Cattle futures nosedived—limit down near limit down in most Feeder Cattle contracts—on Monday in response to the bearish placement numbers in Friday’s Cattle on Feed report. As mentioned in yesterday’s Cattle Current, that report showed August placements 2.6% more than a year earlier at 1.93 million head, better than 5% more than estimates.
Live Cattle futures closed $2.80 lower ($1.85 to $3.00 lower).
Feeder Cattle futures closed an average of $4.13 lower ($2.92 to $4.50 lower).
Live sales ended last week $2.00-$3.50 higher at $108.00-$109.50/cwt. Dressed trade was $2-$7 higher at $170-$172.
Choice boxed beef cutout value was $2.36 higher Monday afternoon at $193.96/cwt. Select was $2.16 higher at $190.89.
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Major U.S. financial indices closed lower on Monday. Pressure included the ongoing tensions between the U.S. and North Korea.
The Dow Jones Industrial Average closed 53 points lower. The S&P 500 closed 5 points lower. The NASDAQ closed 56 points lower.
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More August feedlot placements than expected in Friday’s monthly Cattle on Feed report spooked futures markets on Monday. Considering the net on-feed inventory, however, provides broader context.
“What may be overlooked is the continued strong marketings pace,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “Marketings outpaced placements in August and pulled down the year-over-year increase in feedlot inventories, though not as much as expected. For the first eight months of the year, total placements are up 1.16 million head, an 8.4% year-over-year increase. However, total marketings were up 0.847 million head, 6.1% more than last year, largely offsetting the increased placements. As a result the September 1 on-feed inventory was up a modest 369,000 head year over year.”
Plus, Peel notes that lighter carcass weights and continued strength in beef demand are offsetting some of the impact of increasing numbers and beef production.
For the year to date, steers carcasses have averaged 14.1 lbs. lower than last year, according to Peel. Heifer carcasses are 12.3 lbs. lighter.
The August Choice beef price (retail, $5.94/lb.) was nearly 1% more than August of last year, Peel says. The all-fresh beef retail price was fractionally higher than one year ago.
“Clearly the supply challenges will continue for the foreseeable future,” Peel says. “However, 2017 has demonstrated very well that strong domestic and international demand for U.S. beef can mitigate much of the price pressure from growing beef production. Continued strong beef demand can limit 2018 cattle and beef price changes to modest declines.”