WLI

The widely expected significant increase in October feedlot placements was confirmed in Friday’s monthly Cattle on Feed report. Although less than most expected (see below), positioning ahead of the report provided the opportunity some had been seeking for a market correction.

Live Cattle futures closed an average of $1.52 lower

Feeder Cattle futures closed an average of $3.03 lower.

Wholesale beef values were sharply lower on light demand and moderate offerings, according to the Agricultural Marketing Service.

Choice boxed beef cutout value was $2.29 lower Friday afternoon at $232.57/cwt. Select was $2.54 lower at $211.32.

Corn futures closed mostly fractionally lower to 1¢ lower.

Soybean futures closed 1¢ to 4¢ lower.

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Major U.S. financial indices closed higher Friday. Once again, many ascribed movement to U.S.-China trade talks; positive this time.

The Dow Jones Industrial Average closed 109 points higher. The S&P 500 closed 6 points higher. The NASDAQ was up 13 points.

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Feedlot placements in October were significantly higher than the previous year, as many expected, but a little less than pre-report estimates, according to Friday’s monthly Cattle on Feed report for feedlots with 1,000 head or more capacity.

There were 2.48 million head placed, which was 10.19% more (+299,000 head) than last year. Ahead of the report, amid a wide range, analyst consensus was for an increase of 12%.

In terms of placement weight, 46.02% weighed 699 lbs. or less; 40.05% weighed 700-899 lbs.; 13.93% weighed more than 900 lbs.

“If you remember back to last year, drought throughout the Plains brought many more calves to market through the summer months than in recent times,” say analysts with USDA’s Agricultural Marketing Service (AMS). “This year, with the excellent grazing conditions and uncertainty fueled by the fire at a packing plant in Kansas, producers were content to graze calves longer. At some point, though, these cattle had to show up at auction or be marketed directly to feedlots.” 

Marketings in October of 1.88 million head were 0.64% less (-12,000 head), which was in line with expectations.

As of Nov. 1, there were 11.83 million head on feed, which was 1.19% more (+139,000 head) than the previous year.

Beef in Cold Storage Declines

Total pounds of beef in freezers Oct. 31 were 1% less than the previous month and 10% less than a year earlier, according to the monthly Cold Storage report issued Friday.

Frozen pork supplies were record large for the month, up 3% from the previous month and up 8% from last year.

Total red meat supplies in freezers were up 1% from the previous month but down 1% from last year.

Total frozen poultry supplies were 7% less than the previous month and 3% less than a year earlier.

For the week so far, negotiated cash fed cattle trade is mainly $1 higher on a live basis at $116/cwt. in the Southern Plains and at $115-$117 up north. Dressed trade is $2 higher at $184.

Cattle futures closed lower Thursday, though, especially Feeder Cattle, as wholesale beef values show signs of seasonal weakening, and ahead of Friday’s Cattle on Feed report.

Other than 2¢ higher in spot Dec, Live Cattle futures closed an average of 49¢ lower

Feeder Cattle futures closed an average of $1.18 lower.

Wholesale beef values were sharply lower on light demand and moderate offerings, according to the Agricultural Marketing Service.

Choice boxed beef cutout value was $3.35 lower Thursday afternoon at $234.86/cwt. Select was 91¢ lower at $213.86.

Corn futures closed mostly fractionally higher to 1¢ higher.

Soybean futures closed 1¢ to 4¢ lower.

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Major U.S. financial indices continued to drift lower Thursday, with continued uncertainty surrounding the enigmatic back and forth chatter concerning the U.S.- China trade deal.

The Dow Jones Industrial Average closed 54 points lower. The S&P 500 closed 4 points lower. The NASDAQ was down 20 points.

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Beef cow slaughter appears to be picking up speed, based on USDA’s monthly Livestock Slaughter report issued Thursday.

Non-dairy cow slaughter—the ‘other cow’ category in USDA’s report—for October of 307,900 head was 28,800 head more (+10.32%) than last year. For January through October, non-dairy cow slaughter of 2.61 million head is 82,000 head more (+3.24%) than the same period last year.

Similarly, fed heifer slaughter of 8.16 million head for the first 10 months of the year is 572,400 head more (+7.54%) than the same period in 2018.

For perspective, total fed steer and heifer slaughter in October of 2.28 million head was 9,900 head fewer (-0.43%) than the previous year. For January through October, however, fed steer and heifer slaughter of 21.85 million head is 253,100 head more (+1.17%) than the same period last year.

Federally inspected cattle slaughter for the month of October was 2.93 million head, which was 17,600 head more (+0.61%) than the previous year.

Dressed steer weights in October averaged 902 lbs., which was 4 lbs. heavier than the previous year. For January through October, though, dressed steer weights are 4 lbs. lighter at 872 lbs.

Dressed heifer weights in October averaged 830 lbs., which was even with the previous year. For January through October, however, dressed heifer weights are 5 lbs. lighter at 808 lbs.

Total beef production in October was 2.44 billion lbs., which was 7.5 million lbs. more (+0.31%) than the previous year. For January through October, total beef production of 22.59 billion lbs. was 147.5 million lbs. more (+0.66%) than last year.

Negotiated cash fed cattle trade developed in the Southern Plains Wednesday at $116/cwt., which was $1 higher than last week.

That matched optimism in the weekly Fed Cattle Exchange Auction, where 1,229 head—three lots each from Kansas and Nebraska—sold out of 1,398 head: 283 head for a weighted average price of $116/cwt. (delivery at 1-9 days) and 946 head for a weighted average price of $115.44 (delivery at 1-17 days). One other lot of Texas heifers was passed at $114.50 for delivery at 1-9 days.

Although too few to trend, there were also some early sales in Nebraska Wednesday at $114-$116 and some in the beef at $184, which was $2 higher than the previous week. Early live sales in the western Corn Belt were steady to $2 higher at $115-$117.

Cattle futures were mixed Wednesday, mainly higher toward the front of the board for Live Cattle, but lower for Feeder Cattle, perhaps with defensive positioning ahead of Friday’s Cattle on Feed report (see below).

Live Cattle futures closed narrowly mixed from an average of 27¢ lower to an average of 21¢ higher.

After unchanged and 5¢ higher in the front two contracts, Feeder Cattle futures closed an average of 41¢ lower.

Wholesale beef values were weak to lower on moderate demand and offerings, according to the Agricultural Marketing Service.

Choice boxed beef cutout value was 80¢ lower Wednesday afternoon at $238.21/cwt. Select was 70¢ lower at $214.77.

Corn futures closed mostly 1¢ to 3¢ lower.

Soybean futures closed 1¢ to 6¢ lower through Nov ’20 and then 1¢ to 2¢ higher.

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Major U.S. financial indices closed lower Wednesday. Despite strong earnings from retailers like Lowe’s and Target, pressure came on chatter that the first phase of the U.S.-China trade deal might not get signed this year.

The Dow Jones Industrial Average closed 112 points lower. The S&P 500 closed 11 points lower. The NASDAQ was down 49 points.

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Pre-report estimates of feedlot placements in October are canyon-wide, which could jolt markets one way or the other, after the monthly Cattle on Feed report comes out Friday.

Allendale Inc. projects October placements at 2.163 million head, which would be 3.8% less than the previous year and the least for the month in seven years.

On the other hand, the average estimate of analysts surveyed by Urner Barry, and reported by the Daily Livestock Report, is for placements to be up 12.2%.

There are a number of factors likely driving such diverse views.

Apparent improvement in feedlot margins, reports of poor wheat pasture conditions, delayed calf marketing—due to low prices and market uncertainty and made possible by positive forage conditions—support the notion of higher placements. 

Conversely, lower placements could be driven, in part, by the current value of gain for growing cattle outside the feedyard, reduced imports of feeder cattle, as well as growing chatter that there may be fewer cattle than previously thought. 

Both of the aforementioned groups estimate October marketings to be slightly less than the previous year.

Allendale estimates total cattle on feed Nov. 1, for feedlots with 1,000 head or more capacity to be 11.484 million head, which would be 1.8% less than the previous year. However, given the significantly higher placements anticipated by those in the Urner Barry survey, they estimate a year-over-year on-feed increase of 1.3%.

Cattle futures closed narrowly mixed Tuesday with most of the pressure coming toward the front of the board, but remaining channel bound.

After 7¢ higher in spot Dec and then 5¢ to 22¢ lower in the next three contracts, Live Cattle futures closed an average of 44¢ higher. 

Other than an average of 26¢ lower in three of the front contracts, Feeder Cattle futures closed an average of 33¢ higher.

Wholesale beef values were steady on moderate demand and offerings, according to the Agricultural Marketing Service.

Choice boxed beef cutout value was 11¢ lower Tuesday afternoon at $239.01/cwt. Select was 12¢ lower at $215.47.

Combined, 78.19% of carcasses graded Prime and Choice the week ending Nov. 8, according to the USDA National Steer and Heifer Estimated Grading Percent report. That was the highest level since last May. At 9.89%, Prime was the highest since last March.

Corn futures closed mostly 2¢ to 3¢ higher.

Soybean futures closed mostly fractionally higher to 2¢ higher.

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Major U.S. financial indices closed mixed Tuesday. Weaker same-store sales from the likes of Home Depot and Kohl’s appeared to be the primary pressure.

The Dow Jones Industrial Average closed 102 points lower. The S&P 500 closed 1 point lower. The NASDAQ was up 20 points.

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“While beef exports (U.S.) are likely to end 2019 with an almost 2% decline, shipments are expected to rebound in 2020 by about 7%, as drought in

competitor Australia reduces its exportable supply at the same time as beef demand continues to expand in Asia,” say analysts with USDA’s Economic Research Service (ERS), in the November Livestock, Dairy and Poultry Outlook.

U.S. beef exports in September were 3% less than a year earlier, according to ERS, with most of the decline coming from shipments to Japan, Hong Kong and Mexico. But, exports were higher year over year to South Korea, Indonesia, China, Philippines, Taiwan and Vietnam.

“Several factors, including increased demand for animal proteins in Asia, changes in trading patterns, and tighter supplies in Australia, positioned the United States to expand its shipments of beef to a number of Asian countries during September,” say ERS analysts.

Net sales of beef to international customers (25,300 mt) for the week ending Nov. 7 were up 92% from the four-week average, according to the most recent Weekly U.S. Export Sales report from USDA’s Foreign Agricultural Service.

Domestically, retail beef demand in the third quarter was the highest since 2015, according to the Meat Demand Index (MDI) calculated by the Livestock Marketing Information Center (LMIC).

“Retail beef demand is currently in an up-cycle after 2008-2013 showed values below 100. Since 2014 the index for the third quarter has ranged from 102 to 110,” say LMIC analysts, in the latest Livestock Monitor.