WLI

Cattle futures borrowed support from limit up moves in Lean Hog futures and stronger wholesale beef values to rebound and close higher on Tuesday.

Live Cattle futures closed an average of $1.28 higher (92¢ to $1.47 higher).

Feeder Cattle futures closed an average of $2.28 higher ($1.85 to $2.70 higher).

Choice boxed beef cutout value was 65¢ higher Tuesday afternoon at $197.87/cwt. Select was 74¢ higher at $189.02.

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Major U.S. financial indices closed higher again on Tuesday, extending the recent rally, tied in part to betting on lower corporate rates in the tax reform proposal currently under consideration.

The Dow Jones Industrial Average closed 84 points higher. The S&P 500 closed 5 points higher. The NASDAQ closed 15 points higher.

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“A strong rally in Feeder Cattle futures since late August offers improved winter stocker profit potential,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “At current levels, March Feeder futures would allow a 750 lb. steer to be priced at roughly $150/cwt. in Oklahoma. A 475 lb. steer at today’s prices, would have a March 1 breakeven of $130-$137/cwt. at 750 lbs. depending on pasture and other costs. Such opportunities to price in winter stocker margins are rare and generally fleeting.”

Currently, Peel explains the strength of current prices for spring Feeder Cattle contracts is difficult to justify from a fundamental perspective.

“Producers should act promptly if these futures price levels are attractive,” Peel says. “Remember that futures have been notoriously volatile in recent years and Feeder futures can move $11.25/cwt. in two days of limit moves. While no major cattle market weakness is foreseeable at this time, general expectations are for modestly lower cattle prices in 2018 on continued growth in cattle supplies and beef production. There is clearly more downside risk than upside potential from current levels.”

Incidentally, contrary to early promise, Peel says wheat pasture planting in Oklahoma is behind the average pace due to dry topsoil conditions last month and the continued threat of army worms.

Cattle futures closed lower on Monday, following limited early support. Presumably part of the pressure came from notions that cash fed cattle prices must move lower this week, although there are plenty of fundamental reasons to suggest the opposite, including aggressive feedlot marketings and wholesale beef values that seem to have turned the corner.

Live Cattle futures closed an average of $1.18 lower (87¢ to $1.82 lower).

Feeder Cattle futures closed $1.52 lower (95¢ to $2.40 lower).

Choice boxed beef cutout value was 60¢ higher Monday afternoon at $197.22/cwt. Select was 22¢ lower at $188.28.

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Major U.S. financial indices closed higher on Monday, with those cited here settling at record-high levels. Other than popping the cork on a new quarter and continued optimism surrounding proposed tax reform, there didn’t seem to be a clearly defined driver.

The Dow Jones Industrial Average closed 152 points higher. The S&P 500 closed 9 points higher. The NASDAQ closed 20 points higher.

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Currently available slaughter capacity at U.S packing plants will be sufficient to handle the increase in cattle numbers over the next two years, according to a new report from CoBank’s Knowledge Exchange Division.

“Plants will add additional slaughter hours to manage the extra supply through 2019,” says Trevor Amen, animal protein economist at CoBank. “The biggest potential concerns as the industry drifts closer to maximum packing capacity are labor availability and temporary plant closures for unforeseen maintenance issues.” He adds that processors are expected to increase investments in automation and robotics to reduce the risk of skilled labor shortages.

The CoBank report notes that Saturday slaughter hours have been increasing steadily since the middle of 2016. Analysts note that it is unlikely that packers will need to reopen shuttered plants or build additional facilities.

For perspective on increasing cattle numbers, CoBank projects beef cowherd expansion at 3-5% in 2018 and 2019. USDA estimates the 2017 calf crop will top 36 million head, an increase of 2.9% over 2016 and an 8.3% more compared to the cyclical low calf crop in 2014.

Cash fed cattle trade ended the week primarily steady with the previous week on a live basis at $108/cwt.—$1 lower in Nebraska. Dressed trade was steady to $2 higher at $172.

In the futures market, position squaring for the end of the month and quarter seemed to be the chief order of business on Friday.

Live Cattle futures closed unchanged to marginally higher across the front half of the board and then an average of 53¢ lower.

Feeder Cattle futures closed 85¢ lower (62¢ to $1.05 lower) counting newly minted away Sep.

Choice boxed beef cutout value was 21¢ higher Friday afternoon at $196.62/cwt. Select was 61¢ lower at $188.50.

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Major U.S. financial indices closed higher on Friday.

The Dow Jones Industrial Average closed 23 points higher. The S&P 500 closed 9 points higher. The NASDAQ closed 42 points higher.

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“There remain a large number of cattle on feed, but timely marketing the past 12 months has kept cattle current and the risk of a wall of cattle pushed to the sidelines,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “Cattle feeders have continued to purchase feeder cattle aggressively with the expectation of prices improving moving forward.”

Although calves face seasonal price pressure the next couple of months, Griffith explains strong stocker demand and Feeder Cattle futures remain supportive.

Although too few to trend, there were a few trades on Thursday at the upper end of last week’s range: $108/cwt. on a live basis and $172 in the beef.

Cattle futures closed narrowly mixed on Thursday amid sluggish trade and waiting for the week’s cash fed cattle trade to provide some near-term direction.

Live Cattle futures closed 25¢ lower to 40¢ higher.

Feeder Cattle futures closed 22¢ lower to 50¢ higher.

Choice boxed beef cutout value was $1.11 higher Thursday afternoon at $196.41/cwt. Select was 80¢ lower at $189.11.

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Major U.S. financial indices edged higher on Thursday, extending gains from the previous session with continued support from optimism surrounding the tax reform plan announced Wednesday.

The Dow Jones Industrial Average closed 40 points higher. The S&P 500 closed 3 points higher. The NASDAQ closed fractionally higher.

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“Even with very large tonnage being produced, most products (red meat) have continued to flow through marketing chains at a brisk pace and stocks have not increased year-over-year,” say analysts with the Livestock Marketing Information Center, in the latest Livestock Monitor. “As of Aug. 30, frozen beef tonnage was unchanged from 2016, pork dropped 5%, and lamb/mutton was down 11%.”

The data refers to the latest USDA monthly Cold Storage report released last week.

“Frozen products have differing shelf-life before they must be sold,” LMIC analysts explain. “For example, typical industry specification is that that a frozen whole turkey should be sold within about two years, while frozen ground meats require marketing much sooner (e.g. six month or so). At times U.S. cold storage stocks are increasing to support growing tonnage of frozen products being exported. At other times, stocks may build due to surging U.S. imports, like when Australia has a drought. Stocks can also build up when product is difficult to sell.”