WLI

Cattle futures closed lower on Tuesday, helped along by lighter trade and sagging wholesale beef values. Other potential pressures on the day could include everything from positioning ahead of Friday’s monthly Cattle on Feed report, to the potential for cattle getting bunched as winter grazing conditions dwindle, to pushing beads on the year-end abacus.

Except for fractionally mixed in the front two contracts, Live Cattle futures closed an average of 69¢ lower.

Feeder Cattle futures closed an average of $1.79 lower ($1.17 to $2.45 lower in spot Jan).

Choice boxed beef cutout value was $1.39 lower on Tuesday afternoon at $201.76/cwt. Select was 69¢ lower at $184.32.

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Major U.S. financial indices edged lower on Tuesday. Besides rally fatigue, pressure included a down day for tech pacesetters like Apple, never mind the fact that the House voted to approve tax reform, then figured out a procedural gaff means they must vote again.

The Dow Jones Industrial Average closed 37 points lower. The S&P 500 closed 8 points lower. The NASDAQ closed 30 points lower.

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“Retail beef prices are currently higher than last year despite the increase in beef supplies in 2017,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his latest weekly market comments. “Beef demand is all the more impressive given that total meat supplies are higher year over year, not only the result of more beef, but also increased pork and poultry production.”

For perspective, Peel explains November retail Choice beef prices were $5.81/lb., which was slightly higher than a month earlier and a year ago. The same goes for the all-fresh retail beef price in November of $5.64/lb.

“The ratio of retail beef prices relative to pork and poultry remains very strong, holding near to record levels achieved during the record high prices in 2015,” Peel says. “The calculated beef demand index, which accounts for pork and poultry impacts, as well as increased beef production, showed a slight increase for the third quarter of 2017.”

Ultimately, though, retail beef prices should move lower as tonnage continues to rise.

“This will put additional pressure on wholesale beef prices as well as fed and feeder cattle prices,” Peel says. “However, if demand continues strong, the retail price pressure may be rather modest with less negative impact on wholesale beef and cattle markets.”

More specifically, Peel says strong demand will depend on the continuation of generally strong macro-economic conditions, including decreased unemployment and growth in consumer income.

“Any change in overall macroeconomic conditions is a threat. Factors to watch include rising interest rates and inflationary pressures,” Peel says. “Shocks external to the beef industry—such as a sudden jump in gasoline prices—could sharply impact consumer spending and beef demand.”

Finally, Peel emphasizes, “Continued improvement in beef trade will also be a crucial factor to minimizing price pressure in 2018. Continued strong exports to current major beef destinations including Japan, South Korea, Mexico, Canada and Hong Kong will be essential. New export growth to China is likely to remain a small market in 2018 but holds significant potential over time.”

Cash fed cattle prices last week ended up $1-$3 higher on a live basis at $118.00 to $120.50/cwt., mostly $120. Dressed trade was $1-$3 higher at $188-$190.

The stronger cash trade fueled follow-support for Cattle futures early in Monday’s session. Support faded quickly, though. Cattle futures closed narrowly mixed, mostly to the downside, but still higher week to week.

Except for $1.07 higher in spot Dec, Live Cattle futures closed an average of 37¢ lower.

Except for 7¢ higher in the back two contracts, Feeder Cattle futures closed an average of 37¢ lower (10¢ to 85¢ lower).

Choice boxed beef cutout value was $1.28 higher on Monday afternoon at $203.15/cwt. Select was $1.76 higher at $185.01.

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Major U.S. financial indices took yet another step higher on Monday, with investors apparently expecting Congress to pass the tax reform bill as early as Tuesday. Merger and acquisition news also provided support.

The Dow Jones Industrial Average closed 140 points higher. The S&P 500 closed 14 points higher. The NASDAQ closed 58 points higher.

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Beef cow and heifer slaughter suggest cowherd expansion might be slowing, say analysts with USDA’s Economic Research Service (ERS) in the latest monthly Livestock, Dairy and Poultry Outlook released yesterday.

“Beef cow slaughter through October 2017 was 11% higher than the same period in 2016. Preliminary federally inspected beef cow slaughter in November has also been fairly strong and higher than November last year,” ERS analysts say. “Heifer slaughter has also seen a 12% increase through October 2017, while steer slaughter has only increased by about 3%.”

Likewise, while slowing, Derrell Peel, Extension livestock marketing specialist at Oklahoma State University says current beef cow and heifer slaughter rates still suggest herd expansion.

“Part of the increase in cow slaughter is simply due to herd growth since 2014,” Peel explained in his market comments last week. “However, like heifer slaughter, beef cow slaughter was sharply reduced in 2014-2016 as a part of jumpstarting herd expansion. Net beef cow culling was a record low 7.6% in 2015. Sustained below-average culling rates in 2014-2016 were possible following above average culling rates from 2008-2013, including drought-forced liquidation that removed many older cows, and allowed a period of reduced culling as herd expansion began. If the current beef cow slaughter pace continues through the end of the year, the 2017 beef cow culling rate will be 9.0%, still below but close to the long term average of 9.6%. In other words, the industry is returning to normal beef cow culling rates. Both heifer and beef cow slaughter are consistent with continued but slowing herd expansion.”

As always, Mom Nature will have plenty to say about the possibilities, one way or the other.

Despite indications to the contrary earlier in the week, cash fed cattle prices surged higher on Friday, surprising some, but speaking to how snug supplies are in some regions, how current feedlots are and apparently how much packers want to keep running hard after the holidays.

Through the afternoon, AMS was reporting live trade $1-$2 higher than the previous week in the Southern Plains and Nebraska at $118-$119/cwt. Late in the day, though various sources were reporting live prices as high as $120 and dressed up to $190.

Feeder Cattle futures surged higher on Friday amid oversold conditions and the continued hefty gap with cash trade. That and hints of high cash bids helped lift Live Cattle.

Live Cattle futures closed an average of $1.34 higher (55¢ to $2.62 higher in spot Dec).

Feeder Cattle futures closed an average of $1.27 higher (80¢ to $1.60 higher).

Choice boxed beef cutout value was 83¢ higher on Friday afternoon at $201.87/cwt. Select was 44¢ lower at $183.25.

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Major U.S. financial indices closed at record-high levels on Friday, buoyed by increasing expectations that Congress will accomplish tax reform, given agreement on a Conference bill between the House and Senate; the vote is scheduled for this week.

The Dow Jones Industrial Average closed 143 points higher. The S&P 500 closed 23 points higher. The NASDAQ closed 80 points higher.

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The same mild winter that’s so far helping stretch feed supplies and cattle performance is also growing drought conditions.

“The South, Midwest and High Plains have areas of short-term and long-term extreme drought,” say analysts with USDA’s Agricultural marketing Service (AMS), referencing the latest Drought Monitor. “The top 15 states in beef cow numbers all have some type of drought intensity and impact.”

Andrew P. Griffith, agricultural economist at the University of Tennessee, explains, in his weekly market comments, “The drought situation that has overcome much of cow-calf and stocker grazing country is forcing producers into tough situations.

“Many stocker cattle are purchased based on currently available forage and expected forage. The currently available forage is beginning to wane and the expectation of forage is near zero if precipitation does not fall in the near term. This will continue to result in softer calf prices as feedlots fill pens with cattle that may have to come off winter annuals earlier than expected. Similarly, many of the stocker producers in the Southern Plains will not be active in purchasing calves due to reduced forage production… A good rain or two could alleviate much of the distress.”

Moreover, AMS analysts say, “When the cattle inventory report comes out in late January 2018, the number of beef cows in the main cattle states will be watched by analysts to see if producers are continuing to increase cow herds when facing these drought conditions in such a widespread area.”

Cash fed cattle trade remained undeveloped through Thursday afternoon.

Odds and ends fed cattle trade at auction the previous day pointed to steady to lower prices than last week’s 5-area weighted average of about $117.50/cwt. for steers.

Cattle futures edged higher on Thursday, supported by short covering and the overall livestock complex, but the continued lack of cash direction limited gains.

After an average of 70¢ higher in the front two contracts, Live Cattle futures closed 17¢ lower to 20¢ higher.

Feeder Cattle futures closed an average of 61¢ higher (30¢ to 82¢ higher).

Choice boxed beef cutout value was $1.44 lower on Thursday afternoon at $201.04/cwt. Select was $1.33 lower at $183.69.

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Major U.S. financial indices closed lower on Thursday. Although there was positive economic news, including lower than expected jobless claims and stronger retail sales in November than expected, various analysts attributed most of the pressure to fretting over if and when tax reform will be accomplished.

The Dow Jones Industrial Average closed 76 points lower. The S&P 500 closed 10 points lower. The NASDAQ closed 19 points lower.

Early indications suggest steady to lower cash fed cattle prices this week.

In the weekly Fed Cattle Exchange Auction, 75 head sold out of 704 offered, at $116/cwt. for delivery at 1-9 days. That was about $1.50 lower than last week’s 5-area weekly weighted average.

Likewise, slaughter steers and heifers traded steady to $1 lower at Sioux Falls Livestock in South Dakota.

Cattle futures gave back most of the previous session’s gains on Wednesday. Following tentative early follow-through support.

Live Cattle futures closed an average of 57¢ lower (20¢ to 77¢ lower).

Feeder Cattle futures closed an average of $1.36 lower (75¢ to $1.85 lower).

Choice boxed beef cutout value was $1.58 lower on Wednesday afternoon at $202.48/cwt. Select was 90¢ lower at $185.02.

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Major U.S. financial indices closed mixed on Wednesday with mostly positive macro news that included the Fed’s long-expected and nominal raise in interest rates.

The Dow Jones Industrial Average closed 80 points higher. The S&P 500 closed 1 point lower. The NASDAQ closed 13 points higher.

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Although alternative protein markets are growing, don’t expect to see lab-grown meats hitting the market any time soon, according to a recent report from CoBank’s Knowledge Exchange Division.

Alternative proteins include products derived from plant sources, insects and what are known as cultured or alternative meats, those grown in a lab.

“The future success of alternative meat lies squarely with rising global demand for protein rather than a battle for the existing market share of animal protein food products,” says Trevor Amen, an economist with CoBank. “The road to commercial viability and consumer acceptance of cultured meat is long and this type of product is unlikely to have a marked effect on traditional animal protein demand through at least the next decade.”

Challenges for the cultured meat folks include prohibitive production costs currently, consumer perception and the lack of any sort of regulatory framework.