WLI

Sluggish cash fed cattle on Thursday continued mainly $1-$3 lower than the previous week at $117-$118 on limited trade and light demand.

More than anything, it appeared that light trade enabled Cattle futures to shrug off early pressure to close higher.

Except for unchanged and 20¢ higher in the front two contracts, Live Cattle futures closed an average of 70¢ higher (42¢ to 90¢ higher).     

Feeder Cattle futures closed an average of $1.56 higher ($1.35 to $1.87 higher).

Choice boxed beef cutout value was 64¢ lower Thursday afternoon at $206.43/cwt. Select was $1.21 lower at $196.66.

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Apparently profit taking balanced optimism on Wall Street, as the tech-based NASAQ closed lower, despite positive quarterly earnings, including Facebook.

The Dow Jones Industrial Average closed up 85 points. The S&P 500 closed 2 points lower. The NASDAQ closed 40 points lower.

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Further perspective on the mid-year cattle inventory report from USDA last week:

“Although it’s not clear from the report that beef industry expansion has come to a grinding halt, it does suggest expansion interest is waning,” says James Mintert, agricultural economist at Purdue University, in the University of Illinois’ Farmdoc Daily earlier tis week. “For example, the number of beef heifers being held by producers for herd replacement July 1 was 2% smaller than in 2015 and, when expressed as a percentage of the beef cow inventory totaled just 14.5%. In contrast, when the beef industry was expanding rapidly this ratio climbed above 15%. Additionally, the ratio of female (cow and heifer) slaughter relative to steer slaughter has been above a year ago five out of the last six months, the exception occurring in February. The increase in female relative to steer slaughter suggests herd expansion has slowed, if it has not actually come to a complete halt.”

The overall weighted average of $117.68/cwt. for the weekly Fed Cattle Exchange auction was just 59¢ shy of the previous week’s average. About a third (772 head) sold out of the 2,119 head offered—most for delivery at 1-9 days.

Eventual country trade in Nebraska basically mirrored the pace. Live prices were $1-$3 less than the previous week at mostly $117/cwt. Dressed trade was $2 lower at $188.

Cattle futures were a roller coaster, swinging from early support to mid-session pressure and then mostly back to gains for the day.

Except for $1.12 higher in spot Aug and 2¢ lower at the very back, Live Cattle futures closed an average of 43¢ higher (12¢ to 62¢ higher).  

Feeder Cattle futures closed narrowly mixed (15¢ lower to 40¢ higher).

Choice boxed beef cutout value was 55¢ lower Tuesday afternoon at $207.07/cwt. Select was $1.06 lower at $197.87.

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Major U.S. financial indices closed higher on Wednesday, with support including higher oil prices, positive quarterly earnings report and the widely anticipated decision of the Federal Reserve to leave interest rates unchanged following their most recent meeting.

The Dow Jones Industrial Average closed up 97 points at a new record high. The S&P 500 closed fractionally higher. The NASDAQ closed 10 points higher.

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Increased international demand for U.S. hay is changing the face of U.S. production and prices, according to a new report—Foraging for Higher Prices—from Rabobank International RaboResearch Food & Agribusiness (RRFA).

“We’ve seen the top six hay importers – responsible for buying over 95% of U.S. hay exports –increasing their import volumes and paying a premium for higher-quality hay, supporting prices at their current levels. As a result, prices will likely continue moving in an upward trend,” says RRFA Dairy Analyst, James Williamson.

According to the report, seven states (AZ, CA, ID, NV, OR, UT and WA), produce 18% of U.S. hay and nearly 90% of U.S. hay exports.

Moreover, RRFA analysts explain hay production in California declined by 33% since 2008, due to water restrictions.

“Water restrictions aren’t limited to California,” Williamson explains. “Increasing pressure to conserve water resources around the world, specifically in areas such as Saudi Arabia, will continue to drive demand alfalfa and other hay. This is going to be the new normal.”

Support included the monthly Cold Storage report released earlier this week (see below), as well as another day of stable to higher wholesale beef values.

Live Cattle futures closed an average of $1.26 lower (70¢ to $1.62 lower).

Feeder Cattle futures closed an average of $1.27 lower ($1.07 to $1.92 lower), except for an average of 33¢ lower in the back two contracts.

Choice boxed beef cutout value was 16¢ higher Tuesday afternoon at $207.62/cwt. Select was $1.04 higher at $198.93. At $8.69, the Choice-Select spread was the narrowest since April.

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Major U.S. financial indices closed sharply higher on Tuesday, boosted by stronger than expected quarterly earnings from folks like McDonalds and Caterpillar, as well as another day of rising oil prices.

The Dow Jones Industrial Average closed 100 points higher. The S&P 500 closed up 7 points at a new record high. The NASDAQ closed 1 points higher.

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After spending all of May and June above $16/cwt. ($16.17 to $30.92), the Choice-Select spread narrowed to less than $10 for the past two days—the least since April.

“The widening and narrowing of the spread was mainly due to demand factors as opposed to supply factors,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “Since April, the weekly percentage of beef grading Choice has ranged from 69.8% to 73.2% and it is difficult to see much correlation between percent of beef grading Choice and the Choice-Select spread over that time. From the demand standpoint, consumers were hungry for middle meats, as was the export market during May and June. However, domestic consumers have shifted focus to ground beef as is evidenced by the price increase in fresh 90% lean beef from $218 to $233 (7% increase).”

As suspected, Cattle futures dove on Monday, squeezed hard by reaction to Friday’s Cattle on Feed and Cattle inventory reports.

Live Cattle futures closed an average of $2.21 lower ($1.35 to $3.00 lower).

Feeder Cattle futures closed an average of $4.09 lower ($3.37 to $4.50 lower).

Choice boxed beef cutout value was 55¢ higher Monday afternoon at $207.46/cwt. Select was $3.09 higher at $197.89.

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Major U.S. financial indices closed mostly lower on Monday with pressures including lower home sales in June (see below). The exception was tech stocks with traders betting strong earnings will be revealed later this weak from folks like Amazon and Facebook.

Existing-home sales slipped in 1.8% in June (compared to May) as low supply kept homes selling at a near record pace but ultimately ended up muting overall activity, according to the National Association of Realtors® (NAR).

“Closings were down in most of the country last month because interested buyers are being tripped up by supply that remains stuck at a meager level and price growth that’s straining their budget,” says Lawrence Yun, NAR chief economist. “The demand for buying a home is as strong as it has been since before the Great Recession. Listings in the affordable price range continue to be scooped up rapidly, but the severe housing shortages inflicting many markets are keeping a large segment of would-be buyers on the sidelines.”

The Dow Jones Industrial Average closed 66 points lower. The S&P 500 closed 2 points lower. The NASDAQ closed 23 points higher.

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“Feeder cattle demand has been extremely strong based on very good feedlot profitability recently. Placements were up across all regions suggesting that placements were driven by industry-wide factors rather than regional factors,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, referring to Friday’s Cattle on Feed report. “However, the Northern Plains drought likely contributed a bit to larger placements, especially the strong placements in South Dakota, up 67% year over year. In total, I don’t believe that drought was the major reason for the large June placements.”

In his weekly market comments, Peel points out lighter weights of more cattle placed the last two months suggests feedlots are dipping deeper into supplies. In other words, feedlots remain current in marketing.

“The lightweight placements in May and June will not be on top of earlier heavy placements,” Peel explains. “Moreover, placements have clearly pulled cattle ahead, meaning that more cattle placed now imply fewer relative placements later. However, overall feeder supplies are larger and will continue to grow into 2018.”