WLI

Just a single lot (125 head) sold out of the 1,240 head offered in the weekly Fed Cattle Exchange auction. The heifers sold for a weighted average price of $163/cwt. on a dressed basis for delivery at 1-17 days. That was $3 less than steers selling in the beef there last week.

Another day of firmer wholesale beef values, reports of renewed commercial interest and hopeful notions that packers need to acquire inventory helped lift Cattle futures on Wednesday.

Live Cattle futures closed an average of 57¢ higher.

Feeder Cattle futures closed an average of $1.09 higher (80¢ to $1.50 higher).

Choice boxed beef cutout value was 48¢ higher Wednesday afternoon at $192.93/cwt. Select was 20¢ higher at $190.67.

Corn futures closed 2¢ higher through Sep ’18 and then fractionally higher to 1¢ higher.

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Major U.S. financial indices rebounded from the previous session’s steep losses to close moderately higher on Wednesday, on mixed economic news.

The Dow Jones Industrial Average closed 54 points higher. The S&P 500 closed 7 points higher. The NASDAQ closed 17 points higher.

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Weekly cattle slaughter was running 3-10% higher year over year through July and early August, and it needs to keep up the pace, says Stephen Koontz, agricultural economist at Colorado State University, in the latest issue of In the Cattle Markets.

“Strong packer margins and Saturday kills show no problems as of yet, but what plays out over the months of September and October will be important for fed and feeder cattle prices well into next year,” Koontz explains. “Weekly fed slaughter and monthly fed cattle marketing need to be watched closely. The slowing of either will lead cattle prices lower.”

Compared to beef retail featuring for Memorial Day, Koontz adds that the lack of news about Labor Day featuring poses concern.

“Late summer featuring is present but not as strong as that of early summer,” Koontz says. “Retail prices rebounded sharply upward through May and June after months of softening last fall. This summer’s retail prices are similar to last year and the retailer margin strengthened a lot last month. Strong consumer demand will be needed in the fall and it is not clear that’s likely.”

Sharply higher nearby Lean Hog futures and firming wholesale beef values provided support for Cattle futures early in Tuesday’s session. By the end, though, Feeder Cattle closed lower, while Live Cattle mostly eked out minimal gains.

After 72¢ and 10¢ lower in the front two contracts, Live Cattle futures closed an average of 12¢ higher, except for 45¢ lower in away Oct.

Feeder Cattle futures closed an average of 54¢ lower (15¢ to $1.05 lower).

Choice boxed beef cutout value was $1.10 higher Tuesday afternoon at $192.45/cwt. Select was 18¢ lower at $190.47.

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Major U.S. financial indices closed sharply lower on Tuesday, apparently pressured most by weekend news that North Korea successfully tested a hydrogen bomb.

The Dow Jones Industrial Average closed 234 points lower. The S&P 500 closed 18 points lower. The NASDAQ closed 59 points lower.

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Besides Midwestern farmer-feeders filling yards as a corn marketing alternative, lousy wheat prices and bountiful prospects for wheat pasture could add support to calf prices.

In Oklahoma, for example, Derrell Peel, Extension livestock marketing specialist at Oklahoma State University explains most of the state received about double the average precipitation in August, along with below-normal temperatures, enabling earlier wheat sowing.

“Early planted wheat, along with other forages may add 30 or more days to the front end of winter grazing,” Peel says. “At the same time, expectations for 2018 wheat prices are dismal enough that some producers are beginning fall grazing with an intent or high likelihood of grazing out wheat next spring. A full graze-out adds another 75 or so days to the winter dual-purpose grazing period. Together, these conditions suggest the possibility of 220 or more days of grazing compared to a more typical 120 day winter grazing period.”

Such a lengthy grazing opportunity also means some stocker operators will be looking for two turns on wheat rather than one.

“Two sets of stockers allow producers to consider a wider range of purchase weights and perhaps avoid demand bunched around lightweight stockers,” Peel explains. “It is common in the fall to see prices for typical stocker sizes (400-525 lbs.) to be high relative to heavier stockers (550-650 lbs.). Current prices for stocker cattle suggest that a wide range of purchase weights (400-650 lbs.) all offer roughly the same value of gain and similar potential for returns.”

Negotiated cash fed cattle trade was at $104-$105/cwt., which was $1-$3 less than the previous week. Dressed trade was $2-$5 less at mainly $165-$166.

Cattle futures edged mostly higher by the end of light trade on Friday, likely mostly due to light trade and position squaring ahead of the long weekend. Traders will return from Labor Day looking for indications of how aggressive consumers were in purchasing beef for the last unofficial holiday of summer.

Except for 25¢ lower in new spot Oct, Live Cattle futures closed an average of 52¢ higher (30¢ to 77¢ higher).

Feeder Cattle futures closed an average of 45¢ higher (12¢ to 85¢ higher).

Choice boxed beef cutout value was 56¢ lower Friday afternoon at $191.35/cwt. Select was 69¢ lower at $190.65.

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Despite a fractional increase in the nation’s unemployment rate to 4.4% and fewer new jobs added last month than expected (156,000), according to Friday’s monthly Employment Situation report from the Bureau of Labor Statistics, major U.S. financial indices closed higher on Friday.

The Dow Jones Industrial Average closed 39 points higher. The S&P 500 closed 4 points higher. The NASDAQ closed 6 points higher.

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Wholesale beef prices last week showed signs of steadying for the first time since the middle of June, says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments.

“The Choice cutout price has declined about $58/cwt. in an 11-week period, while the Select cutout price has lost nearly $29 over the same time period,” Griffith says. “During the wholesale beef price decline, the Choice-Select spread essentially moved from historically wide spread (above $30/cwt.) to no spread at all (less than $1). The Choice-Select spread typically narrows this time of year due to demand factors, but the supply side has provided a strong case for a narrowing spread.”

Griffith explains an average of about 64% of federally inspected fed steers and heifers graded Choice or higher in August for the past five years. More than 70% graded Choice or higher so far this year—nearly 74% in recent weeks. In other words, more Choice and higher-grading carcasses in tandem with fewer lower-grading carcasses are also helping to narrow the spread.

For broader perspective, although domestic per-capita beef consumption this year will be the largest since 2012 on a retail weight basis, and domestic per-capita consumption of total red meat and poultry will be the most since 2008, analysts with the Livestock Marketing Information Center (LMIC) point out that neither are projected to be record-large, even though total red meat and poultry production this year is projected to be record-high.

That’s why context is important, they explain in a recent Livestock Monitor.

Production is calculated on a carcass weight basis and LMIC projects U.S. production of red meats this year to be record-high at approximately 52.1 billion lbs. Of the red meats, only pork production is projected record-high at about 25.7 billion lbs. Projected beef production is projected at 26.2 billion lbs. U.S. poultry production this year is projected to be record-large at 47.4 billion lbs.

Rather than an anomaly, LMIC analysts point out that record-large and near record-large annual meat production is the rule rather than the exception. In fact, they say that for 71% of the years from 1960 through last year, record-large U.S. red meat and poultry production was achieved.

Now for the consumption side of the equation.

Consumption, or disappearance, accounts for population growth, subtracts meat exports, adds meat imports and adjusts for year-over-year changes in frozen stocks.

With that in mind, domestic per-capita red meat and poultry consumption is not projected to be record large this year.

“Drilling down into the production numbers shows large supplies of most meats and poultry, but not unheard of levels,” LMIC analysts emphasize. They add that looking at retail weight per person is important because it offers insight, including how exports impact domestic use.

Cash fed cattle trade continued at a grudging pace on Thursday. For the week, live prices have been mainly $104-$105 with dressed sales at $165-$166.

Cattle futures were mixed on Thursday but mostly lower.

After $1.02 lower in spot Aug and 72¢ lower in new spot Oct, Live Cattle futures closed marginally mixed but mostly lower (25¢ lower to 22¢ higher).

Other than 17¢ lower in expiring Aug, Feeder Cattle futures closed an average of 86¢ lower.

Choice boxed beef cutout value was 19¢ higher Thursday afternoon at $191.91/cwt. Select was 22¢ higher at $191.34.

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Traders on Wall Street ended the month on an optimistic note, pushing major U.S. financial indices higher on Thursday. Market-friendly news, depending on how you look at it, included paltry month-to-month gains in personal income of 0.4% and personal consumption expenditures (PCE) of 0.3%, according to the U.S. Bureau of Economic Analysis. The PCE price index measures consumer prices paid for goods and services other than food and energy.

The friendly part of the equation comes with the notion that neither support the Fed’s goal of 2% inflation, leading some to bet against another increase in interest rates.

The Dow Jones Industrial Average closed 55 points higher. The S&P 500 closed 14 points higher. The NASDAQ closed 60 points higher.

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Softer sales and traffic levels dampened the outlook for restaurant sales growth in July, according to the latest Restaurant Performance Index (RPI) released by the National Restaurant Association yesterday. The RPI declined for the first time in three months, declining 0.4% to 100.6.

Likewise, the NPD Group (NPD) reports customer visits to U.S. restaurants and foodservice outlets remained negative in the second quarter this year, resulting in six consecutive quarters of weak traffic performance. The U.S. foodservice industry has not experienced six consecutive quarters of no traffic growth since the recession of 2008-09.

The slowdown in restaurant and foodservice visits is most prevalent at midscale/family dining and casual dining concepts, according to NDP. Midscale registered a 4% decline in traffic for the quarter compared to same quarter year ago. Casual dining visits dropped by 3%, according to NPD’s CREST®, which daily tracks all aspects of how consumers use restaurants .

“No doubt the rising cost of a restaurant meal is weighing heavily on industry traffic performance,” says Bonnie Riggs, NPD Group restaurant industry analyst. “The vast majority of consumers give restaurants fairly low ratings on affordability compared to other customer satisfaction attributes.”

According to NDP, the average check at foodservice outlets rose by 2.6%—the largest increase in several years—reflecting higher menu prices.

“Operators will need to be critical in increasing prices and make sure that when they do raise prices the quality of the food and experience is commensurate with their customer’s cost,” Riggs says.

Most of the offering in Wednesday’s weekly Fed Cattle Exchange Auction sold—1,140 out of 1,777 head—but it was at lower money than cash trade last week.

Prices were basically $105/cwt. (weighted average) on a live basis and $166 in the beef—delivery for 1-17 days. That’s $1-$2 less than last week’s country trade for live cattle and $4 less on a dressed basis.

As for country trade, there were too few negotiated cash fed cattle sales to trend in any major cattle feeding region through mid Wednesday afternoon—a few live sales at $105/cwt. in Nebraska and the western Corn Belt; a few in the beef at $165-$166. That’s $2 less on a live basis than last week in those regions and $4-$5 lower dressed.

After moving lower early in the session with follow-through selling, Cattle futures eked out minimal gains at the close, presumably tied to profit taking.

Except for 7¢ and 22¢ lower in the back two contracts, Live Cattle futures closed an average of 24¢ higher.

Except for 15¢ and 42¢ lower at the back of the board, Feeder Cattle futures closed an average of 47¢ higher.

Choice boxed beef cutout value was 5¢ lower Wednesday afternoon at $191.72/cwt. Select was 33¢ higher at $191.12.

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Major U.S. financial indices close higher on Wednesday, supported by positive economic news, including a healthier increase in national employment than expected. According to the closely watched ADP National Employment report, private sector employment grew by 237,000 jobs last month.

The Dow Jones Industrial Average closed 27 points higher. The S&P 500 closed 11 points higher. The NASDAQ closed 66 points higher.

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U.S. exports must increase to accommodate the expanding U.S. cattle and beef industries, according to a new baseline report from RaboResearch Food and & Agribusiness (RRFA) group.

The RRFA report, Expanding Beef Production Increases the Need for Exports: U.S. Long-Term Beef and Cattle Baseline Outlook projects industry expansion lasting another 2-3 years and notes that the domestic industry is mature with a steady rate of beef consumption.

“In order for the beef market to remain in equilibrium, the U.S. will have to increase exports to be consistently above 10% of total production (greater than 3.1 billion lbs.), thereby also becoming a net exporter of beef,” according to the report.

“Population growth, along with improving middle-class incomes, are the global drivers behind the opportunity for increased beef exports,” notes RaboResearch Global Senior Data Analyst Sterling Liddell. “Conversely, beef imports into the U.S. face headwinds as an increased number of head available for slaughter combines with relatively persistent carcass weights to equal, or exceed, domestic demand levels.”

In the meantime, RRFA analysts expect demand for existing capacity to be high, and packers to enjoy the largest balance of market power through 2022.

The report provides an outlook through 2025 for U.S. beef and cattle industries.