Cattle futures surged higher on Monday, supported by Friday’s Cattle on Feed report, which has July placements significantly less than many anticipated—up 2.7% year over year, rather than general expectations for an increase of 6%. Stable to higher wholesale beef values lent support.
Except for 25¢ higher in spot Aug, Live Cattle futures closed an average of $1.49 higher ($1.10 to $1.80 higher).
Feeder Cattle futures closed an average of $2.82 higher ($1.05 to $3.45 higher).
Choice boxed beef cutout value was 18¢ higher Monday afternoon at $191.50/cwt. Select was 32¢ higher at $188.62.
******************************
Major U.S. financial indices closed narrowly mixed on Monday, supported by a spike in gasoline prices with Gulf Coast refineries shutting down in the wake of Hurricane Harvey.
The Dow Jones Industrial Average closed 5 points lower. The S&P 500 closed 1 point higher. The NASDAQ closed 17 points higher.
******************************
“July placements, though up year over year, were up less than the double-digit levels of the previous four months,” says Derrell Peel, Extension livestock marketing specialist, in his weekly market comments. “The very surprising 16% year-over-year increase in June placements included increased lightweight placements. These were likely placed early, in June rather than July, and contributed to the rather modest year over year increase in July placements.”
Although difficult to estimate, Peel adds that about 6-13% of the increase in placements for May-July are borne by early cattle movement due to drought. Since May, placements in South Dakota, alone, are 48% more year over year.
“USDA currently estimates that about 12% of the total cattle herd in the country is in regions experiencing some level of drought,” Peel says. “I estimate that 6.5-7.0% of the total beef cow herd—roughly 2.1 million beef cows are in regions suffering with severe (D2) to exceptional (D4) drought conditions. This includes nearly a million head of cows in Montana and 500,000-700,000 head each in North and South Dakota. Parts of the region have also experienced large wildfires. Lack of forage has led to significant destocking in the worst areas with cows culled or relocated to other regions. Heading into fall and winter with limited pasture and hay supplies means that cattle producers in the region will continue to struggle at least into spring 2018.”
On the other end of Mother Nature’s meteorological rope, Peel estimates a million beef cows in Texas and Louisiana are being impacted by the torrential rains and flooding associated with Hurricane Harvey.