WLI

Feeder Cattle futures continued to gain ground on Tuesday with support from recent cash markets, lending support to Live Cattle. Plenty of folks will be looking for a hint of direction from this morning’s weekly Fed Cattle Exchange auction.

Live Cattle futures closed an average of 51¢ higher through the front four contracts and then an average of 20¢ higher.

Feeder Cattle futures closed an average of 70¢ higher.

Choice boxed beef cutout value was 51¢ lower Tuesday afternoon at $192.11/cwt. Select was $1.13 higher at $188.83.

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Major U.S. financial indices closed higher again on Tuesday, with few expecting the Fed to raise interest rates this week, and shrugging off increased geopolitical tension with North Korea.

The Dow Jones Industrial Average closed 39 points higher. The S&P 500 closed 2 points higher. The NASDAQ closed 6 points higher.

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“Buyer interest in preconditioned calves is expected to continue to grow as increases are realized in calf prices and the cost to finish cattle,” says Brenda Boetel, Extension economist at the University of Wisconsin-River Falls. “In the current environment, preconditioning may become even more important, not necessarily due to the premium received for preconditioning, but because the cow-calf producer can avoid the discount received for calves with the unknown health status of non-preconditioned calves.”

Last fall’s wreck comes to mind: it was difficult to peddle un-weaned calves for any price.

With that said, in the most recent issue of In the Cattle Markets, Boetel explains there’s lots to consider in deciding whether or not it makes economic sense to keep calves a spell. For instance: how much weight calves can gain and the value of gain of those added pounds, versus the cost of gain.

Cattle feeders won the battle last week in late trade. Live prices were $1 higher at $106/cwt., except for $2 higher in the western Corn Belt at $105-$107. Dressed trade was generally steady at $165-$168.

The CME Feeder Cattle Index edged above $150.00 for the first time since early August.

Live Cattle futures closed mostly marginally higher on Monday (12¢ to 65¢ higher) except for 17¢ lower in spot Oct, 25¢ lower in Feb and unchanged in Aug.

Feeder Cattle futures closed an average of $1.09 higher (57¢ to $1.47 higher).

Choice boxed beef cutout value was $1.20 higher Monday afternoon at $192.62/cwt. Select was $1.85 higher at $187.70.

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Major U.S. financial indices closed higher again on Monday, helped along by Northrup Grumman’s multi-billion acquisition of Orbital ATK.

The Dow Jones Industrial Average closed 63 points higher. The S&P 500 closed 3 points higher. The NASDAQ closed 6 points higher.

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“Although improved forage conditions in the Southern Plains may increase incentives to background calves, placements in feedlots during the fourth quarter are expected to remain relatively large, given the availability of cattle outside feedlots,” say analysts with USDA’s Economic Research Service (ERS), in the monthly Livestock, Dairy and Poultry Outlook released yesterday. “However, expected declines in cattle feeding margins will likely encourage feedlots to bid down the price of calves in the coming months.”

The projected fourth-quarter 5-area fed steer price is $107-$113/cwt.

“Fed steer prices may possibly be pressured in the short-term as ample supplies of cattle are available to be marketed in the fourth quarter. In addition, an abundant supply of competing meats are also available,” ERS analysts say.

Fed steer prices are forecast at $110-$120 in the first quarter of 2018.

In the meantime, those analysts suggest improved forage conditions—allowing folks to keep cattle and wait for higher prices—are helping lift feeder cattle prices, following the month-to-month decline in August.

The price forecast for feeder steers (750-800 lbs.) in the fourth quarter is $140-$146/cwt. First-quarter prices are projected at $132-$140.

Cash fed cattle trade was still undeveloped for the week through mid Friday afternoon. There was a few trades on either side of steady during the week, but too few transactions to trend. Prices the previous week were mainly $105 per cwt on a live basis and $165-$168 in the beef.

Cattle futures closed higher on Friday, apparently buoyed by hopes for stronger cash fed cattle prices and lingering thoughts that the bottom is near.

Other than 2¢ lower in the back contract, Live Cattle futures closed an average of $1.01 higher through the front four contracts and then an average of 46¢ higher.

Feeder Cattle futures closed an average of $1.12 higher (92¢ to $1.42 higher).

Choice boxed beef cutout value was 42¢ higher Friday afternoon at $191.42/cwt. Select was 87¢ lower at $185.85.

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Major U.S. financial indices closed higher on Friday as investors ignored anything that might otherwise be considered negative, like a decline in retail sales and industrial production.

After six consecutive months of gains, industrial production declined 0.9% in August, according to the Federal Reserve, reflecting, in part, the impact of Hurricane Harvey.

Retail and food service sales declined 0.2% in August from the previous months, according to the U.S. Department of Commerce.

The Dow Jones Industrial Average closed 64 points higher. The S&P 500 closed 4 points higher. The NASDAQ closed 19 points higher.

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“It is fairly clear to see at this point that the last official grilling holiday of the summer did little to spur boxed beef prices,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “…With the large quantity of beef being produced and placed on the meat counter, coupled with transitioning out of the grilling season, a sudden price escalation is unlikely.”

At least retail beef prices are trending lower. The Choice retail beef price last months was 13¢ lower than the previous month at $5.97/lb., according to Griffith. The all-fresh retail beef price was just 2¢ lower at $5.79.

“Retail beef prices are likely to soften the next two to three months as the market moves through the large quantities of beef and as the market moves through large quantities of pork,” Griffith says. “If the domestic market is forced to absorb the increased meat production then lower prices can be expected.”

Cash fed cattle trade for the week had yet to develop through Thursday afternoon. There were a few dressed trades at $168/cwt.—the upper end of last week’s range—in Nebraska, but too few to trend.

Although fundamentals remained unchanged, Cattle futures settled mostly modestly lower on Thursday, after early support, then significant pressure, followed by easing pressure.

Other than 5¢ lower in the back contract, Live Cattle futures closed an average of 55¢ lower (27¢ to $1.07 lower).

Other than 20¢ higher in spot Sep and 2¢ lower in Oct, Feeder Cattle futures closed an average of 39¢ lower (25¢ to 47¢ lower).

Choice boxed beef cutout value was 60¢ higher Thursday afternoon at $191.00/cwt. Select was $1.97 lower at $186.72.

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Major U.S. financial indices closed narrowly mixed on Thursday.

The Dow Jones Industrial Average closed 45 points higher. The S&P 500 closed 2 points lower. The NASDAQ closed 31 points lower.

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“Cow-calf producers that are set-up to economically add some weight to cull cows and then sell in the first few months of 2018 instead of this fall at the seasonal price low, might want to put a pencil to that soon,” say analysts with the Livestock Marketing Information Center (LMIC), in the latest Livestock Monitor.

LMIC analysts explain that over the course of a typical cattle inventory cycle (usually 10-12 years), cull cow prices are typically seasonally lowest in the fourth quarter—about a 10% decline between September and November for the long-term average.

“Several factors underpin the seasonal pattern in cull cow prices,” LMIC analysts explain. “First, the supply of cull beef cows is largest in the fall, which dampens prices; after those large supplies are marketed, prices increase. Second, fed cattle prices are typically highest in the winter and early spring months (i.e., February through May), which supports slaughter cow prices. Other factors that can significantly influence cull cow prices are the level of dairy cow slaughter and the amount of beef imported from Australia and New Zealand, which competes mostly in the cow-beef market and not as much with meats from fed steers and heifers.”

LMIC expects the average seasonal decline in cull cow prices through the fourth quarter this year, then an increase into early 2018. Along the way, they expect cull cow prices to be lower year over year.

Cash fed cattle trade remained mostly stuck in place through Wednesday afternoon. There was no country trade to speak of. Only one lot—128 heifers—traded in the weekly Fed Cattle Exchange Auction, out of 1,063 head offered. The weighted average price was $104.75/cwt. (1-9 day delivery), which was about even with last week’s country trade.

Despite early pressure and stagnant wholesale beef values, a sense of firming market conditions helped boost Cattle futures on Wednesday.

Live Cattle futures closed an average of 84¢ higher (40¢ to $1.30 higher).

Feeder Cattle futures closed an average of 51¢ higher.

Choice boxed beef cutout value was 39¢ lower Wednesday afternoon at $190.40/cwt. Select was $2.17 lower at $188.69.

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Major U.S. financial indices closed higher on Wednesday—all three cited here closed at record-high levels for the second consecutive day. Stronger oil prices and suggestions that Congress will get to tax reform this year provided support.

The Dow Jones Industrial Average closed 39 points higher. The S&P 500 closed 1 point higher. The NASDAQ closed 3 points higher.

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Brian Williams, livestock economist at Mississippi State University points out that projected beef production for this year was reduced 140 million lbs. in the latest monthly World Agricultural Supply and Demand Estimates; reduced 85 million lbs. for next year.

“One driver is lower than expected fed cattle marketing as reflected in the last Cattle on Feed Report, although we know those cattle are still out there and will end up coming to market at some point in the future,” Williams explains, in the latest In the Cattle Markets. “Probably the biggest driver is reduced slaughter weights. Total slaughter numbers have been trending at or above last year’s numbers most of the year, however slaughter weights have been trending well below year-ago levels. When those two are put together, the lower slaughter weights outweigh the increase in the number of head, leading to lower production numbers.”

Williams notes that positive cattle feeding returns encouraged feeding and marketing more cattle quicker, which equates to lighter carcass weights.

“Now that profits (feedlot) are turning negative, that incentive is gone and feedlots will likely shift toward trying to squeeze as much gain out of each animal as possible,” Williams says. “If that happens, look for the uptick in slaughter weights to shift total beef production higher in the coming months.”