Feeder Cattle futures took another step lower Tuesday, presumably pressured mostly by surging grain prices (see below) and month-end positioning. Live Cattle followed along, to a lesser degree.
Except for 7¢ higher in away Aug, and unchanged in Feb and June, Live Cattle futures closed an average of 38¢ lower (5¢ to 75¢ lower).
Feeder Cattle futures closed an average of $1.76 lower through the front half of the board and then an average of 46¢ lower.
Boxed beef cutout values were weak on Choice and firm on Select, with light to moderate demand and offerings, according to the Agricultural Marketing Service.
Choice boxed beef cutout value was 45¢ lower Tuesday afternoon at $204.27/cwt. Select was 40¢ higher at $198.38.
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Major U.S. financial indices closed higher Tuesday, about gaining back what was given in the previous session. Support included chatter about global economic powers wanting to figure out how to avoid a trade war. Crude oil futures (WTI-CME) were $1.17 to $1.37 lower through the rest of the year.
The Dow Jones Industrial average closed 108 points higher. The S&P 500 closed 13 points higher. The NASDAQ was up 41 points.
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“This calendar year, calf and yearling prices are projected to be similar to 2016’s and 2017’s. In the fourth quarter of this year, calf prices may average slightly below 2017’s, but substantially above 2016’s,” say analysts with the Livestock Marketing Information Center (LMIC), in the latest Livestock Monitor. “If the general trends of the first half of 2018 persist, as of January 1, 2019, the U.S. cowherd likely will be up well less than 1.0% year over year. That suggests cyclically stronger calf prices are ahead (e.g., calf prices in the fall of 2020). Pre-planning may position a cattle operation to take advantage of this market transition.”
Bottom line, those analysts explain the clearest signal in the current market resides on the supply side of the equation, with the national beef cowherd a good ways down the expansion phase of the current cattle cycle.
The recent mid-year Cattle report from USDA underscored the point with just less than 1% more beef cows year to year, along with 2.1% fewer beef replacement heifers.
“The NASS survey largely confirmed that the national herd is still growing, but importantly, at a moderating pace compared to that of recent years,” LMIC analysts say. “Looking ahead, smaller herd growth rates will translate into the rather modest year-over-year increase in beef production in 2019. If recent cowherd trends persist, 2020 could mark the end of the current U.S. cattle inventory build-up.”