WLI

Although there were too few transactions to trend, a few live sales were reported in the western Corn Belt on Thursday at $120-$121/cwt. and a few in the beef at $190-$192. On a live basis, that was $2-$3 more than the top end of last week’s prices in the region; $9-$10 more in the beef.

Cattle futures closed lower on Thursday—arguably more of a breather from the recent rally than anything else. Queasiness about-near term demand and where prices can go from here also limited trade.

After $2.27 and $1.30 lower in the front two contracts, Live Cattle futures closed an average of 17¢ lower (5¢ to 50¢ lower).

Feeder Cattle futures closed an average of $1.50 lower ($1.15 to $2.42 lower).

Choice boxed beef cutout value was 86¢ higher Thursday afternoon at $208.25/cwt. Select was 55¢ lower at $193.16.

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Major U.S. financial indices closed mostly narrowly higher on Thursday as investors sorted through a variety of news, including: details on the Republican tax-reform proposal; earnings reports; President Trump naming Jerome Powell as successor to Janet Yellen as chair of the Federal Reserve.

The Dow Jones Industrial Average closed 81 points higher. The S&P 500 closed fractionally higher. The NASDAQ closed 1 point lower.

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Although robust growth in U.S. beef exports this year is partly due to increased global beef demand, it also reflects growing market share by the U.S. in international markets.

As an example, the U.S. market share of imported beef to Japan grew from 33% in 2013 to 42% currently. In South Korea it’s grown from 34% to 45%. Joel Haggard, U.S. Meat Export Federation senior vice president for the Asia-Pacific region shared that insight during a media call last week.

Only a single lot (274 heifers in Texas) sold in the weekly Fed Cattle Exchange Auction. The weighted average price was $120/cwt. for delivery at 1-9 days. There were 1,515 head on offer.

Slaughter steers and heifers sold mostly $5-$6 higher at Sioux Falls Regional Livestock in South Dakota on Wednesday. Choice steers brought $116.00-$119.75/cwt.; $116.50-$118.25 for heifers.

Although traders backed away from stronger follow-through support early in the session, Cattle futures closed solidly higher again on Wednesday.

Live Cattle futures closed an average of 70¢ higher (32¢ to $1.17 higher).

After 27¢ higher in spot Nov, and besides 57¢ and 50¢ higher in the back two contracts, Feeder Cattle futures closed an average of $1.08 higher.

Choice boxed beef cutout value was 95¢ higher Wednesday afternoon at $207.39/cwt.; that’s $7 higher week to week. Select was 19¢ lower at $193.71.

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Major U.S. financial indices closed mainly narrowly mixed on Wednesday. Support came from recently higher energy prices and variety of positive economic news, including: a sharp rebound in monthly jobs (ADP); positive manufacturing data (ISM); strong quarterly earnings; and the Fed standing pat on interest rates.

The Dow Jones Industrial Average closed 57 points higher. The S&P 500 closed 4 points higher. The NASDAQ closed 11 points lower.

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“With fluctuating beef cow inventories over the past decade, the U.S. dairy herd has offered a stable source of both feeder cattle and cull cows to fill beef demand,” say Brenda Boetel, Extension economist at the University of Wisconsin-River Falls and research assistant, Jared Geiser.

In the most recent issue of In the Cattle Markets, Boetel and Geiser explain, “In 2016 the dairy sector contributed 5.7 billion lbs. of beef through cull cows and finished dairy steers and heifers to the U.S. beef supply chain.”

Moreover, they point out the contribution of dairy beef to total U.S. beef production, while variable, continues to grow over time. Dairy beef accounted for 17.9% of total beef production in 2002; 22.7% in 2016. During that same period, Holstein steers accounted for 32% to 60% of all of the Prime-grading beef each year.

“Continued contributions from dairy steers can be expected with the dairy cowherd surpassing 2015 levels and reaching a new high since 2002,” say Boetel and Geiser.

Between follow-through buying and increasing fundamental bullishness, Cattle futures extended gains from the surge in the previous session.

Live Cattle futures closed an average of $1.37 higher (92¢ to $2.25 higher).

Except for 55¢ higher in the back contract, Feeder Cattle futures closed an average of $1.74 higher ($1.10 to $1.95 higher).

Choice boxed beef cutout value was $3.12 higher Tuesday afternoon at $206.44/cwt. Select was 26¢ higher at $193.90. At $12.54, the Choice-Select spread was the highest since July.

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Major U.S. financial indices ended the month slightly higher on Tuesday.

The Dow Jones Industrial Average closed 28 points higher. The S&P 500 closed 2 points higher. The NASDAQ closed 28 points higher.

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Agricultural lenders cited commodity prices, liquidity positions, income levels, and financial leverage as their top concerns about customer financial health in the first half of 2017, according to the Summer Agricultural Lender Survey results released this week.

“Overall, the data showed that agricultural lenders are a little more optimistic about what’s ahead for their customers than they were in December of 2016,” says Brittany Kleinpaste, director of economic policy and research for the American Bankers Association (ABA).

All told, 82% of agricultural lenders reported a decline in farm profitability in the last 12 months, according to the joint survey by the ABA and the Federal Agricultural Mortgage Corporation (Farmer Mac). Despite the continued decline, the survey of more than 580 agricultural lenders indicates the agricultural loan approval rate is 84%.

By commodity sector, lenders expressed the most concern about grains, dairy and beef cattle (see chart below). They were less concerned about the sectors of swine, poultry, fruit and nuts, and vegetables.

“Farmland represents an increasingly important component of agricultural industry wealth and borrowing capacity,” according to the report. “Real estate represents more than 80% percent of all farm sector assets, and it secures more than $200 billion in mortgage lending. Because many farm acres are at least partially financed through loans, agricultural lenders must be in-tune with changes in land markets. Through a previous survey, Farmer Mac tracked lender expectations of land markets since 2014, which showed a downward trend. The June 2017 ABA-Farmer Mac survey shows a slight reversal of this trend, with

57% of respondents reporting stable values in the first half of 2017, and 51% expecting no major changes in the second half of 2017. On average, survey respondents from the June survey exhibited more confidence in stable land values than respondents to the December survey.”

Other highlights from the survey include:

• The average agricultural lender expected 52% of their customers to be profitable in 2017, a drop of two percentage points from December 2016.
• Portfolio credit quality and competition topped lender business concerns in early 2017.
• Virtually all respondents expected short-term interest rates to rise in the second half of 2017 (85%), and a wide majority of respondents expected long-term interest rates to rise as well (71%).

It took all of last week to get cash fed cattle traded, but it was well worth the wait. Prices were mainly $5-$8 higher on a live basis at mostly $116.00-$119.50/cwt. Dressed prices were mainly $5-$10 higher at $180-$185.

Those significantly higher cash prices fueled sharp gains in Cattle futures on Monday, with Live Cattle in the lead.

Live Cattle futures closed an average of $2.82 higher through the front three contracts ($1.70 to $4.20 higher) and then an average of 69¢ higher (35¢ to 32¢ to 97¢ higher).

Feeder Cattle futures closed an average of $1.30 higher ($1.07 to $1.85 higher).

Choice boxed beef cutout value was 28¢ lower Monday afternoon at $203.02/cwt. Select was $1.16 higher at $193.64.

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Major U.S. financial indices closed lower on Monday. Key pressure was apparently tied to a report that proposed tax reform could include a gradual reduction in the corporate tax rate, rather than an immediate and full break to lower levels.

The Dow Jones Industrial Average closed 85 points lower. The S&P 500 closed 8 points lower. The NASDAQ closed 2 points lower.

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“Cow-calf producers are selling weaned calves for $150 to $200 per head more than last year,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments.

Besides calf and feeder cattle prices being significantly higher than last year, he explains price levels for heavier feeders, relative to stocker weights, are boosting the value of gain.

“Heavy feeder cattle prices have not declined seasonally; rather, they have increased this fall,” Peel says. “Seven-weight steers were up about 6% in October from August and were 25% higher than last year. An increase in heavy-feeder price, relative to stocker price, increases the value of gain and is a stocker signal to put more weight on cattle in the country.”

For instance, he ran the numbers at the end of October for adding 250 lbs. to a steer calf weighing 500 lbs. The value of gain was $1.35/lb. He also notes Feeder Cattle futures continued to offer opportunities to lock in favorable margins.

“March Feeder futures at the time of writing this article were about $153/cwt., suggesting a rare margin opportunity for winter grazing,” Peels says. Stocker producers and cow-calf producers with potential to retain weaned calves as stockers, should pencil out the opportunities depending on beginning weight and expected timing and weight of later sales. While cash market fundamentals are solid, spring Feeder futures are arguably overpriced and subject to correction at any time. The best opportunities may be fleeting.”

Cattle futures closed mostly slightly lower Friday with profit taking from the week’s rally and positioning.

Other than $1.22 higher in spot Oct and 12¢ higher in near Dec, Live Cattle futures closed an average of 50¢ lower (32¢ to 85¢ lower).

Not counting expired Oct and newly hatched away Oct, Feeder Cattle futures closed an average of 27¢ lower, except for 2¢ higher in Aug.

Choice boxed beef cutout value was 93¢ higher Friday afternoon at $203.30/cwt. Select was 57¢ higher at $192.48

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Major U.S. financial indices closed higher on Friday led by tech stocks, including better than expected earnings from Amazon and Microsoft.

The Dow Jones Industrial Average closed 33 points higher. The S&P 500 closed 20 points higher. The NASDAQ closed 144 points higher.

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“Thus far, prices in the fall of 2017 have been beneficial to adding additional weight to calves,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “As an example, starting October with a 525-pound steer and adding 50 lbs. in the month has resulted in a value of gain near $1.74 per pound, which has likely resulted in $50-$70 per head gains after feed costs. Continuing to hold on to lightweight calves should prove beneficial if those animals will be carried into 2018 and sold as value-added calves. Alternatively, if the plan is to sell calves in the next four to five weeks, then producers continue to face the risk of calf prices seasonally declining in November. Calf prices could remain steady over the next month, but there is no guarantee. Stocker producers should run breakeven analysis on fall purchased calves. It appears profits of at least $100 per head can still be hedged at this time.”