Feeder Cattle futures closed sharply lower on Tuesday, leading Live Cattle along, but to a lesser degree. There continues to be plenty of uncertainty surrounding the top in fed cattle prices, as well as consumer beef demand, relative to forward-contracted beef, coming out Thanksgiving. Lower wholesale beef values also contributed pressure.
Live Cattle futures closed an average of $1.43 lower (95¢ to $1.90 lower).
Feeder Cattle futures closed an average of $2.40 lower ($1.07 to $3.07 lower).
Choice boxed beef cutout value was $2.14 lower Tuesday afternoon at $210.67/cwt. Select was 34¢ lower at $193.49.
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Major U.S. financial indices closed lower on Tuesday. Among pressures cited by analysts: slower than expected economic growth in China and uncertainty surrounding tax reform.
The Dow Jones Industrial Average closed 30 points lower. The S&P 500 closed 5 points lower. The NASDAQ closed 19 points lower.
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Stronger cattle prices than expected this year are boosting estimated cow-calf returns higher to about on par with 2011, say analysts with the Livestock marketing Information Center (LIMC).
LMIC estimates a return of about $69 per cow this year compared to -$21 last year, even though cash production costs per cow are estimated to be slightly higher. That’s based on a typical commercial full-time spring calving and fall weaning operation.
“Those estimates are not survey-based and are developed for market analysis purposes,” LMIC analysts say in the latest Livestock Monitor. “They do not represent an individual ranch/farm resource base. LMIC calculations only include cash costs of production and pasture rent. That is, return to owner management, labor, etc., are not included. The returns are useful only in a general context. For example, the LMIC uses those estimates because producer return is a key factor influencing national herd growth or contraction.”
For perspective compared to last year, LMIC projects steer calf prices (500-600 lbs.) in the Southern Plains to be in the upper $160s for the fourth quarter. That would be about 21% ($28-$29 per head) more than last year.
Although returns look to be more than anticipated this year, LMIC analysts caution that they’re likely to erode over the next couple of years.
“Cyclically, U.S. calf crops are forecast to continue increasing throughout 2019,” LMIC analysts say. “U.S. beef tonnage produced in 2018 is expected to be record-large and should rise again in 2019. Unless demand (domestic and foreign) for beef comes in much better than anticipated, calf prices are forecast to slip for the next two years. Still, calf prices in the fourth quarters of both 2018 and 2019 could remain above 2016’s depressed level. However, any faltering in demand relative to 2017’s could quickly send cattle prices back down to 2016 levels.”