Cash fed cattle trade opened the week at mostly steady money. Live prices were at $120/cwt. in the Southern Plains and Nebraska, on moderate demand and trade. That matched the price paid in the weekly Fed Cattle Exchange auction on 239 head sold out of 466 offered (delivery 1-9 days). Dressed prices in Nebraska were steady to $2 higher than last week at $190, with a few up to $191.
Despite cash strength, Live Cattle futures closed lower, pressured by the strong downturn in Feeder Cattle, which was tied in part to wonderments about Friday’s monthly Cattle on Feed report (see below) and the level of fund liquidation through the end of the year.
Live Cattle futures closed an average of $1.34 lower (60¢ to $1.80 lower).
Feeder Cattle futures closed an average of $2.51 lower ($1.17 to $3.55 lower). That cleaved a $10.70 wedge between spot Jan and the CME Feeder Cattle Index of $152.47.
Choice boxed beef cutout value was $3.67 lower on Wednesday afternoon at $198.09/cwt.; about $5 lower in the last two days. Select was $1.17 higher at $185.49.
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Major U.S. financial indices edged lower again on Wednesday with Congress passing the tax reform bill.
The Dow Jones Industrial Average closed 28 points lower. The S&P 500 closed 2 points lower. The NASDAQ closed 2 points lower.
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Perhaps more speculation than usual surrounds the monthly Cattle on Feed report to be released Friday.
On one hand, the cowherd continues to expand.
Plus, David Anderson, Extension economist with Texas A&M University explains, “It is likely that dry conditions in the Southern Plains hindering winter pasture development may have forced more to feedlots. Feeder cattle imports from Mexico were up about 50,000 head in November compared to a year ago. Normally, many of those cattle would be going to winter pastures, but perhaps more went to feedlots given dry conditions. There were also, likely, some good opportunities to place cattle, especially early in the month. The expectation is that many more heifers are being placed reflecting more heifers born to the larger cow herd, but fewer being held back to replace cows.”
In the latest issue of In the Cattle Markets, Anderson says most analysts expect November placements to be higher again year over year, but across a wide range of about 3% to 10% more.
He explains “Placements towards the top end of the range would be the largest since the mid-2000s, while placements up about 6.7% would be the largest since 2011,” Anderson says.
On the other hand, analysts at Allendale, Inc. say, “Despite a $9 rise in fed cattle prices from October to November, cattle feeders have been impacted by profitability concerns. Kansas State University projects breakevens for December through April delivery fed cattle at $123/cwt. November placements supply the May through September slaughter period.”
Allendale expects November Placements to be 0.8% less than last year at 1.828 million head, slightly higher than the five-year November average.
As for fed cattle marketing, Anderson says some signs point to a less aggressive rate than what defined the year so far. Still, he sees November marketings 3.3% more than same period a year earlier.
“That would be the largest November marketings since the Cattle on Feed report began in its current form,” Anderson says.
Similarly, Allendale anticipates marketings to be 2.9% more than last year.
“Combining marketings and placements leaves expected cattle on feed for December 1 up 6.9% from a year ago,” Anderson says. “That would be the most December cattle on feed since 2011, as the drought was pushing more cattle to feedlots. Beef and live cattle demand will be critical in the coming months to avoid large price declines given this number of cattle on feed.”
Although a little less bearish, Allendale estimates total cattle on feed at the beginning of December to be 5.6% more, the largest Dec. 1 total in five years.