WLI

Cattle futures closed sharply lower on Tuesday, basically giving back what they gained during the previous day’s rally, driven by short covering and placement numbers in last week’s Cattle on Feed report. Among other factors, bears continue focusing on increasing cattle numbers and stagnant wholesale beef values, rather than the increased tonnage cleared through the market and signs that cattle feeders are maintaining currentness.

Live Cattle futures closed an average of $1.50 lower (92¢ to $2.27 lower).

Feeder Cattle futures closed an average of $2.60 lower. The exception was 17¢ higher in spot Aug.

There were a few early dressed fed cattle trades reported in Nebraska at $168/cwt. with light demand and very limited trade, but too few transactions to trend. Elsewhere trade was mostly inactive on light demand.

Choice boxed beef cutout value was 27¢ higher Tuesday afternoon at $191.77/cwt. Select was $2.17 higher at $190.79, squeezing the Choice-Select spread to 98¢.

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After early pressure, attributed to North Korea firing a missile over Japan, major U.S. financial indices rebounded to close higher on Tuesday.

The Dow Jones Industrial Average closed 56 points higher. The S&P 500 closed 2 points higher. The NASDAQ closed 18 points higher.

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Reflecting on last Friday’s Cattle on Feed report, analysts with the Livestock Marketing Information Center (LMIC) point out in the latest Livestock Monitor that July placements were less than June for the first time since 2007.

“More animals are on feed than a year ago, but that does not imply any cattle feeders have not marketed animals when ready, as happened in 2016,” LMIC analysts say. “Marketing’s remained aggressive compared to the last two years. However, the percentage of animals marketed relative to the calculated number of head that had been on feed for over 90 days was not as dramatic as in the last eight months (back to November 2016) and was in line with the 5-year average from 2011-15.”

“Marketings remained strong in July (up 4%), but with the deterioration in feeding returns, it’s clear feedlots are thinking twice about filling pens with negative returns projected,” says Katelyn McCullock, an economist with the American Farm Bureau Federation.

In a recent edition of In the Cattle Markets, McCullock explains feedlot returns fell significantly from June to July and are expected to turn negative in August.

Cattle futures surged higher on Monday, supported by Friday’s Cattle on Feed report, which has July placements significantly less than many anticipated—up 2.7% year over year, rather than general expectations for an increase of 6%. Stable to higher wholesale beef values lent support.

Except for 25¢ higher in spot Aug, Live Cattle futures closed an average of $1.49 higher ($1.10 to $1.80 higher).

Feeder Cattle futures closed an average of $2.82 higher ($1.05 to $3.45 higher).

Choice boxed beef cutout value was 18¢ higher Monday afternoon at $191.50/cwt. Select was 32¢ higher at $188.62.

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Major U.S. financial indices closed narrowly mixed on Monday, supported by a spike in gasoline prices with Gulf Coast refineries shutting down in the wake of Hurricane Harvey.

The Dow Jones Industrial Average closed 5 points lower. The S&P 500 closed 1 point higher. The NASDAQ closed 17 points higher.

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“July placements, though up year over year, were up less than the double-digit levels of the previous four months,” says Derrell Peel, Extension livestock marketing specialist, in his weekly market comments. “The very surprising 16% year-over-year increase in June placements included increased lightweight placements. These were likely placed early, in June rather than July, and contributed to the rather modest year over year increase in July placements.”

Although difficult to estimate, Peel adds that about 6-13% of the increase in placements for May-July are borne by early cattle movement due to drought. Since May, placements in South Dakota, alone, are 48% more year over year.

“USDA currently estimates that about 12% of the total cattle herd in the country is in regions experiencing some level of drought,” Peel says. “I estimate that 6.5-7.0% of the total beef cow herd—roughly 2.1 million beef cows are in regions suffering with severe (D2) to exceptional (D4) drought conditions. This includes nearly a million head of cows in Montana and 500,000-700,000 head each in North and South Dakota. Parts of the region have also experienced large wildfires. Lack of forage has led to significant destocking in the worst areas with cows culled or relocated to other regions. Heading into fall and winter with limited pasture and hay supplies means that cattle producers in the region will continue to struggle at least into spring 2018.”

On the other end of Mother Nature’s meteorological rope, Peel estimates a million beef cows in Texas and Louisiana are being impacted by the torrential rains and flooding associated with Hurricane Harvey.

Cash fed cattle trade finished the week $2-$4 lower at mostly $106-$107 on a live basis. Dressed sales were $5-$7 less at $168-$170.

Choice boxed beef cutout value was 43¢ lower Friday afternoon at $191.32/cwt. Select was 36¢ lower at $188.30.

Early support faded in Cattle futures, though they still closed mostly higher.

Except for unchanged in spot Aug and 92¢ higher at the back, Live Cattle futures closed an average of 25¢ higher (5¢ to 57¢ higher).

After 22¢ lower in spot Aug, Feeder Cattle futures closed an average of 71¢ higher (55¢ to $1.02 higher).

If anything, Friday’s monthly Cattle on Feed Report (see below) should be neutral to supportive, with fewer July placements than many analysts anticipated.

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Major U.S. financial indices basically tread water on Friday, but mostly to the upside, buoyed by news that President Trump will begin beating the drum for tax reform this week. Support also came from news out of the closely watched Federal Reserve-sponsored economic policy symposium in Jackson Hole. It included Federal Reserve Chair, Janet Yellen, explaining that financial stability has risen from the ashes of the Great Recession and the financial crisis that preceded it a decade ago.

The Dow Jones Industrial Average closed 30 points higher. The S&P 500 closed 4 points higher. The NASDAQ closed 5 points lower.

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Cattle feeders placed fewer cattle on feed in July than many analysts anticipated, according to the monthly Cattle on Feed report from USDA on Friday.

Specifically, July placements of 1.615 million head were 2.7% more than the previous year. Pre-report estimates were generally in the area of 6.0% higher.

On the other hand, the composition of placements—percentage of placements by weight—is similar to a month earlier, especially on the heavier side. There were 36.9% placed at weights lighter than 700 lbs. in July (595,000 head), compared to 39% in June (690,000 head). There were 39.3% placed on feed at weights heavier than 800 lbs. in July (635,000 head), compared to 36.2% in June (650,000 head).

Marketings in July (1.784 million head) were 4.1% more than the previous year, in line with pre-report estimates.

The on-feed total Aug. 1 of 10.604 million head was 4.3% more than the same period a year ago, which reflected estimates ahead of the report.

Negotiated cash fed cattle trade continued lower on Thursday at $106/cwt. in the western Corn Belt, which was $2-$4 less than last week. Live sales in other regions on Wednesday were mainly $3 less than last week at $107.

Choice boxed beef cutout value was 58¢ lower Thursday afternoon at $191.75/cwt. Select was 81¢ lower at $188.66.

Cattle futures spent most of the day under pressure, but reversed directions by the closing bell, apparently the product of short covering.

Except for 7¢ lower at the back, Live Cattle futures closed an average of 63¢ higher (30¢ to 92¢ higher).

After 2¢ lower in spot Aug, Feeder Cattle futures closed an average of 58¢ higher across a broad range (7¢ to 87¢ higher).

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Major U.S. financial indices edged lower on Thursday amid little economic news.

The Dow Jones Industrial Average closed 28 points lower. The S&P 500 closed 5 points lower. The NASDAQ closed 7 points lower.

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Given the hefty level of feedlot placements in recent months, perhaps more than usual, plenty of folks will pore over the monthly Cattle on Feed report to be published by USDA on Friday. Heavyweight placements in July will likely attract much of the attention.

Pre-report estimates are all over the board with plenty of variables.

In his market comments last week, David Anderson, Extension livestock economist with Texas A&M University, noted that placement estimates range from less than 1% higher to an increase of more than 10%.

“Most years, July placements exceed June placements. Only in 2005 and 2007 were July placements smaller than in June in recent years,” Anderson says. “July placements would have to be up a whopping 12.6% over a year ago to equal June’s placements.”

Among the logical reasons for a year-to-year increase in July placements, Anderson cites:

Increasing reports of Corn Belt feeders buying calves, and perhaps the need for some of them to free up bin space ahead of what appear to be another near-record corn crop.

Continued drought in the Northern Plains, pushing cattle to market earlier.

Profit opportunities continued for cattle placed in July.

On the other hand, Anderson says, “It may also be that the large placements in May and June pulled some cattle ahead and out of July placements…Placement levels so far this year would suggest the increase in feeder cattle over last year have already been placed, limiting supplies to lighter weight calves and heifers.”

Anderson estimates July placements at 2.5% more than a year ago.