WLI

Cattle futures closed lower on Monday, following limited early support. Presumably part of the pressure came from notions that cash fed cattle prices must move lower this week, although there are plenty of fundamental reasons to suggest the opposite, including aggressive feedlot marketings and wholesale beef values that seem to have turned the corner.

Live Cattle futures closed an average of $1.18 lower (87¢ to $1.82 lower).

Feeder Cattle futures closed $1.52 lower (95¢ to $2.40 lower).

Choice boxed beef cutout value was 60¢ higher Monday afternoon at $197.22/cwt. Select was 22¢ lower at $188.28.

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Major U.S. financial indices closed higher on Monday, with those cited here settling at record-high levels. Other than popping the cork on a new quarter and continued optimism surrounding proposed tax reform, there didn’t seem to be a clearly defined driver.

The Dow Jones Industrial Average closed 152 points higher. The S&P 500 closed 9 points higher. The NASDAQ closed 20 points higher.

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Currently available slaughter capacity at U.S packing plants will be sufficient to handle the increase in cattle numbers over the next two years, according to a new report from CoBank’s Knowledge Exchange Division.

“Plants will add additional slaughter hours to manage the extra supply through 2019,” says Trevor Amen, animal protein economist at CoBank. “The biggest potential concerns as the industry drifts closer to maximum packing capacity are labor availability and temporary plant closures for unforeseen maintenance issues.” He adds that processors are expected to increase investments in automation and robotics to reduce the risk of skilled labor shortages.

The CoBank report notes that Saturday slaughter hours have been increasing steadily since the middle of 2016. Analysts note that it is unlikely that packers will need to reopen shuttered plants or build additional facilities.

For perspective on increasing cattle numbers, CoBank projects beef cowherd expansion at 3-5% in 2018 and 2019. USDA estimates the 2017 calf crop will top 36 million head, an increase of 2.9% over 2016 and an 8.3% more compared to the cyclical low calf crop in 2014.

Cash fed cattle trade ended the week primarily steady with the previous week on a live basis at $108/cwt.—$1 lower in Nebraska. Dressed trade was steady to $2 higher at $172.

In the futures market, position squaring for the end of the month and quarter seemed to be the chief order of business on Friday.

Live Cattle futures closed unchanged to marginally higher across the front half of the board and then an average of 53¢ lower.

Feeder Cattle futures closed 85¢ lower (62¢ to $1.05 lower) counting newly minted away Sep.

Choice boxed beef cutout value was 21¢ higher Friday afternoon at $196.62/cwt. Select was 61¢ lower at $188.50.

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Major U.S. financial indices closed higher on Friday.

The Dow Jones Industrial Average closed 23 points higher. The S&P 500 closed 9 points higher. The NASDAQ closed 42 points higher.

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“There remain a large number of cattle on feed, but timely marketing the past 12 months has kept cattle current and the risk of a wall of cattle pushed to the sidelines,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “Cattle feeders have continued to purchase feeder cattle aggressively with the expectation of prices improving moving forward.”

Although calves face seasonal price pressure the next couple of months, Griffith explains strong stocker demand and Feeder Cattle futures remain supportive.

Although too few to trend, there were a few trades on Thursday at the upper end of last week’s range: $108/cwt. on a live basis and $172 in the beef.

Cattle futures closed narrowly mixed on Thursday amid sluggish trade and waiting for the week’s cash fed cattle trade to provide some near-term direction.

Live Cattle futures closed 25¢ lower to 40¢ higher.

Feeder Cattle futures closed 22¢ lower to 50¢ higher.

Choice boxed beef cutout value was $1.11 higher Thursday afternoon at $196.41/cwt. Select was 80¢ lower at $189.11.

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Major U.S. financial indices edged higher on Thursday, extending gains from the previous session with continued support from optimism surrounding the tax reform plan announced Wednesday.

The Dow Jones Industrial Average closed 40 points higher. The S&P 500 closed 3 points higher. The NASDAQ closed fractionally higher.

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“Even with very large tonnage being produced, most products (red meat) have continued to flow through marketing chains at a brisk pace and stocks have not increased year-over-year,” say analysts with the Livestock Marketing Information Center, in the latest Livestock Monitor. “As of Aug. 30, frozen beef tonnage was unchanged from 2016, pork dropped 5%, and lamb/mutton was down 11%.”

The data refers to the latest USDA monthly Cold Storage report released last week.

“Frozen products have differing shelf-life before they must be sold,” LMIC analysts explain. “For example, typical industry specification is that that a frozen whole turkey should be sold within about two years, while frozen ground meats require marketing much sooner (e.g. six month or so). At times U.S. cold storage stocks are increasing to support growing tonnage of frozen products being exported. At other times, stocks may build due to surging U.S. imports, like when Australia has a drought. Stocks can also build up when product is difficult to sell.”

So much for Monday’s limit-down moves in Cattle futures, on the heels of more August feedlot placements than expected. Stability returned yesterday; today, prices were on a tear to the upside, except for spot contracts. There was likely short covering, but there seems little fundamental explanation for the surge. Perhaps funds are returning, or maybe enough folks are coming to rational conclusions about the higher placements noted in last week’s Cattle on Feed report (see below).

There were only 1,342 head offered, and no sales, in the weekly Fed Cattle Exchange auction. That might have plenty to do with the surge in futures prices and increasing expectations for at least steady cash fed cattle trade this week, if not higher.

After 30¢ higher in spot Oct, Live Cattle futures closed an average of $1.09 higher (67¢ to $1.42 higher).

Feeder Cattle futures closed an average of $2.48 higher ($1.82 to $2.87 higher).

Choice boxed beef cutout value was $1.48 lower Wednesday afternoon at $195.30/cwt. Select was $3.20 lower at $189.91. Both are still higher week to week.

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Major U.S. financial indices closed higher on Wednesday, with many analysts crediting much of the optimism to the tax reform plan announced yesterday.

The Dow Jones Industrial Average closed 56 points higher. The S&P 500 closed 10 points higher. The NASDAQ closed 73 points higher.

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“Before we all freak out about placements being above the average expectation, a little perspective is in order,” says David Anderson, Extension livestock economist at Texas A&M University, referring to last Friday’s Cattle on Feed report. “Total placements were 49,000 head above August 2016. That’s not a large number compared to total placements of 1.9 million. The 65,000 head increase in the heavier categories marketed over a likely two-month period is about 1,500 head per day, likely early in 2018, with maybe a few in late 2017. And remember, marketings exceeded placements in August for the first time since 2013, pulling down on-feed inventories. Feedlot marketings continued at their rapid pace, up 6%, which is preventing backed up supplies.”

Moreover, Anderson emphasizes that fundamentals remain strong.

“It’s worth remembering also that current prices reflect the current market,” Anderson explains, in the most recent In the Cattle Markets. “The Cattle on Feed report contains information about supplies that will affect prices some months down the road. If anything, there is some fundamental market information that would suggest $108 fed cattle might be underpriced.”