Update with Wes Ishmael.
Cattle futures struggled to maintain some of the stability established in deferred contracts on Friday, losing the battle for the most part as traders continue fretting over sagging wholesale beef values and near-term supply abundance. Sliding nearby Lean Hog futures added spillover pressure.
Choice boxed beef cutout value was $1.20 lower Monday afternoon at $193.09/cwt. Select was 88¢ lower at $191.62.
Live Cattle futures closed 5¢ to 45¢ lower, except for 20¢ higher in Dec, 25¢ higher in away Oct and unchanged at the back.
Feeder Cattle futures closed an average of 66¢ lower across the front half of the board and then 5¢ lower to 55¢ higher.
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Major U.S. financial indices closed narrowly mixed but mostly marginally higher on Monday, amid little economic news and lingering unease over geopolitical events.
The Dow Jones Industrial Average closed 29 points higher. The S&P 500 closed 2 points higher. The NASDAQ was down 3 points.
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Along with the vagaries of seasonal beef demand, Derrell Peel, Extension livestock marketing specialist at Oklahoma State University explains that comparatively high beef prices, as well as continued adjustment following record high prices from late 2014 to early 2016 are affecting current wholesale beef values.
“The current ratio of retail beef to broiler prices is equal to the record level set in July, 2015,” Peel says, in his weekly market comments. “The retail beef to pork price ratio is also holding steady at levels near the record during the high prices of 2014 into 2016 and, like the beef to broiler retail price ratio, are at levels well above historical ratios prior to 2014.”
For perspective, Peel explains all-fresh retail beef prices in July ($5.83) were 1% higher year over year, increasing each month of this year. Choice retail beef prices ($6.10) in July were slightly less than a month earlier, but fractionally higher year over year.
At same time, Peel points out that beef wholesale cutout values dropped sharply in the past two months after climbing to a stronger than expected seasonal peak of $250.86/cwt. in mid-June.
“Choice beef prices have struggled to find a summer bottom with ample supplies and summer heat weighing on beef markets,” Peel says. “Weekly Choice cutout values averaged higher year over year from late April until last week. Select cutout values also increased from January to a weekly seasonal peak of $224.54/cwt. in mid-May before dropping to last week’s $194.81/cwt.”
Most recently, Peel explains wholesale values for middle meets weakened more, relative to the chuck and round. He adds the ground beef market this year continues to be volatile.
“Longer term, wholesale beef product markets continue to adjust following unusual price relationships that emerged during the record high prices from late 2014 through early 2016,” Peel says. “Many lower value products increased relative to middle meats during this period but are returning to more typical price relationships in 2017. Products from the chuck, round and sirloin increased relative to loin and rib prices during this period. The Choice-Select spread narrowed during the record price period and has widened back out to near record levels at times in 2017.”