WLI

Cattle futures closed mostly narrowly mixed on Monday. They were pressured early in the session, but rather than crashing sharply lower in response to Friday’s Cattle on Feed report, they recovered most of the ground by the end of the day (see below).

Live Cattle futures closed narrowly mixed (25¢ lower to 45¢ higher).

Except for unchanged in spot Oct and $1.20 lower in the back contract, Feeder Cattle futures closed an average of 25¢ lower.

Choice boxed beef cutout value was 61¢ lower Monday afternoon at $199.25/cwt. Select was 9¢ lower at $191.05.

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Major U.S. financial indices closed lower on Monday, perhaps due partly to profit taking ahead of a busy week for quarterly earnings reports.

The Dow Jones Industrial Average closed 54 points lower. The S&P 500 closed 10 points lower. The NASDAQ closed 42 points lower.

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Futures price reaction to Friday’s Cattle on Feed report—13.5% more September placements than a year earlier—may go a long ways in underscoring the strength of the current marketplace. Prices wobbled early on, but then bounced back quickly. Besides more placements being expected as the cowherd grows, logical reasons for the subdued reaction include: placements the previous September were atypically low; market strength continues supporting packer profits and feedlot demand.

“Counter-seasonally strong feeder cattle prices this fall indicate good demand despite growing feeder cattle supplies,” explains Derrell Peel, Extension livestock marketing specialist, in his weekly market comments. “The October Cattle on Feed report confirmed that much of that demand came from feedlots.”

Heifers continue to comprise an increasing proportion of the on-feed mix—13% more Oct. 1 than a year earlier—suggesting that herd growth is slowing.

“Heifer slaughter so far this year is consistent with these inventory totals, up 12% year over year, and suggests that heifer slaughter will continue to grow for the foreseeable future,” Peel says. “These numbers suggest that heifer retention (and likely herd growth) is slowing. However, the average ratio of steer to heifer slaughter (which peaked recently in 2016) and is adjusting down, is still at levels not seen since 1975 (prior to mid-2015).”

Along the way, Peel points out average fed carcass weights are 14.6 lbs. lighter year to date.

“Average fed carcass weights are down due to lighter steer and heifer carcasses and a growing proportion of heifers to steers in the fed slaughter mix,” Peel says. “USDA reports total cattle slaughter up 5.8% year over year so far this year with beef production up 4.2% for the year to date.”

Negotiated cash fed cattle prices in the Southern Plains on Friday were steady with the previous week at $111/cwt. Dressed trade was also steady in Nebraska at $175. Trade and demand were moderate in both regions. Elsewhere, prices appeared to be mostly steady, but there were too few transactions to trend.

Cattle futures edged hire on Friday, presumably in part due to short covering ahead of the monthly Cattle on Feed report (see below).

Live Cattle futures closed an average of 49¢ higher, (20¢ to 85¢ higher).        

Feeder Cattle futures closed an average of 41¢ higher (10¢ to 82¢ higher).

Choice boxed beef cutout value was 29¢ higher Friday afternoon at $199.86/cwt. Select was 38¢ higher at $191.14.

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Major U.S. financial indices closed higher on Friday—sharply higher for the Dow. Analysts broadly attributed much of the optimism to the Senate’s budget approval, another step toward tax reform.

The Dow Jones Industrial Average closed 165 points higher. The S&P 500 closed 13 points higher. The NASDAQ closed 23 points higher.

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For the second consecutive month, feedlot placements were significantly higher than most analysts expected.

According to the monthly Cattle on Feed report issued Friday, feedlot placements (2.15 million head) in September were 13.5% more than last year. That’s at least 6% more than most pre-report estimates.

You’ll recall that last month, August placements (+2.6%) were about 6% higher that pre-release estimates, too. The news helped push Cattle futures sharply lower the following, Monday.

Of the cattle placed in September, 34.7% weighed 699 lbs. or less, 46.7% weighing 700-899 lbs. and 18.6% weighed 900 lbs. or more.

Marketings in September of 1.78 million head were 2.9% more, which was in line with estimates.

Total cattle on feed Oct. 1 of 10.81 million head were 5.4% more, which mirrored estimates ahead of the report.

Cash fed cattle trade was still mostly undeveloped for the week through Thursday afternoon.

There were a few live trades in Kansas and Nebraska at $110/cwt., on limited trade and light to moderate demand. That was $1 less than the previous week, but there were too few transactions to trend.

Cattle futures continued in range-bound two-sided trade on Thursday.

Live Cattle futures closed mostly marginally higher, from an average of 27¢ lower to an average of 31¢ higher.  

Feeder Cattle futures closed an average of 93¢ higher (62¢ to $1.20 higher).

Choice boxed beef cutout value was $2.31 higher Thursday afternoon at $199.57/cwt. Select was $1.67 higher at $190.76.

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After trending lower for much of the day, major U.S. financial indices closed narrowly mixed on Thursday. There was mixed economic news, nothing strongly bullish or bearish.

The Dow Jones Industrial Average closed 5 points higher. The S&P 500 closed fractionally higher. The NASDAQ closed 19 points lower.

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“The overall perspective on protein markets is that beef, pork and poultry supplies are likely to be large through the fall and early winter,” says Stephen Koontz, agricultural economist at Colorado State University, in the latest issue of In the Cattle Markets. “Supplies are large and cold storage stocks are increasing. Thus, feeder cattle and calve are unlikely to hold at the levels seen in this environment.”

The latest monthly livestock slaughter data from USDA’s National Agricultural Statistics Service (NASS) underscores that notion. Total red meat and pork production was record high in September.

Beef production of 2.22 billion lbs. in September was 2% more than the previous year. Cattle slaughter of 2.70 million head was 3% more than last September, although average cattle live weight was 11 lbs. lighter at 1,359 lbs.

Commercial U.S. red meat production was 2% more than the previous September at 4.33 billion lbs., according to NASS.

For January through September this year, commercial red meat production was 4% more than the same month last year at 38.4 billion lbs. Accumulated beef production was up 5%. Pork production for the period was up 3%.

Early negotiated cash fed cattle prices were a mixed bag on Wednesday.

Direct trade in the Texas Panhandle was reported at $110/cwt. on a live basis, which was $1 less than last week. That was on moderate demand and light to moderate trade.

Fat cattle auctions in the north trended higher.

For instance, Slaughter steers sold steady to $1 higher at Sioux Falls Regional Livestock in South Dakota with instances of $2 higher. Slaughter heifers sold steady to $1 higher.

Choice steers sold $1.75-$2.00 higher at Tama, Iowa (mostly $113.95). Heifers traded $1.00-$1.75 higher (mostly $113.85).

There were only 919 head offered in the weekly Fed Cattle Exchange auction. Of those 230 head (two lots of heifers from Kansas) sold for a weighted average price of $109/cwt. with delivery at 1-9 days. There were no sales there last week for a trend.

Cattle futures closed mixed on Wednesday, rebounding some from early pressure.

Live Cattle futures closed an average 39¢ higher in the front five contracts (17¢ to 67¢ higher) and then unchanged to 47¢ lower.     

Except for 37¢ higher in spot October, Feeder Cattle futures closed an average of 50¢ lower (27¢ to 70¢ lower).

Choice boxed beef cutout value was 40¢ lower Wednesday afternoon at $197.26/cwt. Select was 76¢ lower at $189.09.

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Major U.S. financial indices closed higher on Wednesday, led by a bounce in the DJIA, driven in part by stronger than expected quarterly results from IBM.

The Dow Jones Industrial Average closed 160 points higher. The S&P 500 closed 1 point higher. The NASDAQ closed fractionally higher.

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“Despite the sizable number of cattle outside feedlots, medium-frame feeder steers in Oklahoma City averaged $148.12/cwt. in the third quarter, which is $7.48 higher than the same period last year,” according to analysts with USDA’s Economic Research Service (ERS), in the monthly Livestock, Dairy and Poultry Outlook released on Wednesday. “Winter grazing opportunities in the Southern Plains are likely encouraging increased demand by stockers, which should support feeder calf prices. Fourth-quarter prices are raised from last month to $143-$147/cwt., reflecting firm demand by both backgrounders and feedlots. First-half 2018 prices are raised from last month as well.”

On the other side of the trade, ERS analysts note that increasing cattle numbers are keeping fed cattle prices near year-ago levels.

“Recent large supplies of market-ready cattle have prevented the USDA 5-area fed steer price from rebounding off recent lows,” say ERS analysts. “In July, the monthly weighted average price for fed steers was $118.45/cwt. and trended lower through September to $107.11/cwt. for a quarterly average of $112.46/cwt. The third-quarter estimate is slightly below prices last year, but the latest weekly price of $109.45/cwt. (Oct. 6) is about 8% higher than the same week last year. As a result, fourth-quarter fed steer price is unchanged from last month to $108-$112/cwt., staying above 2016 for the quarter.”

Cattle futures tread water for most of Tuesday’s session and then closed decidedly lower in late trade. Along with the consolidated price range, perhaps late selling included some positioning ahead of Friday’s monthly Cattle on Feed report.

Live Cattle futures closed 91¢ lower (55¢ to $1.37 lower).         

Feeder Cattle futures closed an average of $1.82 lower ($1.42 to $2.15 lower).

Choice boxed beef cutout value was $1.15 lower Tuesday afternoon at $197.66/cwt. Select was 72¢ lower at $189.85.

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Major U.S. financial indices closed narrowly mixed on Tuesday with support from continued strength in quarterly earnings.

The Dow Jones Industrial Average closed 40 points higher. The S&P 500 closed 1 point higher. The NASDAQ closed fractionally lower.

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USDA withdrew its controversial Grain Inspection, Packers and Stockyard Administration (GIPSA) interim final rule (IFR) yesterday, a victory for those who favor a free market and competition.

You’ll recall that the rule (also known as the Farmer Fair Practices Rules) would have eliminated the need for someone to prove competitive injury in order to win a GIPSA lawsuit. Intended or not, the rules would have unhinged the alternative marketing arrangements that enable producers to receive more than an average price for more than added value. In other words, rather than risk litigation, beef packers would have effectively been forced by law to pay the same money for all cattle, regardless of value.

“Collectively, the rules would have made it unnecessary for plaintiffs to show general harm to competition when challenging a packer’s decision to offer premiums to producers through established marketing agreements, going well beyond the statutory language, potentially opening the gates to lawsuits from disgruntled producers, and ultimately limiting marketing options and consumer choice,” according to a statement from the House Committee on Agriculture.

“The IFR attempted to renew a proposal rejected by Congress through four funding bills and directly circumvented the rulings of eight separate federal appeals courts,” according to a statement from the North American Meat Institute. “The IFR would have greatly limited marketing agreements that allow the industry to meet consumer demand for various animal handling and production requirements, such as organic, grass fed, raised without an antibiotics and others, limiting the availability of these products for consumers.”

House Agriculture Committee Chairman K. Michael Conaway said after yesterday’s announcement, “Today’s decision helps restore both Congressional intent and common sense by ensuring American producers have the freedom to market their products without the threat of frivolous lawsuits.”

Colin Woodall, the National Cattlemen’s Beef Association’s Senior Vice President, Government Affairs, summed up withdrawal of the IFR this way: This is a victory for America’s cattle and beef producers – and it’s a victory for America’s consumers…The proposed rule would have crippled cattle producers’ ability to market their products through the value-added programs that help make American-produced beef the most delicious and nutritious in the world. This is a decision worthy of celebrating with a top-quality steak.”