WLI

Negotiated cash fed cattle trade remained mostly undeveloped for the week through Friday afternoon. Although too few to trend, there were a few live trades in Kansas at $118-$120/cwt.; some earlier in the week in the Texas Panhandle at $117.

Cattle futures closed mixed on Friday, amid apparent profit taking and waiting on direction from cash fed cattle.

Other than unchanged to 15¢ lower in four contracts, Live Cattle futures closed an average of 48¢ higher (20¢ higher to 80¢ higher in spot Apr).

Except for 30¢ and 10¢ lower at the back of the board, Feeder Cattle futures closed an average of 47¢ higher.

Choice boxed beef cutout value was 13¢ higher Friday afternoon at $212.61/cwt. Select was 76¢ lower at $199.91.

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Major U.S. financial indices closed lower on Friday, pressured by banks like Citigroup and J.P. Morgan, even though their quarterly earnings surpassed expectations.

The Dow Jones Industrial Average closed 122 points lower. The S&P 500 closed 7 points lower. The NASDAQ closed 33 points lower.

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According to analysts with the Agricultural Marketing Service (AMS), preliminary first-quarter slaughter data indicates heifer slaughter was 4% more than last year and 10% more than the 3-year average. Beef cow slaughter was 10% more than last year and about 19% more than the 3-year average.

With drought in so many locations and forage prices increasing, AMS analysts note that heifer and beef cow slaughter levels could accelerate.

Cattle futures surged higher on Thursday—led by Live Cattle—amid short covering, technical buying and the notion that cash fed cattle prices for the week will be firm to a touch higher.

Live Cattle futures closed an average of $1.87 higher ($1.62 to $2.25 higher).

Feeder Cattle futures closed an average of $3.62 higher ($2.90 to $4.42 higher).

Choice boxed beef cutout value was 59¢ lower Thursday afternoon at $212.48/cwt. Select was 6¢ higher at $200.67.

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On Wall Street Thursday, Major U.S. financial indices ricocheted back the other way from the previous session, closing sharply higher, with a strong start to quarterly earnings and President Trump taking some edge off his rhetoric from the previous day regarding a potential attack on Syria.

The Dow Jones Industrial Average closed 293 points higher. The S&P 500 closed 21 points higher. The NASDAQ closed 71 points higher.

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USDA’s General Accounting Office, this week, released the results of its investigation into the price behavior of fed cattle prices from 2013 to 2016.

That investigation was launched at the behest of some in the industry convinced there had to be some reason, other than market forces, for the sudden decline of prices in the fall of 2015.

You might recall that prices that year continued historically high, buoyed by still-tight cattle supplies from the multi-year widespread drought, as well as nascent herd expansion. Some chinks were starting to  show up in the armor of the extraordinary price run, though, including China’s currency devaluation that summer which rocked export markets, on top of a glut of international animal protein supplies. Cattle feeders were bleeding red ink, on a cash to cash basis at least, with pricey cattle in their yards and the fed market starting to turn south as domestic demand sputtered with price-weary consumers. So, they held cattle, adding more pounds to get as much as possible out of each head and delaying the need to pay for still high-priced replacements. Carcass weights increased and marketing fell behind, way behind, markets sank.

Rather than the popular bogymen posited by folks calling for the GAO investigation, specters like packer collusion and cattle and beef imports to the U.S., by and large, fundamentals did a swell job of explaining the situation.

That’s also the bottom line of the GAO report, which attributes the price behavior to supply and demand factors, including the drought that affected cattle and feed prices.

“GAO’s analysis of cattle market data from the U.S. Department of Agriculture also indicated that competition levels among packers that slaughter and process fed cattle did not appear to affect the national price changes in the fed cattle market in 2015 but that areas of the country with less competition among packers had lower cattle prices,” according to the report.

So, again, no surprises.

There were significantly more cattle—3,931 head—offered in the weekly Fed Cattle Exchange Auction on Wednesday. All said and done, 450 head sold for 1-9 day delivery at a weighted average price of $117.71/cwt.; 59 sold for 17-30 day delivery at a weighted average price of $114.

That mirrored light country trade in the Southern Plains. Though too few to trend, there were some early live sales in the Texas Panhandle at $117 and in Kansas at $117-$118.

Cattle futures were mostly a repeat of the prior session, strong support early that eroded with a lack of activity.

After 70¢ higher in spot Apr, Live Cattle futures closed narrowly mixed, (an average of 20¢ lower in five contracts to an average of except for 8¢ higher in three.

Feeder Cattle futures closed narrowly mixed (from an average of 6¢ lower in three contracts to an average of 32¢ higher in five contracts).

Choice boxed beef cutout value was 44¢ lower Wednesday afternoon at $213.07/cwt. Select was 72¢ lower at $200.61.

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Major U.S. financial indices closed strongly lower Wednesday, reportedly on President Trump’s tweet-threat that the U.S. might aim missiles at Syria, in response to the alleged use of chemical weapons there over the weekend.

The Dow Jones Industrial Average closed 218 points lower. The S&P 500 closed 14 points lower. The NASDAQ closed 25 points lower.

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“It is unlikely that trade issues are responsible for the dramatic market softening in March,” says Stephen Koontz, agricultural economist at Colorado State University, in the latest issue of In the Cattle Markets. “Rather, many of the underlying fundamentals are different between this year and this time in 2017.  And, different such that lower prices are to be expected.”

Most notable, Koontz says, are significantly more cattle on feed for more than 120 days. 

“It is well known that inventories of cattle are higher as are on-feed numbers.  But, the number of long-fed cattle is substantially higher this year than last, Koontz explains. “Last year, the market entered April with a very clean show-list.  Not this April. Consequently, while in seasonal decline, carcass weights are running ahead of last year. Both of these will limit upward potential for fed cattle.”

On the other hand, Koontz believes the overall situation is unlikely to worsen for fed cattle, given the healthy fed slaughter volume and strong packers margins.

“It will be important to watch Saturday volumes (fed harvest) through the remainder of April. Strong volumes will indicate solid featuring at retail, which for the most part of this year has been soft compared to last year,” Koontz says. “I am not optimistic that retail featuring will lead to much improved beef demand in the northern and central parts of the nation–with the cold spring solidly in place. Further, beef will clearly need to compete through the summer with larger volumes of chicken and pork. These also limit upward potential for cattle and calves.”

Cattle futures settled narrowly mixed on Tuesday after a surge of support to start the day.

Live Cattle futures closed an average of 33¢ lower, except for 77¢ higher in spot Apr and 25¢ higher in Feb.

Other than 37¢ higher in spot Apr, Feeder Cattle futures edged lower (5¢ to 42¢ lower).

Choice boxed beef cutout value was $1.53 lower Tuesday afternoon at $213.51/cwt. Select was $1.81 lower at $201.33.

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Major U.S. financial indices bounced sharply higher on Tuesday with conciliatory comments from China’s president boosting investor optimism. Crude oil prices also offered support.

The Dow Jones Industrial Average closed 428 points higher. The S&P 500 closed 43 points higher. The NASDAQ closed 143 points higher.

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Projected total red meat and poultry production was lowered in the latest World Agricultural Supply and Demand Estimates (WASDE). Anticipated beef production was reduced from the previous month on lower first-half slaughter and lighter weights.

“Cattle and hog price forecasts are reduced from last month as demand for cattle and hogs has softened and supplies are expected to be large in the coming quarters,” said analysts with USDA’s Economic Research Service.

The annual fed steer price (5-area direct) was estimated $2-$4 lower at $114-$119/cwt. Second-quarter prices are projected at $114-$118; third quarter at $106-$114; fourth quarter at $108-$118.

Ending corn stocks were increased 55 million bu. on 50 million fewer bu. for feed and residual use. The projected range for the season-average corn price received by producers was unchanged at the midpoint with the range narrowed to $3.20 to $3.50/bu.

U.S. soybean stocks were projected 5 million bu. less with record-large soybean crush. The season-average soybean price is forecast at $9.10 to $9.50/bu., unchanged at the midpoint. The soybean oil price is projected at 30.5¢ to 32.5¢/lb., also unchanged at the midpoint. Soybean meal prices are projected at $340 to $360 per short ton, up $10.00 at the midpoint.

Ending U.S. wheat stocks were estimated 30 million bu. higher on lower feed and residual use. Based on NASS prices and marketings reported to date, along with price expectations for the rest of 2017-18, the season-average farm wheat price is unchanged at the range of $4.60 to $4.70/bu.