Cattle futures closed sharply lower on Tuesday, basically giving back what they gained during the previous day’s rally, driven by short covering and placement numbers in last week’s Cattle on Feed report. Among other factors, bears continue focusing on increasing cattle numbers and stagnant wholesale beef values, rather than the increased tonnage cleared through the market and signs that cattle feeders are maintaining currentness.
Live Cattle futures closed an average of $1.50 lower (92¢ to $2.27 lower).
Feeder Cattle futures closed an average of $2.60 lower. The exception was 17¢ higher in spot Aug.
There were a few early dressed fed cattle trades reported in Nebraska at $168/cwt. with light demand and very limited trade, but too few transactions to trend. Elsewhere trade was mostly inactive on light demand.
Choice boxed beef cutout value was 27¢ higher Tuesday afternoon at $191.77/cwt. Select was $2.17 higher at $190.79, squeezing the Choice-Select spread to 98¢.
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After early pressure, attributed to North Korea firing a missile over Japan, major U.S. financial indices rebounded to close higher on Tuesday.
The Dow Jones Industrial Average closed 56 points higher. The S&P 500 closed 2 points higher. The NASDAQ closed 18 points higher.
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Reflecting on last Friday’s Cattle on Feed report, analysts with the Livestock Marketing Information Center (LMIC) point out in the latest Livestock Monitor that July placements were less than June for the first time since 2007.
“More animals are on feed than a year ago, but that does not imply any cattle feeders have not marketed animals when ready, as happened in 2016,” LMIC analysts say. “Marketing’s remained aggressive compared to the last two years. However, the percentage of animals marketed relative to the calculated number of head that had been on feed for over 90 days was not as dramatic as in the last eight months (back to November 2016) and was in line with the 5-year average from 2011-15.”
“Marketings remained strong in July (up 4%), but with the deterioration in feeding returns, it’s clear feedlots are thinking twice about filling pens with negative returns projected,” says Katelyn McCullock, an economist with the American Farm Bureau Federation.
In a recent edition of In the Cattle Markets, McCullock explains feedlot returns fell significantly from June to July and are expected to turn negative in August.