WLI

Apparently, futures traders priced in a gloomier monthly Cattle on Feed report than what it wound up being Friday, or they’re beginning to price in something else. After early and expected pressure, Limit-up moves in nearby Feeder Cattle futures led Live Cattle higher, as both pits expanded on gains established at the end of last week.

Except for 60¢ higher in newly minted away Oct, Live Cattle futures closed an average of $2.52 higher ($2.20 to $3.00 higher).

Feeder Cattle futures closed an average of $3.92 higher ($3.17 to limit-up $4.50 higher).

Choice boxed beef cutout value was $1.18 lower Monday afternoon at $238.57/cwt. Select was 94¢ higher at $217.66.

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Major U.S. financial indices closed narrowly mixed on Monday.

The Dow Jones Industrial Average closed 14 points higher. The S&P 500 closed fractionally higher. The NASDAQ closed 18 points lower.

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“Beef and cattle markets have defied gravity by staying stronger, longer than most expected this spring. However, with seasonal pressure prevailing, beef and cattle markets have weakened and will likely struggle seasonally for the next six plus weeks,” says Derrell Peel, Extension livestock marketing specialist, in his weekly market comments. “Beef markets often weaken during the summer doldrums, that period of summer heat between Independence Day and Labor Day. The summer slump may be mitigated somewhat if July 4 beef sales are strong, prompting follow-up beef sales. Wholesale markets will likely struggle until August when Labor Day purchases will pick up to support beef features for Labor Day, the last big grilling holiday of the summer.”

Peel points out that lighter year-to-year carcass weights continue to dilute the impact of increasing cattle numbers. Beef production is up 3.8% so far this year while cattle slaughter is 5.7% more. Even though steer and heifer carcass weights reached a seasonal nadir in early May, he explains a typical seasonal increase in carcass weights heading into the fourth quarter would still leave carcass weights significantly lower year over year.

“Strong beef demand has helped make the first half of 2017 a pleasant surprise to all cattle industry sectors,” Peel says. “Strong demand in the third and fourth quarters may help significantly, but supply pressures are likely to weigh a bit more heavily on cattle and beef markets in the second half of the year, holding markets generally to a sideways pattern for the remainder of the year.”

Cattle futures rallied a bit on Friday, buoyed by apparent short covering and likely a psychological lift from news late the previous day that USDA halted fresh Brazilian beef imports.

Live Cattle futures closed an average of 57¢ higher (32¢ to $1.00 higher).

Feeder Cattle futures closed an average of $1.52 higher ($1.25 to $2.07 higher).

Choice boxed beef cutout value was $3.13 lower Friday afternoon at $239.75/cwt. Select was 20¢ lower at $216.72.

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Major U.S. financial indices closed narrowly mixed on Friday. Higher oil prices provided support, while fewer May home sales than the trade expected added some pressure. The adjusted seasonal rate of new single-family houses (610,000) in May was 2.9% more than April, according to the U.S. Census Bureau and U.S. Department of Housing and Urban Development.

The Dow Jones Industrial Average closed 2 points lower. The S&P 500 closed 3 points higher. The NASDAQ closed 28 points higher.

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If anything, the monthly Cattle on Feed report released Friday will be viewed as a touch bearish, with May placements and the on-feed inventory June 1 at the upper end of estimates.

Feedlot placements in May (2.12 million head) were 12.2% more than a year earlier. That’s about 2% more than the average of some estimates and 2% less than some others. Cattle weighing 700-799 lbs. (529,000 head) and 800-899 lbs. (550,000) comprised 51% of the placements; another 11% for cattle weighing 900-99 lbs. (235,000).

Feedlot marketings in May (1.95 million head) were 8.7% more than a year earlier.

All told, the on-feed inventory June 1 (11.1 million head) was 2.7% more than last year.

Cattle futures continued lower on Thursday, pressured by lower wholesale beef values, sharply lower cash fed cattle prices and increasing skittishness about prices and demand through the summer.

Choice boxed beef cutout value was $2.54 lower Thursday afternoon at $242.88/cwt. Select was $1.98 lower at $216.92.

Live Cattle futures closed an average of 89¢ lower (57¢ to $1.15 lower).

Feeder Cattle futures closed an average of 96¢ lower across the front half of the board and then an average of 40¢ lower.

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Major U.S. financial indices closed narrowly mixed on Thursday.

The Dow Jones Industrial Average closed 12 points lower. The S&P 500 closed 1 point lower. The NASDAQ closed 2 points higher.

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USDA’s monthly Cold Storage report should provide no pressure to beef prices, maybe even a little support.

Total pounds of beef in freezers May 31 were 10% less than the previous month and 11% less than the previous year.

Frozen pork supplies were down slightly from the previous month and down 4% from last year.

All told, total red meat supplies in freezers were down 5% from the previous month and down 7% from last year.

Total frozen poultry supplies on May 31, 2017 were up 4% from the previous month and up 4% from a year ago.

In country trade on Wednesday, negotiated cash fed cattle sales were $8-$10 lower than last week on a live basis at $121-$123/cwt. Dressed trade was $4-$17 lower in Nebraska at $196-$198.

Those live sales mirrored the weekly Fed Cattle Exchange Auction earlier in the day, where the weighted average price was $123 for delivery at 1-9 days. Of the 2,147 head offered, only two lots sold, comprising 457 head—all steers, some from Texas and some from South Dakota.

Feeder Cattle futures eked out minimal gains on Wednesday, while Live Cattle turned lower after support early in the session.

Other than 2¢ higher in back Jun, Live Cattle futures closed an average of 46¢ lower (15¢ to 85¢ lower).

Feeder Cattle futures closed an average of 68¢ higher (47¢ to $1.15 higher).

Choice boxed beef cutout value was $1.57 lower Wednesday afternoon at $245.42/cwt. Select was 98¢ lower at $218.90.

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Other than tech stocks, Major U.S. financial indices closed lower on Wednesday, pressured once again by softer crude oil and energy prices.

The Dow Jones Industrial Average closed 57 points lower. The S&P 500 closed 1 point lower. The NASDAQ closed 45 points higher.

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There seems little doubt that Amazon will capture some of the current conventional grocery market with their acquisition of Whole Foods. On the other hand, it seems just as likely that plenty of food shoppers will opt for the tried and true physical store.

Consumers who tried grocery shopping online but didn’t go back (referred to as lapsed consumers), as well as those who have never shopped for groceries online point out a number of barriers to their adoption of online grocery shopping, the top reason being that they want to pick out their own fresh items. That’s according to the NPD Group (NPD), a leading global information company.

“Brick-and-mortar stores aren’t dead, they will just need to step up their game. There will continue to be a large percentage of the population who will prefer to shop at brick-and-mortar grocers,” says Darren Seifer, NPD food and beverage industry analyst. “Brick-and- mortar food retailers should market the unique consumer needs they meet that online grocers aren’t currently offering, experience being a key one. At the same time, they need to keep up with the times and leverage digital ordering via their own click-and-collect programs as well as partnering with third parties for delivery in order to expand their offerings.”

At the same time, the folks at NPD say there’s plenty of growth potential for grocery e-commerce, with only 7% of U.S. consumers saying they shopped online for groceries in the last month.

NPD predicts that online grocery shopping will grow at a faster rate than the early online pioneers since consumers have already experienced the convenience of online shopping. In fact, 20 million consumers who are current, lapsed, or new to online grocery shopping plan to increase their virtual shopping for foods and beverages over the next six months, according to the NPD study, The Virtual Grocery Store.

Cattle futures closed lower again on Tuesday with Feeder Cattle leading the way. There seems to be a growing belief that holders of non-commercial long positions will begin unwinding them within the next couple of weeks—arguably they’ve already started—as wholesale beef values and cash fed cattle prices swoon seasonally lower. News that JBS S.A. plans to sell JBS Five Rivers Cattle Feeding added uncertainty (see below).

Other than 35¢ higher in spot Jun, Live Cattle futures closed an average of 18¢ lower.

Feeder Cattle futures closed an average of $1.35 lower (95¢ to $2.67 lower).

Choice boxed beef cutout value was $2.47 lower Tuesday afternoon at $246.99/cwt. Select was $1.48 lower at $219.88.

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Major U.S. financial indices closed lower on Tuesday, pressured by softer energy prices, led by another step lower in Crude Oil.

The Dow Jones Industrial Average closed 61 points lower. The S&P 500 closed 16 points lower. The NASDAQ closed 50 points lower.

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JBS S.A. announced yesterday that it is selling Five Rivers Cattle Feeding as part of a divestiture program to reduce the company’s net debt.

You’ll recall that JBS announced a month ago that seven of its executives and its controlling entity—J&F Investimentos—entered into a plea bargain agreement with the Federal Public Prosecutor’s Office in Brazil, which came with a fine of about $67.6 million (US). Apparently, that’s besides the approximately $3.2 billion (US) that J&F agreed, in principle, to pay in fines. All of that was the result of a massive political and financial scandal reportedly involving thousands of bribes by JBS and J&F to government officials in Brazil.

Five Rivers is the largest cattle feeder in the United States with feedlots in six states and close to 1 million head capacity. As well, JBS will sell other assets including: shareholding interests in Vigor Almientos, S.A. (one of Brazil’s largest dairy companies) and Moy Park (one of the 10 largest food companies in the United Kingdom).

JBS executive directors estimate that the divestment program will result in a capital injection of approximately $6 billion (Brazilian Real), which is equivalent to about $1.8 billion U.S., based on the current exchange rate.

“Selling these assets is central to a strategy designed to reinforce JBS’ competitive advantage in the global food industry,” according to a JBS news release. “The sale of feedyard assets will more closely align the JBS business model with key U.S. competitors and allow the company to concentrate its efforts on its core food and value-added products businesses.”

If the announcement firms up the odds of JBS maintaining its beef packing plants in the U.S., the market will view it as positive. In the meantime, uncertainty increases with the fact that JBS had to liquidate Five Rivers and other assets, and that there is apparently no buyer for Five Rivers lined up and ready to go.