Indecision may be the most apt description of Cattle futures trade on Tuesday as traders tried to sort out how much upside there is to the current oversold status, compared to sluggish wholesale beef values and increasing cattle numbers.
Cattle futures closed narrowly mixed—a touch higher for Feeder Cattle and a touch lower for Live Cattle.
Except for 7¢ higher in the back contract, Live Cattle futures closed an average 22¢ lower.
Feeder Cattle futures closed an average of 28¢ higher.
Choice boxed beef cutout value was 94¢ lower Tuesday afternoon at $208.63/cwt. Select was 8¢ lower at $187.20.
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Major U.S. financial indices closed sharply higher on Tuesday, with many analysts crediting the sharp bounce to reports that the Senate is close to passing its tax reform proposal. Other support came from merger and acquisition news, including the deal for Arby’s Restaurant Group to acquire Buffalo Wild Wings (BWW) in a $2.9 billion deal (including BWW debt).
The Dow Jones Industrial Average closed 255 points higher. The S&P 500 closed 25 points higher. The NASDAQ closed 33 points higher.
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“Chicken production this quarter is poised to post the biggest year-over-year increase since the summer of 2015,” say analysts with the Livestock Marketing Information Center (LMIC) in a recent Livestock Monitor. “Hatchery output has been up by as much as 5% in some weeks in recent months as the chicken industry responds to the best profitability since the middle of 2014, based on the metric of wholesale parts prices relative to feed costs.”
That’s worth pondering with increased red meat and poultry production this year, which will grow even more next year.
USDA’s Economic Research Service (ERS) estimates broiler production next year 1.8% higher at 42.3 billion lbs. That total is about 35% more than estimated beef production for next year of 27.6 billion lbs. For the record, pork production next year is projected at 26.9 billion lbs.
Back to those chickens, LMIC estimates heavier average bird weights likely will account for 1% of the estimated 3.4% year-to-year increase in fourth-quarter broiler production.
“Average bird weights in September set a record at 6.25 lbs., up from 6.18 lbs. in the prior month and 6.15 lbs. a year ago,” LMIC analysts say. “Bird weights in September 2016 were lighter than in September 2015 as the chicken industry was trying to find a solution to breast meat quality problems that were believed to be related to rapid bird growth.”
More worrying to animal protein competitors is the lack of international demand for U.S. chicken, relative to production growth.
“The increase in U.S. chicken production is not being matched by larger volumes of product moving into the export market,” LMIC analysts explain. “Consequently, domestic supplies of chicken available are up commensurately… This year’s shipments to Mexico are on course to be the smallest since 2012. Sales to Canada have run below year-earlier levels since April. Cuba had been a growth market, but exports to that destination fell in September. All told, chicken exports in September were down 12% from September 2016, the biggest monthly decline from a year ago for 2017 to-date.”