WLI

Negotiated cash fed cattle trade remained undeveloped through Wednesday afternoon. Depending on the snugness of packer inventories, odds appear to favor at least steady money.

There were only 528 head offered in the weekly Fed Cattle Exchange auction. No takers.

Cattle futures continued to putter along, holding on to most of last week’s gains, closing narrowly mixed to a touch lower and awaiting cash direction.

Live Cattle futures closed unchanged to an average of 10¢ lower.

Feeder Cattle futures closed from 42¢ lower to 50¢ higher.

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

Choice boxed beef cutout value was $1.04 lower Wednesday afternoon at $204.25/cwt. Select was $1.29 lower at $194.18.

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Major U.S. financial indices closed mixed Wednesday, with bank shares pushing the Dow higher with support from the higher 10-year treasury yield.

The Dow Jones Industrial Average closed 158 points higher. The S&P 500 closed 3 points higher. The NASDAQ was down 6 points.

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“Feeder cattle prices have shown strength through the summer, but seasonal pressures will likely take hold, moving prices lower in the fourth quarter,” say analysts with USDA’s Economic Research Service (ERS), in the latest monthly Livestock, Dairy and Poultry Outlook. “Prices typically decrease when the spring-born calves (about two-thirds of the annual calf crop) are brought to market in the fall. Assuming normal weather in the Great Plains, availability of winter forages for backgrounding could bolster prices in fourth-quarter 2018.”

Prices for the rest of this year and next were forecast slightly higher than the previous month at $148-$151/cwt. in the third quarter; $143-$151 in the fourth quarter; $139-$151 for the 2019 annual price, based on lower projected corn prices.

“Regarding fed cattle prices in second-half 2018, feedlots seem to have resisted recent lower prices from packers, which may be reflected in a greater proportion of cattle on feed over 120 days. To the extent these cattle are remaining on feed longer as producers respond to the prospects of higher future prices, there could be a shift of some marketings from the third quarter to the fourth,” say ERS analysts. “The fed steer price forecast for the 5-area marketing region in third-quarter of 2018 is $108-$111/cwt., but the fourth-quarter forecast is lowered to $108-$114/cwt., in line with expectations of increased marketings.”

Live Cattle futures meandered to a narrowly lower close Tuesday, with pressure and support apparently capped by strong trader interest in surging Lean Hog futures. Feeder Cattle closed lower on light trade, across a wide range.

Live Cattle futures closed an average of 29¢ lower.

Feeder Cattle futures closed an average of 80¢ lower, (7¢ lower in the back contract to $1.50 lower in spot Sep).

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

Choice boxed beef cutout value was 75¢ lower Tuesday afternoon at $205.29/cwt. Select was $1.91 lower at $195.47.

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Major U.S. financial indices closed higher Tuesday, with investors reportedly less concerned about the recently announced added tariffs on Chinese imports.

The Dow Jones Industrial Average closed 184 points higher. The S&P 500 closed 15 points higher. The NASDAQ was up 60 points.

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Byproduct values continue to languish, pressured by significantly lower hide prices.

“Heavy steer hides set the lowest weekly average value since 2012 this July, at $68.40 per piece,” according to analysts with the Livestock Marketing Information Center (LMIC), in the latest Livestock Monitor. “The average weekly value during this five-year timeframe is $104.67 per piece. In the second week of September, the price hit $69.33, nearly 35% off the average weekly value…That in part could be related to certain companies moving away from real leather in favor of synthetics, dampening demand. Also, the supply of hides has grown as slaughter rates have increased…On a per-head basis, the weakness in hide prices is knocking off more than $25 per animal compared to the five-year average.”

Hides are the primary contributor to the cattle by-product calculation.

For the most recent week (ending Sept. 7), steer by-product value was down 12%/cwt., compared to last year, according to LMIC. For the last year, the daily reported steer byproduct value has ranged from $9.01 to $10.86/cwt.

The late-week surge in Cattle futures ultimately helped negotiated cash fed cattle prices take a strong step higher. Live sales were mainly $3-$4 higher at $110.00-$111.50/cwt. Dressed trade was $2-$5 higher at $172-$175.

Cattle futures mostly held on to Friday’s strong gains, closing narrowly mixed to mostly a touch higher.

Live Cattle futures closed narrowly mixed (37¢ lower to 40¢ higher), with the most open interest since July.

After 10¢ higher in spot Sep, Feeder Cattle futures closed an average of 46¢ higher, except for unchanged to 37¢ lower in the back three contracts.

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

Choice boxed beef cutout value was $1.77 higher Monday afternoon at $206.04/cwt. Select was 91¢ higher at $197.38.

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Major U.S. financial indices closed lower Monday, with most of the pressure attributed to sliding tech shares, tied to more sabre rattling about trade between the U.S. and China.

The Dow Jones Industrial Average closed 92 points lower. The S&P 500 closed 16 points lower. The NASDAQ was down 114 points.

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“There is still a likelihood that calf prices will hold steady or decline some into October, but the seasonal pressure may be muted with strong stocker demand,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “The market appears to be developing a typical fall market pattern for mid-weight steers with a sharp break on prices from 475 to 525 lbs. and prices relatively flat for steers weighing 525-700 lbs. Heifer calf prices continued a modest seasonal decline last week. Stocker producers should evaluate a range of possible purchase weights and look at steers versus heifers to determine the best purchase opportunity.”

With recent moisture, Peel says there’s plenty of chatter about wheat grazing prospects this winter.

“Budgets for winter grazing appear to pencil out quite attractively at this point.  Feeder futures have remained remarkably strong, with March feeder futures trading near $153/cwt. at the end of last week,” Peel explains. “With normal basis, these contract levels offer an opportunity to price spring cattle above projected break-evens for winter grazing. However, this may be a fleeting opportunity as there several factors that might drive a futures market correction.  One is that current feeder price levels result in negative projected feedlot margins in coming months. The reality is that feeder cattle supplies are still plentiful and the September Cattle on Feed report, due out September 21, could indicate a large feedlot placement level with implications for spring feeder markets.”

Running the numbers for Oklahoma, Peel says, given expected wheat price, along with fertilizer and seed cost, the projected cost of wheat pasture (above other wheat production costs) is estimated at near $70/acre. 

“The cost per pound of gain depends on cattle average daily gain, number of days of grazing and wheat pasture stocking rate. Across a range of these assumptions, wheat pasture breakeven cost calculates out to a range from 30¢ to 45¢/lb. gain for winter grazing,” Peel says.

Cattle feeders and beef packers continued their weekly standoff through late Friday afternoon, based on USDA reports. However, the strong rally in Cattle futures had most betting for higher fed prices when all was said and done.

In fact, Live Cattle futures for spot Oct closed at the highest level since March, finally breaking out of the month’s long, sideways trend. That dragged the rest of the complex higher.

There didn’t seem to be a simple explanation for the surge in futures prices. Looking beyond the third quarter, supply fundamentals improve, of course. There was also chatter that some of the spark came from reports that more Foot and Mouth Disease had been confirmed in a Chinese cattle herd.

Except for 60¢ and 37¢ higher in the back two contracts, Live Cattle futures closed an average of $1.93 higher ($1.12 higher to $3.00 higher in spot Oct).

Feeder Cattle futures closed an average of $2.58 higher ($1.77 to $3.47 higher).

“This week’s price movement is working against the seasonal tendency of calf prices as are feeder cattle futures contracts,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “The calf and feeder cattle market have remained strong through the late summer months and the futures market is suggesting continued strength while seasonal price trends would suggest lower prices. Prices are strong now with most of the price risk being to the downside.”

Wholesale beef values were steady on Choice and lower on Select, with light to moderate demand and offerings, according to the Agricultural Marketing Service.

Choice boxed beef cutout value was 23¢ higher Friday afternoon at $204.27/cwt. Select was 77¢ lower at $196.47.

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Major U.S. financial indices closed narrowly mixed Friday, between strength from chipmakers and more angst about U.S.-China trade.

The Dow Jones Industrial Average closed 8 points higher. The S&P 500 closed fractionally higher. The NASDAQ was down 3 points.

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Wholesale beef values continue to ride seasonal trends lower, but Andrew P. Griffith, agricultural economist at the University of Tennessee, points out demand remains relatively strong in the face of increased beef production.

“Beef demand the past several years has been relatively strong based on the demand index computed by the Livestock Marketing Information Center (LMIC). Demand for beef in 2015 was at its highest level since 1991, based on LMIC calculations. Demand softened slightly in 2016 and 2017 based on the same calculations, but remained relatively strong compared to the previous decade,” Griffith explains, in his weekly market comments. “Demand in 2018 appears to be rounding into form similar to the previous two years with continued strong demand that has supported beef and cattle prices through the entire production chain. Several factors are contributing to strong beef demand, with the most likely being increased income levels, consumers preference for beef, and exports.”