WLI

Cash fed cattle prices ended up mainly $3 higher last week at $123/cwt. ($2-$3 higher in the western Corn Belt at $122-$123). Dressed trade was $3 higher at $195.

That helped renew support in Cattle futures. Traders also were eying another round of severe winter weather in the Northern Plains that will slow production.

Except for 25¢ lower in the back contract, Live Cattle futures closed an average of 78¢ higher (35¢ to $165 higher).

Except for 5¢ lower in spot Jan, Feeder Cattle futures closed an average of 64¢ higher (22¢ to $105 higher).

Choice boxed beef cutout value was 21¢ higher on Monday afternoon at $205.07/cwt. Select 64¢ lower at $199.52.

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Major U.S. financial indices closed higher on Monday, supported by quarterly earning reports and hopes that a short-term spending bill passed by the Senate would also receive House approval, reopening the government for at least a couple of more weeks.

The Dow Jones Industrial Average closed 142 points higher. The S&P 500 closed 22 points higher. The NASDAQ closed 71 points higher.

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The percentage of cattle on feed for more than 120 days during the fourth quarter remained below the prior year, according to the January Livestock, Dairy and Poultry Outlook. Analysts with USDA’s Economic Research Service (ERS) note that dry conditions in the Southern Plains stressed pasture availability, supporting strong placements of calves in feedlots in fourth-quarter.

“Given expected pressure on fed cattle prices from larger placements in second-half 2017, feedlot operators will likely have incentives to continue to aggressively market finished cattle in 2018,” explained analysts with USDA’s Economic Research Service (ERS). “As feedlots are expected to maintain a rapid pace of marketings in the first half of 2018, the percent of cattle on feed beyond 120 days should stay relatively low.”

ERS analysts project the 5-Area fed steer price at $120-$124/cwt. in the first quarter and at $115-$123 in the second.

Cattle futures trended lower on Friday with apparent position squaring and profit taking, and without direction from the cash fed cattle market.

There were too few cash fed cattle trades to trend through Friday afternoon. According to the AMS Cattle Dashboard, 1,036 head were reported on Friday with steers selling for $121.31/cwt. on a live basis and at $193 in the beef.

Similarly, the Texas Cattle Feeders Association reported its members trading steers about $2 higher than the previous week at $122.04 and heifers about $3 higher at $123.

The previous week, live trade was at $120/cwt. in all major cattle feeding regions. Dressed trade was at $192 in Nebraska and the western Corn Belt.

Lack of cash direction helped Cattle futures drift lower on Friday, along with profit taking and position squaring.

Live Cattle futures closed an average of 41¢ lower (from 5¢ lower in spot Feb to 75¢ lower).

Except for 35¢ lower in the back contract, Feeder Cattle futures closed an average of $1.22 lower.

Choice boxed beef cutout value was 83¢ lower on Friday afternoon at $204.86/cwt. Select 71¢ lower at $200.16.

A wildcard heading into this week will be the government shutdown, if it continues: the overall impact of market reaction, as well as the absence of data provided by the Agricultural Marketing Service.

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Major U.S. financial indices closed higher on Friday, even as Congress had yet to pass a spending bill or stopgap measure to prevent the government shutdown that began after midnight on Friday.

The Dow Jones Industrial Average closed 53 points higher. The S&P 500 closed 12 points higher. The NASDAQ closed 40 points higher.

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JBS USA announced last week that that it entered an agreement to sell its Five Rivers Cattle Feeding assets to affiliates of Pinnacle Asset Management, L.P. for approximately $200 million in U.S. dollars.

Five Rivers, the world’s largest cattle feeding operation has a one-time capacity of more than 900,000 head—close to a million head depending on who you talk to. Pinnacle Asset Management is a commodities and natural resources investment firm.

The transaction includes 11 feedyards in six states and a long-term agreement for Five Rivers to supply cattle to JBS USA beef processing plants. The current Five Rivers management team will remain in place.

A press statement last week indicated that Five Rivers will continue to operate as usual, including the purchasing of cattle and commodities in the ordinary course of business, until the closure of the transaction. In addition, JBS USA will continue agreements to purchase cattle from feedyards associated with Five Rivers Cattle Feeding operations.

Completion of the acquisition is subject to U.S. regulatory review and approval, approval from the JBS S.A. Board of Directors, and subject to Pinnacle Asset Management, L.P. securing the relevant funding.

Weekly cash fed cattle trade remained a no-go through Thursday afternoon with feedlots eyeing recent futures market strength and packers apparently overlooking apparent regional snugness in supplies.

Cattle futures continued to firm on Thursday with chatter about more optimistic demand in the short run and the chance for prices to rally.

Live Cattle futures closed an average of 67¢ higher (7¢ to 97¢ higher in spot Feb).

Feeder Cattle futures closed an average of $1.21 higher through the front four contracts and then an average of 71¢ higher, except for 12¢ higher in the back contract.

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Major U.S. financial indices closed lower on Thursday, dampened by the continuing possibility of a government shutdown if Congress can’t pass a spending bill or stop-gap measure by the end of the week.

The Dow Jones Industrial Average closed 97 points lower. The S&P 500 closed 4 points lower. The NASDAQ closed 2 points lower.

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Restaurant operator confidence in current and future business conditions grew in November, according to the National Restaurant Association’s monthly Restaurant Performance Index (RPI) released at the end of December.

The RPI in November was 101.1, up from 100.9 the previous month.

“Although the overall RPI increase was modest in November, some key indicators registered notable improvements,” according to the report. “Restaurant operators reported their strongest same-store sales performance since June. In addition, nearly one-half of operators expect their sales to be higher in six months, while their outlook for the overall economy improved to its strongest level in three years.”

It’s worth noting this optimism was in place before the reality of tax reform.

Cattle futures surged higher on Wednesday, extending gains from the previous session. Perhaps traders are expecting a bounce back from last week’s winter storms that dampened beef demand. High-flying equity markets added to market optimism.

There was no country trade to speak of, but early signs pointed to steady to slightly higher cash fed cattle prices this week.

Besides strength on the Board, Choice 2-4 steers sold $2-$3 higher at Sioux Falls Regional in South Dakota on Wednesday at $121.50 to $125.00/cwt. Last week’s country trade was mainly $120 on a live basis.

Only 108 head (one lot—steers) out of 304 offered sold in the weekly Fed Cattle Exchange Auction. The weighted average price was $119.75 for deliver at 1-9 days. There were POs on two lots of heifers at $118.00 and $119.50.

Choice boxed beef cutout value was 28¢ lower on Wednesday afternoon at $205.30/cwt. Select was 28¢ lower at $199.61.

Live Cattle futures closed an average of $1.93 higher ($1.52 to $2.87 higher in spot Feb).

Feeder Cattle futures closed an average of $2.03 higher ($1.72 to $2.27 higher).

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Major U.S. financial indices closed sharply higher on Wednesday, fueled by stronger than expected quarterly earnings reports from the likes of Bank Of America. Apple’s announcement that it plans to repatriate billions of dollars of cash from overseas—and pay billions in taxes here—also provided support.

The Dow Jones Industrial Average closed 322 points higher. The S&P 500 closed 26 points higher. The NASDAQ closed 74 points higher.

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“The hard cold weather in the northern and eastern U.S. and the warm dry weather in the southern and western U.S. will likely contribute to further declines in hay stocks and support hay prices through the rest of the winter,” says Stephen Koontz, an agricultural economist with Colorado State University, in the latest issue of In the Cattle Markets.

As it is, Koontz points out that all-hay production was 2.6% less last year than in 2016, according to the recently released annual Crop Production Summary from USDA’s Economic Research Service.

“The largest decreases were in states most impacted by dry weather last year, including Montana and the Dakotas, and there were substantial decreases in states with some of the largest production, including California and Texas,” Koontz says. “Missouri and Nevada showed substantial increases among the higher-production states. On farm hay stocks as of Dec. 1 showed a 3% decline compared to the prior year.”