Cattle futures closed mostly narrowly mixed on Monday. They were pressured early in the session, but rather than crashing sharply lower in response to Friday’s Cattle on Feed report, they recovered most of the ground by the end of the day (see below).
Live Cattle futures closed narrowly mixed (25¢ lower to 45¢ higher).
Except for unchanged in spot Oct and $1.20 lower in the back contract, Feeder Cattle futures closed an average of 25¢ lower.
Choice boxed beef cutout value was 61¢ lower Monday afternoon at $199.25/cwt. Select was 9¢ lower at $191.05.
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Major U.S. financial indices closed lower on Monday, perhaps due partly to profit taking ahead of a busy week for quarterly earnings reports.
The Dow Jones Industrial Average closed 54 points lower. The S&P 500 closed 10 points lower. The NASDAQ closed 42 points lower.
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Futures price reaction to Friday’s Cattle on Feed report—13.5% more September placements than a year earlier—may go a long ways in underscoring the strength of the current marketplace. Prices wobbled early on, but then bounced back quickly. Besides more placements being expected as the cowherd grows, logical reasons for the subdued reaction include: placements the previous September were atypically low; market strength continues supporting packer profits and feedlot demand.
“Counter-seasonally strong feeder cattle prices this fall indicate good demand despite growing feeder cattle supplies,” explains Derrell Peel, Extension livestock marketing specialist, in his weekly market comments. “The October Cattle on Feed report confirmed that much of that demand came from feedlots.”
Heifers continue to comprise an increasing proportion of the on-feed mix—13% more Oct. 1 than a year earlier—suggesting that herd growth is slowing.
“Heifer slaughter so far this year is consistent with these inventory totals, up 12% year over year, and suggests that heifer slaughter will continue to grow for the foreseeable future,” Peel says. “These numbers suggest that heifer retention (and likely herd growth) is slowing. However, the average ratio of steer to heifer slaughter (which peaked recently in 2016) and is adjusting down, is still at levels not seen since 1975 (prior to mid-2015).”
Along the way, Peel points out average fed carcass weights are 14.6 lbs. lighter year to date.
“Average fed carcass weights are down due to lighter steer and heifer carcasses and a growing proportion of heifers to steers in the fed slaughter mix,” Peel says. “USDA reports total cattle slaughter up 5.8% year over year so far this year with beef production up 4.2% for the year to date.”