WLI

Steep declines in nearby Lean Hog futures, pressure in the corn market and continued skittishness over near-term supply and demand helped pressure Live Cattle futures on Tuesday, leading Feeder Cattle lower, too.

Other than 17¢ and 25¢ higher at the back of the board, Live Cattle futures closed an average of 81¢ lower (35¢ to $1.32 lower).

Feeder Cattle futures closed an average of 42¢ lower.

Choice boxed beef cutout value was 77¢ lower Tuesday afternoon at $190.79/cwt. Select was 48¢ higher at $190.86. You read those prices correctly, the Choice-Select spread turned negative. If my records are right, that’s the first time since January in 2014.

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Major U.S. financial indices closed sharply higher on Tuesday. Easing concerns about North Korea—if only for a day—less damage from Hurricane Irma than expected and bullish treasury yields (10 years) all provided support.

The Dow Jones Industrial Average closed 61 points higher. The S&P 500 closed 8 points higher. The NASDAQ closed 22 points higher.

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The Livestock Marketing Information Center (LMIC) forecasts calf prices (500-600 lbs. steer) prices in the Southern Plains for the fourth quarter will average above last year’s depressed price level.

However, in the latest Livestock Monitor, LMIC analysts emphasize that does not suggest continued year-over-year price increases in 2018 and 2019.

“The fundamentals of the cattle and beef supply for the next two years will be the size of the U.S. calf crops,” LMIC analysts explain. “As reported by USDA-NASS, the size U.S. calf crops have increased each of the last three years and in 2017 looks to be the largest since 2008. Based on the cowherd, both the 2018 and 2019 calf crops are expected to be even bigger. All else equal, that is a challenging environment to keep raising prices.”

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Odds continue for lower feed prices, according to the monthly World Agricultural Supply and Demand Estimates (WSADE) released yesterday.

All told, WASDE says the outlook for the 2017-18 U.S. corn crop is for increased production, greater feed and residual use, higher ending stocks, and lower prices.

The projected range for the season-average corn price received by producers was lowered 10¢ on both ends to a range of $2.80 to $3.60/bu.

Soybean production is forecast at a record 4.43 billion bu.

The 2017-18 U.S. season-average soybean price is forecast at $8.35 to $10.05/bu. Soybean meal prices are projected at $290 to $330 per short ton. Soybean oil prices are projected higher at 32.5¢ to 36.5¢ per pound.

The season-average wheat price at the farm price is forecast to be $4.30 to $4.90/bu.

WASE forecasts less total meat production for this year than a month earlier, with estimated decreases in beef and broiler production more than offsetting increased pork and turkey production.

Second-half beef production was reduced on the slower expected marketing pace for fed cattle. For 2018, the beef production forecast is lowered from the previous month on the slower rate of placements during the second-half of 2017, which are expected to result in reduced steer and heifer slaughter in the first half of next year.

The fourth-quarter fed steer price is projected at $107-$113/cwt., compared to $110-$113 estimated for the third quarter. The annual price was reduced $2 on both ends of the range from the previous month’s forecast to $118-$120. The projected first-quarter price for next year is $110-$120.

Climbing futures prices later last week and firming wholesale beef values helped hold the line on cash fed cattle trade, when it finally opened up late on Friday. Prices were mainly steady to $1 higher than the previous week at $105/cwt. on a live basis and $165 in the beef, up to $168. Many would say that’s a victory, considering that expectations earlier in the week were for lower money.

Although the degree of support softened, Cattle futures closed mostly higher on Monday with Feeder cattle in the lead once again.

Other than 12¢ lower in spot Oct and 7¢ lower in Feb, Live Cattle futures closed an average of 59¢ higher (2¢ to $1.15 higher).

Feeder Cattle futures closed an average of 84¢ higher (57¢ to $1.07 higher).

Choice boxed beef cutout value was 32¢ lower Monday afternoon at $191.56/cwt. Select was 41¢ higher at $190.38.

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Major U.S. financial indices closed sharply higher on Monday. One popular notion for the bounce was a relief rally based on Hurricane Irma, though severe, appearing less so than traders anticipated.

The Dow Jones Industrial Average closed 259 points higher. The S&P 500 closed 26 points higher. The NASDAQ closed 72 points higher.

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Despite increased cattle slaughter, lighter carcass weights, strong beef exports, reduced beef imports and steady domestic consumer beef demand continue to bolster cattle and beef prices at higher levels than many anticipated. That’s how Derrell Peel, Extension livestock marketing specialist at Oklahoma State University sums up the price outlook heading into the fourth quarter.

“Calf and feeder prices peaked in June, a later-than-usual seasonal peak for calves and earlier than typical for the heavy feeders,” Peel explains in his latest weekly market comments. “Calf prices will likely decline a bit more to a seasonal low in October but are expected to remain higher year over year through the fourth quarter. Strong stocker demand for fall and winter grazing may limit seasonal price pressure this fall. Heavyweight feeder cattle prices typically decline seasonally through the end of the year but are also expected to remain above year-ago levels. While prices may weaken seasonally, I don’t expect a repeat of last year’s October crash in cattle prices.”

Although fed cattle prices are currently about 5% less compared to the same time last year, Peel expects them to stabilize near current levels before increasing seasonally in the fourth quarter and remaining above year-earlier levels.

Similarly, Peel explains, “Boxed beef prices have dropped sharply from June highs but appear to have stabilized recently. Choice boxed beef prices are currently very close to year-ago levels, while Select boxed beef prices are slightly higher year over year. Boxed beef prices are expected to increase some in the fourth quarter and average higher year over year for the balance of the year.”

Although there were too few transactions to trend, a few cattle traded in Nebraska through Friday afternoon at $105/cwt. on a live basis, which was steady with the previous week.

Feeder Cattle futures continued to rally on Friday, also leading Live Cattle to another day of gains.

Live Cattle futures closed an average of $1.26 higher (90¢ to $1.72 higher).

Feeder Cattle futures closed an average of $2.01 higher ($1.37 to $2.32 higher).

Choice boxed beef cutout value was 25¢ lower Friday afternoon at $191.88/cwt. Select was 19¢ lower at $189.97.

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

The Dow Jones Industrial Average closed 13 points higher. The S&P 500 closed 3 points lower. The NASDAQ closed 37 points lower.

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“Several weeks ago there seemed to be a dichotomy between feeder cattle prices and finished cattle prices as feeder cattle prices remained relatively strong while finished cattle prices were taking a nose dive,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “This dichotomy appears to have ceased as both Feeder Cattle and Live Cattle futures contracts have begun to move to the upside. A point that further points to the contrast between prices a few weeks ago is that the Live Cattle contracts have gained nearly as many dollars per hundredweight as the Feeder Cattle contracts. Another point of interest in the Feeder Cattle market is the narrow price spread among the eight actively traded contracts from September 2017 to August 2018. The eight contracts are all within a $5/cwt. price range, with the remaining 2017 contracts trading within a $1 range. Similarly, the 2018 contracts are all within $2 of each other. The information from the narrow spreads across months can be difficult to decipher. In the near term, it likely means traders are not sure how many cattle are still on pasture and that they may question some of the information reported earlier in the year.

Growing chatter that wholesale beef values may have finally found the seasonal bottom, significantly more trade and short covering helped Cattle futures rally on Thursday. That’s despite the lower cash fed cattle trade last week and undeveloped trade so far this week.

Except for 27¢ higher in the back contract, Live Cattle futures closed an average of $1.11 higher (65¢ to $1.52 higher).

Feeder Cattle futures closed an average of $2.03 higher ($1.50 to $2.45 higher).

Choice boxed beef cutout value was 80¢ lower Thursday afternoon at $192.13/cwt. Select was 51¢ lower at $190.16.

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

The Dow Jones Industrial Average closed 22 points lower. The S&P 500 closed fractionally lower. The NASDAQ closed 4 points higher.

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U.S. beef exports in July were among the highest monthly totals on record, according to data from USDA and compiled by the U.S. Meat Export Federation (USMEF).

July beef exports totaled 104,488 metric tons (mt), were 5% more year over year. Export value for the month was 18% more than a year earlier at $623.7 million.

For January through July, exports increased 11% in volume (711,364 mt) and 15% in value ($3.97 billion) compared to the first seven months of last year.

Export value per head of fed slaughter in July averaged $299.21, up more than $35 (or 13%) from a year ago. Through July, per-head export value this year was up 9% to $273.52.

“July was certainly a solid month, especially for beef exports, but these results remind us that the U.S. red meat industry operates in an intensely competitive global environment,” says USMEF CEO Philip Seng. “At a time when some of our most essential trade agreements are under review, we must be mindful of how these agreements have helped make U.S. beef, pork and lamb more readily available and more affordable for millions of global customers, to the benefit of U.S. producers and everyone in the U.S. supply chain.”

Among beef export highlights for the month:

Beef export volume to Japan was most in four years; value was the highest of post-BSE era. Keep in mind that Japan’s frozen beef safeguard was triggered in late July, increasing the duty on frozen beef imports from suppliers without a trade agreement with Japan, including the U.S., from 38.5% to 50%. The impact of the safeguard is not likely to surface until the September export data is available, according to USMEF.

July was the first full month for exports to China, with exports of 137 mt valued at $1.3 million.