WLI

Cattle futures took another step higher on Thursday, buoyed by stronger wholesale beef values and continued expectations for higher cash fed cattle prices this week.

Live Cattle futures closed an average of $1.34 higher through the front four contracts and then an average of 46¢ higher.

Feeder Cattle futures closed an average of 69¢ higher (42¢ to $1.22 higher).

Choice boxed beef cutout value was $2.16 higher Thursday afternoon at $202.37/cwt. Select was 48¢ lower at $191.91.

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Major U.S. financial indices closed mixed on Thursday, with another hurdle cleared toward tax reform–the House passing the budget–on one side of the ledger and lower pending home sales on the other. Wednesday, pressured by weaker quarterly earnings reports, including Boeing.

The Dow Jones Industrial Average closed 71 points higher. The S&P 500 closed 3 points higher. The NASDAQ closed 7 points lower.

There wasn’t much country trade to speak of, and there were only 897 head offered in the weekly Fed Cattle Exchange auction, with no sales.

However, slaughter steers sold mostly $1-$2 higher at Sioux Falls in South Dakota. Slaughter heifers sold mostly $2 higher.

So, that and other factors including chatter about tighter front end supplies suggest odds continue to favor higher cash fed cattle prices this week.

Cattle futures received support early with follow-through buying from the previous day’s rally. Although that support faded, futures were confined to a narrow trading range and managed a mixed close.

Live Cattle futures closed narrowly mixed (after 60¢ and 45¢ lower in the front two contracts, mainly 2¢ to 27¢ higher).

After 27¢ lower and 5¢ higher in the front two contracts, Feeder Cattle futures closed an average of 57¢ higher.

Choice boxed beef cutout value was 8¢ higher Wednesday afternoon at $200.21/cwt. Select was 30¢ lower at $192.39.

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Major U.S. financial indices closed sharply lower on Wednesday, pressured by weaker quarterly earnings reports, including Boeing.

The Dow Jones Industrial Average closed 112 points lower. The S&P 500 closed 11 points lower. The NASDAQ closed 34 points lower.

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“Even though the head (fed cattle) marketed has not been a surprise, its role in the market has been key to fed cattle prices, which recently have been more than $10/cwt. above a year ago,” say analysts with the Livestock Marketing Information Center, in the latest Livestock Monitor. “A critical result of the marketing pace has been year-on-year declines in slaughter steer and heifer dressed weights. To a large extent, the market environment since late 2016 has pulled animals through the feeding stage of the production system, and that has driven weights below a year ago. For the last five weeks of data (through the week ending October 7) steer carcass weights were essentially flat and did not increase seasonally.”

Those analysts point out weight declines early this year were driven by market incentive, not severe winter weather.

“The bottom line is, at this time, a backlog of market ready cattle is not apparent,” say LMIC analysts.

Cattle futures closed sharply higher on Tuesday, led by Feeder Cattle and supported by some traction in wholesale beef values, as well as the steady to slightly higher prices for fed cattle last week. If it holds together, the rally could help set the stage for higher cash fed cattle trade this week.

Live Cattle futures closed an average of $2.31 higher ($1.95 to $2.95 higher).

Feeder Cattle futures closed an average of $3.49 higher ($1.50 to $4.12 higher).

Choice boxed beef cutout value was 88¢ higher Tuesday afternoon at $200.13/cwt. Select was $1.64 higher at $192.69.

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Major U.S. financial indices closed sharply higher on Tuesday, buoyed by strong quarterly earnings reports from the likes of Caterpillar and 3M.

The Dow Jones Industrial Average closed 167 points higher. The S&P 500 closed 4 points higher. The NASDAQ closed 11 points higher.

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“Grass hay values were surprisingly weak in August, mostly due to a 25% price decline in Oklahoma, the third largest non-Alfalfa hay producing state,” say analysts with the Livestock Marketing Information Center (LMIC), in the most recent Livestock Monitor. “Grass hay prices were down 5% in Texas, the largest producer of non-Alfalfa hay. California, Minnesota, and Ohio also recorded double-digit percentage declines in non-Alfalfa hay prices from July to August.”

Until August, LMIC analysts explain hay prices were higher year-over-year on 2% less hay in tandem with the growing cowherd. In the Southern Plains they say favorable pasture conditions in August, coupled with abundant carryover hay supplies began to pressure prices.

“Carryover hay supplies from last year in Oklahoma were at the highest levels since 2008 at the end of April and tripled the inventory on hand in April 2012 when Oklahoma experienced its last drought,” LMIC analysts say. “These large supplies, coupled with favorable weather in August for pastures in Oklahoma put pressure on hay prices even though current year grass hay production is about the same as last year. Also, alfalfa hay production in Oklahoma is up more than 40% from 2016.”

Cattle futures closed mostly narrowly mixed on Monday. They were pressured early in the session, but rather than crashing sharply lower in response to Friday’s Cattle on Feed report, they recovered most of the ground by the end of the day (see below).

Live Cattle futures closed narrowly mixed (25¢ lower to 45¢ higher).

Except for unchanged in spot Oct and $1.20 lower in the back contract, Feeder Cattle futures closed an average of 25¢ lower.

Choice boxed beef cutout value was 61¢ lower Monday afternoon at $199.25/cwt. Select was 9¢ lower at $191.05.

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Major U.S. financial indices closed lower on Monday, perhaps due partly to profit taking ahead of a busy week for quarterly earnings reports.

The Dow Jones Industrial Average closed 54 points lower. The S&P 500 closed 10 points lower. The NASDAQ closed 42 points lower.

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Futures price reaction to Friday’s Cattle on Feed report—13.5% more September placements than a year earlier—may go a long ways in underscoring the strength of the current marketplace. Prices wobbled early on, but then bounced back quickly. Besides more placements being expected as the cowherd grows, logical reasons for the subdued reaction include: placements the previous September were atypically low; market strength continues supporting packer profits and feedlot demand.

“Counter-seasonally strong feeder cattle prices this fall indicate good demand despite growing feeder cattle supplies,” explains Derrell Peel, Extension livestock marketing specialist, in his weekly market comments. “The October Cattle on Feed report confirmed that much of that demand came from feedlots.”

Heifers continue to comprise an increasing proportion of the on-feed mix—13% more Oct. 1 than a year earlier—suggesting that herd growth is slowing.

“Heifer slaughter so far this year is consistent with these inventory totals, up 12% year over year, and suggests that heifer slaughter will continue to grow for the foreseeable future,” Peel says. “These numbers suggest that heifer retention (and likely herd growth) is slowing. However, the average ratio of steer to heifer slaughter (which peaked recently in 2016) and is adjusting down, is still at levels not seen since 1975 (prior to mid-2015).”

Along the way, Peel points out average fed carcass weights are 14.6 lbs. lighter year to date.

“Average fed carcass weights are down due to lighter steer and heifer carcasses and a growing proportion of heifers to steers in the fed slaughter mix,” Peel says. “USDA reports total cattle slaughter up 5.8% year over year so far this year with beef production up 4.2% for the year to date.”