WLI

Negotiated cash fed cattle trade in the Texas Panhandle was 50¢ to $1 higher than the previous week on Friday at $117.50-$118.00/cwt.

Nationwide, live trade for the week was mostly $1 more than the previous week at mostly $118/cwt. Dressed trade was steady to unevenly steady at $187-$188.

Cattle futures closed lower on Friday as scattered cash fed cattle trade continued at the week’s higher mark, while wholesale beef values drifted lower.

Choice boxed beef cutout value was $1.55 lower Friday afternoon at $203.61/cwt. Select was 47¢ lower at $197.31.

Except for 22¢ and 17¢ higher at either end of the board, Live Cattle futures closed an average of 48¢ lower (27¢ to 72¢ lower).

Feeder Cattle futures closed an average of 72¢ lower (35¢ to $1.17 lower).

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Stronger than expected employment numbers boosted Major U.S. financial indices on Friday.

Non-farm payroll employment increased by 209,000 in July, according to Friday’s summary from the Bureau of Labor Statistics. The nation’s unemployment rate was little changed at 4.3%.

The Dow Jones Industrial Average closed up 66 points. The S&P 500 closed 4 points higher. The NASDAQ closed 11 points higher.

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“Following a week of price declines in the futures market, the market began to slowly improve last week and was able to recapture about $4 of the previous week’s loss. Thus, cash prices tended to improve as the market progressed from Monday through Friday,” says Andrew P. Griffith, agricultural economist with the University of Tennessee, in his weekly market comments. “What may be of even more interest to producers looking to market feeder cattle in the near term is the fact that September and October feeder cattle futures contract prices are outperforming the August contract. This would indicate prices improving through late summer and early fall, but the market is not expecting prices to make a hasty move to the upside for cattle ready to enter the feedlot. Diligence in watching the market is warranted at this time as favorable pricing opportunities may present them-selves.”

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There are always challenges to building and maintaining international market share for U.S. beef, but one of the most essential—the ability to deliver the product—became more certain with the recent three-year extension of the labor contract covering 29 West Coast ports.

Specifically, according to the U.S. Meat Export Federation (USMEF), the International Longshore and Warehouse Union (ILWU) announced the agreement on Friday. The contract between ILWU and the Pacific Maritime Association (PMA) now runs through June 30, 2022.

“USMEF is pleased that ILWU and PMA pursued this early contract extension, which is a positive development for U.S. exporters and for the entire U.S. economy,” says Philip Seng, USMEF president and CEO. “The severe congestion we saw in the West Coast ports in 2014 and 2015 created major logistical problems for U.S. red meat exporters and prompted some international customers to seek alternative suppliers. The contract extension helps ensure that the United States will continue to live up to its reputation as a reliable red meat supplier. It is very good news for everyone in the supply chain – from farmers and ranchers to processors and traders – and for our customers in key Asian and Latin American markets.”

Cash fed cattle prices on Thursday continued mainly steady to $1 higher than last week at $117-$118/cwt.

Choice boxed beef cutout value was 10¢ higher Thursday afternoon at $205.16/cwt. Select was 36¢ higher at $197.78.

Cattle futures edged higher on Thursday as traders digested the notion of steady to higher cash trade and continued stabilization in wholesale beef values.

Live Cattle futures closed an average of 38¢ higher (2¢ to 75¢ higher).

Feeder Cattle futures closed an average of 38¢ higher (7¢ to 60¢ higher).

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Major U.S. financial indices closed narrowly mixed on Thursday as investors awaited Friday’s monthly employment numbers.

The Dow Jones Industrial Average closed up 9 points. The S&P 500 closed 5 points lower. The NASDAQ closed 22 points lower.

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“Lower corn prices could help to boost feedlot demand for lighter weight cattle at a time when we will likely see larger supplies of those same cattle. That could help to add some support for feeder cattle prices just as many producers are looking to unload,” says Brian Williams, a livestock economist with Mississippi State University, in the most recent issue of In the Cattle Markets.

Although corn yield looks to be lower than last year’s record pace, barring major weather catastrophe over the next month or so, Williams expects corn prices to continue trending lower through harvest.

Moreover, Williams expects more calves to trade hands earlier than usual, due to drought in the Northern Plains. Other than finding pasture south beyond the Corn Belt, he notes the most likely destination is straight to the feedlot.

“Profitability has allowed cattle feeders to aggressively buy animals (feeder cattle). The result has been more steers and heifers placed on-feed than a year ago and higher feeder cattle prices,” say analyst with the Livestock Marketing Information Center, in the most recent Livestock Monitor. “Monthly Cattle on Feed reports from NASS show the number of cattle placed into feedlots with 1,000 head or more capacity during the first six months of 2017 was 11.17 million head. That was a year-over-year jump of 1.10 million head or 11%. Further, the number of head placed during January through June was the largest for that timeframe since 2003.”

Cash fed cattle trade started out $1 lower yesterday, beginning with the weekly Fed Cattle Exchange auction. Only one lot (54 head) sold out of the 1,063 head offered, at a weighted average price of $116/cwt. for delivery at 1-9 days. The weighted average there last week was $117.68.

Country trade started out mostly $1 less than last week too, at $116, but by the end of the day, sales were reported up to $118.

Cattle futures followed a similar path, except they started the session with support that faded by mid-day before bouncing to close with mostly triple-digit gains.

Except for 60¢ and 55¢ higher in the back two contracts, Live Cattle futures closed an average of $1.45 higher ($1.07 to $1.80 higher).

Feeder Cattle futures closed an average of $1.13 higher (85¢ to $1.45 higher).

Choice boxed beef cutout value was 35¢ lower Wednesday afternoon at $205.06/cwt. Select was 87¢ lower at $197.42.

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Major U.S. financial indices closed mostly higher on Wednesday as a bump higher in Apple (quarterly earnings blowing past expectations) helped lift the Dow to a record-high close over 22000 for the first time.

The Dow Jones Industrial Average closed up 52 points. The S&P 500 closed 1 point higher. The NASDAQ closed fractionally lower.

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Keeping in mind how depressed prices were last fall, the Livestock Marketing Information Center (LMIC) forecasts yearling prices at or above a year ago for the balance of 2017.

As for calf prices, LMIC analysts say, “Current quarter (July-September) calf prices are likely to be unchanged to higher, compared to 2016’s. In 2017’s fourth quarter, Southern Plains calf prices (500-600 lbs. steers) are currently forecast to be $8-$12/cwt. above 2016’s.”

Heading into next year, LMIC notes increasing cattle numbers will likely pressure fed cattle prices. The degree of pressure will have plenty to do with domestic and international demand.

“For planning purposes, look for some erosion in calf and yearling prices in 2018 compared to 2017’s,” LMIC analysts say, in the most recent Livestock Monitor. “Currently, LMIC is forecasting the annual average fed steer price in 2018 will be 2% to 6% below 2017’s. The 2017, U.S. calf crop was bigger than 2016’s, and 2018’s will increase, again. Feedlots and backgrounders could face higher feedstuff costs in 2018, which may provide some additional headwind to prices.”

Feeder Cattle futures rallied sharply higher on Tuesday, fueled by oversold conditions, declining corn prices and apparent short covering. Live Cattle followed along with less conviction.

Choice boxed beef cutout value was 34¢ lower Tuesday afternoon at $205.41/cwt. Select was 45¢ higher at $198.29.

Except for 45¢ higher at the back, Live Cattle futures closed an average of 99¢ higher (75¢ to $1.22 higher).

Feeder Cattle futures closed an average of $2.72 higher ($2.27 to $3.00 higher).

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Major U.S. financial indices closed decisively higher on Tuesday, supported by continued strong quarterly earnings reports.

The Dow Jones Industrial Average closed up 72 points. The S&P 500 closed 6 points higher. The NASDAQ closed 14 points higher.

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“…the question being asked by most in the industry is if the increased placements (Cattle on Feed report, Jul. 21) are from pulling cattle out of the country early or if there were that many additional cattle out there,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. The recent Cattle on Feed report indicated that June feedlot placements were 16% more than the previous year, which was 10% more than analysts expected.

“The most likely scenario is that there are a few more cattle and some cattle were pulled forward,” Griffith says. “The feeder cattle market will likely bounce back from the bearish news and continue to trade in a steady range that the market has been in for the past three months or so. Producers are still encouraged to use price risk management strategies if deemed necessary.”

On the other end of the scale, Griffith says cattle feeders continue to be profitable on a cash to cash basis, although fed cattle prices last week were 19% less than the spring top.

“The higher feeder cattle prices paid in the spring will put pressure on cattle feeders if the fed market does not turn in the coming weeks,” Griffith says. “If $117/cwt. (last week’s price) is the low, then the seasonal would push live cattle over $130 during the holidays, but this may be a tough target to hit.”

Cattle futures tottered mostly lower on Monday, pressured by last week’s lower cash fed cattle trade, follow-through selling and month-end position squaring.

Wholesale beef values continued to firm. Choice boxed beef cutout value was 47¢ lower Monday afternoon at $205.75/cwt. Select was $1.02 higher at $197.84.

Live Cattle futures closed an average of 52¢ lower (25¢ to 90¢ lower).

Except for 12¢ higher in spot Aug and 27¢ and $1.02 higher at the back, Feeder Cattle futures closed an average of 53¢ lower (37¢ to 80¢ lower).

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Major U.S. financial indices closed mostly narrowly mixed on Monday, while strong quarterly earnings reports and stable oil prices helped lift the Dow.

The Dow Jones Industrial Average closed up 60 points. The S&P 500 closed 1 point lower. The NASDAQ closed 26 points lower.

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Even though packing capacity today is less than a few years ago, it should be enough to keep up with expanding cattle numbers, at least for the time being, according to Derrell Peel, Extension livestock marketing specialist at Oklahoma State University.

Peel explains that U.S. packing capacity declined from 2012 to 2106 with the close of one major packing facility along with some smaller ones.

“Published estimates of slaughter capacity suggest that capacity utilization (average daily slaughter as a percent of slaughter capacity) increased from 79% in 2012 to 83% in 2016 for the top 20 beef packing plants,” Peel says, in his weekly market comments. “The average daily federally inspected slaughter level in 2016 was 95,913 head with a maximum daily level of 117,978 head on November 10, 2016. That was the only day in 2016 with slaughter above 117,000 head. This compares to five years earlier in 2012 when the average daily slaughter was 103,580 head and there were 225 days with slaughter above 117,000 head, including 205 days with slaughter exceeding 120,000 head.”

So, Peel says, “Slaughter capacity could become a factor at some point with continued herd growth, but it is unlikely to be a significant issue for the foreseeable future.”

In the meantime, labor constraints could prove more challenging. In other words, the raw capacity is there, but there has to be enough labor to run added daily and weekend shifts as necessary.

CattleFax analysts noted in their 2017 Industry Outlook in February, “Adequate processing capacity has been a major issue in the pork and beef industries in 2016. The available supply continues to outpace facility growth, and this will remain a challenge for market participants during peak market cattle and hog supplies the next few years.”