WLI

Negotiated cash fed cattle trade was $1-$2 lower last week at $108/cwt. (western Corn Belt) to $109.50. Dressed trade was steady to $2 lower at $171-$174.

Softer cash fed cattle prices, the lack of open interest and anxiety about Friday’s monthly Cattle on Feed report (see below) pressured Cattle futures sharply lower to end the week.

Except for 57¢ and 7¢ lower in the back two contracts, Live Cattle futures closed an average of $1.51 lower.

Except for 17¢ higher in soon-spent spot Aug and 95¢ lower in the back contract, Feeder Cattle futures closed an average of $1.71 lower.

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

Choice boxed beef cutout value was $1.05 lower Thursday afternoon at $213.32/cwt. Select was 17¢ lower at $203.82.

*******************************

Major U.S. financial indices closed higher Friday, amid broad economic optimism.

The Dow Jones Industrial average closed 133 points higher. The S&P 500 closed 17 points higher. The NASDAQ was up 67 points.

*******************************

USDA’s monthly Cattle on Feed report will likely be viewed as bearish by the trade with more placements than many expected and the most cattle on feed Aug. 1 since the data series began in 1996.

Placements in July—in feedlots with 1,000 head or more capacity—were 1.74 million head, which was 7.86% more (+127,000 head) than the previous year. That’s about 2% more than popular expectations. In terms of weight distribution, 40.19% went on feed weighing 699 lbs. or less; 44.89% weighing 700-899 lbs.; 14.93% weighing more than 900 lbs.

Marketings in July of 1.87 million head were 4.99% more (+89,000 head) than last year.

Cattle on feed Aug. 1 of 11.09 million head were 4.61% more (+489,000 head) than last year.

At $109/cwt. Thursday, negotiated cash fed cattle trade in the Southern Plains was $1.50 lower than the previous week, amid moderate trade and light to moderate demand. Live trade in other regions this week was generally steady to $1 lower at $108-$110, but mostly $109.00-$109.50. Dressed sales were steady to $1 either side of even at $172-$174.

Cattle futures closed narrowly mixed to lower Thursday, pressured by softer cash prices and perhaps some positioning ahead of Friday’s monthly Cattle on Feed report. Trade continued sluggish and open interest continued to decline.

Live Cattle futures closed an average of 35¢ lower.

Feeder Cattle futures closed 25¢ lower to 32¢ higher.

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

Choice boxed beef cutout value was 33¢ higher Thursday afternoon at $214.37/cwt. Select was 2¢ higher at $203.99.

*******************************

Major U.S. financial indices closed lower Thursday, pressured by trade worries and White House legal issues.

The Dow Jones Industrial average closed 76 points lower. The S&P 500 closed 4 points lower. The NASDAQ was down 10 points.

*******************************

Unsurprisingly, given drought-forced cattle movement, there’s plenty of range in expectations for Friday’s monthly Cattle on Feed report. Depending on the analyst or survey considered, July placements will be 5-8% more than the prior year, July marketings will be from 2% less to 5% more and the Aug. 1 cattle on feed number will be 4-5% more.

For instance, according to Allendale, Inc., “July Placements are expected to be 8.7% over last year at 1.756 million head. This is the largest July placement in six years. It would also mark three months in a row of higher than last year placements. High placements have been seen despite profitability concerns.”

Allendale anticipates a July marketing total of 1.2% less than the previous year for a total of 1.763 million. The firm expects total cattle on feed Aug. 1 of 11.224 million head, which would be 5.8% more than last year and a record high since the current data-series began in 1996.

*******************************

U.S. beef production, was 6% more than the previous July at 2.23 billion lbs., according to the monthly USDA Livestock Slaughter report released Thursday. Total cattle slaughter of 2.77 million head was also 6% higher. The average live weight was 3 lbs. lighter at 1,330 lbs. Keep in mind, there was one more workday this July. Accumulated beef production for January through July was 4% more than the same period last year at 15.42 billion lbs.

Likewise, pork production was 6% more year over year at 1.99 billion lbs. Hog slaughter totaled 9.60 million head, up 6% from July 2017. The average live weight was unchanged from the previous year, at 277 lbs.

In July, U.S. commercial red meat production was 6% more than the previous year at 4.24 billion lbs. For January through July, commercial red meat production was 4% more at 30.5 billion lbs.

There were only 359 head offered—two lots of Kansas heifers—in the weekly Fed Cattle Exchange Auction, but 280 head sold for a weighted average price of $109.50 (delivery at 1-9 days). That’s 50¢ lower than most of the country trade in the region last week.

“Packers are buying cattle in the country at $109.00-$109.50 and were not willing to push any higher than that at the auction,” said the AMS reporter on hand at Sioux Falls Regional Livestock in South Dakota. Choice 2-4 steers brought $108-$109.25 at the auction with estimated dressed cost of $173-$175, some to $176.

Likewise, Ch 2-4 steers brought $109.41-$110.44 at Tama Livestock Auction in Iowa.

Though too few to trend, USDA reported country trade in the region at $108-$110, which was steady to $1 lower than the previous week. Trade in the Northern Plains continued 50¢ to $1.00 lower at $109.00-$109.50.

Although closing above session lows, Cattle futures sagged lower from the outset Wednesday. Commodities had a rough day, in general. Some chalked pressure up to lower outside markets and uncertainty surrounding trade. Others suspect it was mostly algo-trading in the driver’s seat.

Live Cattle futures closed an average of $1.25 lower (67¢ to $1.57 lower).

Except for 47¢ lower in spot Aug, Feeder Cattle futures closed an average of $2.03 lower.

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

Choice boxed beef cutout value was 47¢ higher Wednesday afternoon at $214.04/cwt. Select was 11¢ lower at $203.97.

*******************************

Major U.S. financial indices closed mixed Wednesday with continued strong quarterly earnings providing a counterweight to concerns about the President’s legal troubles.

The Dow Jones Industrial average closed 88 points lower. The S&P 500 closed 1 point lower. The NASDAQ was up 29 points.

*******************************

Projected feedlot returns continue on the negative side (cash to cash basis) through the rest of the year, but are significantly more robust than expectations just a few months ago, according to the August Historical and Projected Kansas Feedlot Net Returns.

For instance, projected steer closeouts increase from an estimated -$109.31 per head in July ($82.95/cwt. FCOG*) to -$10.31 in December ($83.94 FCOG).

Likewise, projected heifer closeouts increase from an estimated -$79.18 in July ($88.80 FCOG) to -$11.75 in December ($90.46 FCOG).

“Returns for August-October improved from last month, mainly reflecting increased fed cattle price expectations,” says Glynn Tonsor, agricultural economist at Kansas State University, author of the report.

*Feeding Cost of Gain

Cattle futures closed narrowly mixed to slightly lower Tuesday amid sluggish action and participation as the trade awaits direction from the cash market.

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

Choice boxed beef cutout value was 41¢ lower Tuesday afternoon at $213.57/cwt. Select was $1.79 higher at $204.08.

Except for 2¢ to 20¢ higher in the front three contracts, Live Cattle futures closed an average of 28¢ lower.

Feeder Cattle futures closed an average of 39¢ lower.

*******************************

Major U.S. financial indices continued to rise Tuesday amid positive economic news, higher crude oil prices and chatter about the longest bull market in history.

The Dow Jones Industrial average closed 63 points higher. The S&P 500 closed 5 points higher. The NASDAQ was up 38 points.

*******************************

“Looking at the rest of 2018, feeder prices are expected to be a little lower than during the same period of 2017,” says Josh Maples, Extension livestock economist at Mississippi State University, in the latest issue of In the Cattle Markets. “We typically see seasonal feeder price declines heading into September and October, and the large supplies of calves this year provide some reasoning for that seasonal pattern to hold this year. Looking beyond 2018, the slower herd growth numbers begin to paint a brighter price picture for 2019 and 2020. If the strong domestic economy maintains or grows and exports continue to gain steam, it is not difficult to project higher prices in the Fall of 2019 compared to fall 2018.”

In the meantime, Maples says increasing beef production will pressure prices. He explains beef production increased 6.4% in 2016 and 3.8% last year.

“Current forecasts suggest about a 4% increase in 2018, and 1.5% in 2019,” Maples says. “Put it all together and that would be about a 16% increase in beef production in just four years. This would be the fastest four-year growth since 1973-1977. The increases are slowing, though. All signs are pointing to slower herd expansion in 2018 and 2019. With respect to the cattle cycle, recent cowherd trends suggest 2020 could potentially mark the end of the current U.S. cattle inventory build-up. It is important to note that this would not be the end of a cycle, just the increasing segment of the cycle.”

Negotiated cash fed cattle trade ended up mostly 50¢ to $1 lower last week at mostly $110/cwt. Dressed sales were $1-$3 lower at mostly $173. The weekly 5-area fed steer price was $1.07 lower week to week on Monday at $109.91 live.

Cattle futures edged lower, but firmed after early-session pressure from last week’s softer cash fed cattle prices. Support included sharply higher wholesale beef prices, reaching their highest levels since June.

Choice boxed beef cutout value was $2.60 higher Monday afternoon at $213.98/cwt. Select was $1.37 higher at $202.29.

Except for unchanged to 7¢ higher in the middle of the board, Live Cattle futures closed an average of 21¢ lower.

Except for 2¢ higher in the back contract, Feeder Cattle futures closed an average of 44¢ lower (5¢ lower to $1.32 lower).

*******************************

Major U.S. financial indices extended gains Monday, with a decline in Treasury yields and higher hopes that trade issues between the U.S. and a number of countries will find resolution.

Mergers and acquisition news were also supportive, including news that Tyson Foods will purchase Keystone Foods—a major meat supplier to leading Quick Service restaurants—from Marfrig Global Foods for $2.16 billion.

According to Tom Hayes, president and CEO of Tyson Foods, “…Keystone provides a significant foundation for international growth with its in-country operations, sales and distribution network in high growth markets in the Asia Pacific region, as well as exports to key markets in Europe, the Middle East and Africa.

The Dow Jones Industrial average closed 89 points higher. The S&P 500 closed 6 points higher. The NASDAQ was up 4 points.

*******************************

African Swine Fever (AFS) is threatening China’s swine industry, the world’s largest hog population. Three cases have been confirmed so far—in three provinces with a fourth implicated—according to the Swine Health Information Center (SHIC). The first was confirmed Aug. 3 and the latest Aug. 20.

AFS is a highly contagious hemorrhagic disease that affects pigs of all ages, according to the World Organization for Animal Health Organization (WHO).

“With high virulence forms of the virus, ASF is characterized by high fever, loss of appetite, haemorrhages in the skin and internal organs, and death in 2-10 days on average. Mortality rates may be as high as 100%,” according to a WHO fact sheet.

Although some pork production systems in China are similar to those in the U.S., SHIC explains much of domestic consumption in China comes from small production units—family or neighborhood—with pigs fed human food scraps.

“The swine industry has never seen an ASF outbreak in such a production landscape, and control measures are untested,” according to the SHIC Monitoring Report. “The Chinese industry has had difficulties in controlling FMD (Foot and Mouth Disease) and CSF (Classical Swine Fever), and has relied heavily on the use of vaccines. As a vaccine is not available for ASF, the industry is thus reliant on heightened biosecurity, rapid diagnosis, complete isolation, and then elimination of infected pigs and contaminated materials.”