WLI

There were only 225 head—two lots of steers—offered in the weekly Fed Cattle Exchange auction on Wednesday and no takers. Likewise, country trade remained undeveloped through the afternoon.

Cattle futures took another step higher on Wednesday, though, building on early-week gains. Besides follow-through support, perhaps some of it was positioning ahead of the monthly Cattle on Feed report due out Friday, and the long holiday weekend ahead.

Live Cattle futures closed an average of $1.49 higher (55¢ higher in spot Jun to $2.15 higher).

Feeder Cattle futures closed an average of $2.01 higher (95¢  higher in spot May to $2.62 higher).

Wholesale beef values were mixed on Wednesday. 

Choice boxed beef cutout value was 73¢ higher in the afternoon at $230.08/cwt. Select was 82¢ lower at $205.04. The Choice-Select spread widened to $25.04, the most since last June.

Select and Choice rib and chuck cuts sold steady to firm, while round cuts traded steady to weak, according to the Agricultural marketing Service. Choice loin cuts sold higher, weak for Select. Beef trimmings sold mostly moderately lower on light to moderate demand and moderate offerings.

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Major U.S. financial indices closed higher on Wednesday, after early follow-through pressure. Reportedly, much of the support was tied to release of minutes from the Federal Open Market Committee (FOMC) indicating a willingness to let inflation run a little past its objective of 2% without applying more brake via more aggressive interest rate hikes.

Consumer price inflation, as measured by the 12-month percentage change in the price index for personal consumption expenditures, was 2% in March, according to the minutes.

The Dow Jones Industrial Average closed 52 points higher. The S&P 500 closed 8 points higher. The NASDAQ closed 47 points higher.

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“…heifer carcass weights in 2018 are the same size as steer carcasses were in 2005,” notes Derrell Peel, Extension livestock marketing specialist at Oklahoma State University.

In his weekly market comments, Peel provides insights regarding the impact of heifer slaughter, relative to overall fed beef production. It has to do with both the percentage of heifers in the slaughter mix and their average carcass weight.

“During periods of herd expansion, the heifer percentage of yearling slaughter drops to roughly 31%. During periods of herd liquidation, heifers will contribute about 40% to total yearling slaughter,” Peel explains. “Most recently, heifer slaughter has increased to an annual average of 34.3% of yearling slaughter as heifer retention slows down.”

As for weight, both steer and heifer carcass weights continue to trend higher, as they have for the past 50 years, Peel says. However, heifer carcass weights continue to grow more, relative to steers.

Heifer carcasses averaged 564 lbs. in 1967, according to Peel. The average weight last year was 811 lbs. Looking from another angle, he explains heifer carcasses averaged 84% of steer carcass weights until the mid 1970s. By 2010, heifer carcass weights were 92.3% of steer carcass weights. The percentage continues to edge higher since then—92.5% for the 12-month moving average.

“Heifer carcass weights appear to have provided a buffer against big steer carcasses for the past decade or more, but that may be coming to an end,” Peel says. “It may be that cattle and carcass weights can physically continue to get bigger, but there is a very real question of the demand implications and economic consequences of continued growth in steer and heifer carcass weights.”

Cattle futures edged marginally higher on Tuesday, able to hold on to the previous day’s strong gains, after early pressure and amid light trade.

Except for 2¢ lower in spot Jun, Live Cattle futures closed an average of 20¢ higher.

Feeder Cattle futures closed an average of 10¢ higher.

Wholesale beef values continued to unwind Tuesday. 

Choice boxed beef cutout value was $1.47 lower in the afternoon at $229.35/cwt. Select was $1.66 lower at $205.86. Demand was light to moderate on moderate offerings.

Select and Choice rib, chuck, round, and loin cuts sold steady to weak, according to the Agricultural marketing Service. Beef trimmings sold sharply higher on moderate to good demand and moderate offerings.

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Major U.S. financial indices gave back a majority of the previous day’s gains on Tuesday, reportedly on President Trump commenting that he’s dissatisfied with Chinese trade talks thus far. Of course, it was the weekend joint statement from the two nations—placing new tariffs on hold—that boosted stocks on Monday.

The Dow Jones Industrial Average closed 178 points lower. The S&P 500 closed 8 points lower. The NASDAQ closed 15 points lower.

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Total pounds of beef in freezers edged up last month, according to the monthly Cold Storage report released yesterday.

As of Apr. 30, there were 471.5 million lbs. of beef in freezers, which was 1.6% more than the previous month and 2.9% more than the previous year.

Frozen pork supplies were 5.0% more than the previous month and 8.7% more than the same time a year ago.

Total red meat supplies in cold storage were 3.9% more than the previous month and 6.8% more than the previous year.

Frozen poultry supplies were 1.9% more than the previous month and 7.2% more than the previous year.

Cattle futures blasted from the weekly blocks with a sharply higher close on Monday, presumably tied to oversold conditions, short covering and the cash premium for fed cattle.

Live Cattle futures closed an average of $1.93 higher ($1.47 higher to $2.52 higher in spot Jun).

Feeder Cattle futures closed an average of $2.47 higher.

That’s more than welcome, considering the plunge last week, led by fed cattle prices. Looking at the weekly report—5-area Weekly Weighted Average Direct Slaughter—fed steer prices declined $6.92 on a live basis to an average of $114.73/cwt. Fed heifers were $7.31 lower at $114.08. On a dressed basis, steers were $7.97 lower at $184.02 and heifers were $9.35 less at $182.99.

Cattle markets were also buoyed by higher outside markets, which rose on increasing optimism about simmering trade issues between the U.S. and China.

According to a joint U.S. and China statement issued by the White House on Saturday, “There was a consensus on taking effective measures to substantially reduce the United States trade deficit in goods with China. To meet the growing consumption needs of the Chinese people and the need for high-quality economic development, China will significantly increase purchases of United States goods and services. This will help support growth and employment in the United States.

“Both sides agreed on meaningful increases in United States agriculture and energy exports. The United States will send a team to China to work out the details…”

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Wholesale beef value softened on Monday amid moderate offerings and demand, according to the Agricultural Marketing Service. Choice boxed beef cutout value was $1.39 lower Monday afternoon at $230.82/cwt. Select was 94¢ lower at $207.52.

Select and Choice chuck, round, and loin cuts sold steady to weak, according to AMS. Choice rib cuts sold lower, while Select traded steady. Beef trimmings sold sharply lower on light demand and moderate offerings.

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Major U.S. financial indices surged Monday on the weekend news that the U.S. and China were making progress toward reducing the U.S. trade deficit in goods with China.

The Dow Jones Industrial Average closed 298 points higher. The S&P 500 closed 20 points higher. The NASDAQ closed 39 points higher.

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“The packer margin is strong, as are net exports of beef. Saturday and total slaughter volumes have been strong, slaughter weights continue their seasonal decline and boxed beef composite values have been relatively high,” says Stephen Koontz, agricultural economist at Colorado State University, citing current bullish market fundamentals, in the latest issue of In the Cattle Markets. “The Choice-Select spread is also very strong, indicating excellent demand going into summer. All of these indicate strong beef movement and good demand in the face of high production.”

On the other side of the scale, Koontz point to increasing supplies of market-ready fed cattle, the looming seasonal increase in carcass weights, dismal byproduct values and retail beef prices so high that they could limit some demand.

“Strong margins incentivize the packer to buy aggressively and continue to move large volumes of beef,” Koontz says of key factors to monitor. “We need to see continued heavy marketings, slaughter, and a pull-down in the number of market-ready cattle. Aggressive marketings will also limit the seasonal growth in slaughter weights. It would not hurt to see continued strong exports and some softening of retail beef prices. But, the market has very limited upside potential based on fundamental supply and demand. A lot has to happen to see a market similar to that of 2017. One or two things going wrong have the potential to seriously weaken fed and feeder cattle prices.”

Negotiated cash fed cattle trade finished the week generally $7-$10 lower, depending on the region, at $112 to $117/cwt. Dressed prices were $4 to $10 lower than the previous week at $180-$185.

Choice wholesale beef value softened a bit on Friday with moderate offerings and light to moderate demand, according to the Agricultural Marketing Service. Choice boxed beef cutout value was 47¢ lower Friday afternoon at $232.21/cwt. Select was 22¢ higher at $208.46.

Select and Choice rib, chuck, and round cuts traded steady to weak, while loin cuts sold firm to higher. Beef trimmings sold generally steady on moderate demand and offerings.

Cattle futures closed lower on Friday, but choppiness early suggested a plumbing for bottom rather than free-fall. Profit taking likely added pressure, overall, while surging corn prices added squeeze to Feeder Cattle.

Other than 12¢ lower in the back two contracts, Live Cattle futures closed an average of 56¢ lower. 

Feeder Cattle futures closed an average of $1.17 lower (87¢ to $1.42 lower).

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Major U.S. financial indices closed little changed on Friday, amid ongoing pressure from rising interest rates and ongoing uncertainty surrounding trade talks between the U.S. and China.

The Dow Jones Industrial Average closed 1 point higher. The S&P 500 closed 7 points lower. The NASDAQ closed 28 points lower.

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“With the expansion of the cattle herd in 2016 and 2017, heifers were being retained at a higher rate than normal,” say analysts with the Agricultural Marketing Service (AMS). “The 2018 January to April heifer slaughter compared to total fed cattle slaughter is calculated at near 35.5%, while the same calculation for 2016 and 2017 was 33.2-34.0%. This would generally indicate a stable herd size. This indicator could change if the heart of cattle country gets encompassed by more drought conditions this summer.”

Based on the most current data from the World Agricultural Outlook Board, AMS analysts say about 23% of the nation’s cattle inventory is in areas currently experiencing drought.

According to the season’s first rating, pasture and range is off to a poorer year-over-year start.

For the week ending May 13, according to USDA’s Crop Progress report, 43% of pasture and range was rated in Good (37%) or Excellent (6%) condition, compared to the previous year’s historically higher 72%. 20% is rated as Poor (15%) or Very Poor (5%) compared to 10% last year. That’s the worst first week of the reporting season since 2014, according to the Livestock Marketing Information Center (LMIC).

States with the most pastures and range in Poor or Very Poor condition include: Arizona (100%); New Mexico (66%); Kansas (31%); Virginia (31%); Missouri (30%); Colorado (29%); North Dakota (28%); Texas (28%); California (25%); Oklahoma (23%); West Virginia (22%); Florida (21%).

Choice wholesale beef value bounced higher Thursday with moderate to fairly good demand and moderate to heavy offerings, according to the Agricultural Marketing Service. Choice boxed beef cutout value was $1.65 higher Thursday afternoon at $232.68/cwt., the highest level since last June. Select was 26¢ lower at $208.24. Select and Choice chuck, round, and loin cuts sold steady to firm. Rib cuts traded higher for Choice and weaker for Select. Beef trimmings sold mostly moderately lower on light demand and heavy offerings. At $24.44, the Choice-Select spread was also the widest since last June.

The firmer beef values helped Cattle futures come up for air on Thursday, along with apparent short covering.

Other than unchanged in Oct and 25¢ lower in the back contract, Live Cattle futures closed an average of 65¢ higher (5¢ to $1.22 higher in spot Jun).

Feeder Cattle futures closed an average of $1.28 higher (37¢ to $2.00 higher).

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Major U.S. financial indices closed lower on Thursday, giving back some of the previous session’s gains. Pressures included rising interest rates and negative rhetoric from the White House regarding trade talks with China.

The Dow Jones Industrial Average closed 54 points lower. The S&P 500 closed 2 points lower. The NASDAQ closed 15 points lower.

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“Greater U.S. production and continued strength in demand from Asian markets are expected to boost beef exports to a consecutive record high in 2019,” say analysts with USDA’s Economic Research Service (ERS), in the monthly Livestock, Dairy and Poultry Outlook.

Specifically, ERS forecasts a 3.8% year-over-year increase next year to 3.150 billion lbs.

Overall, ERS expects strong domestic and international demand for U.S. beef to support slightly higher fed cattle prices next year.