Daily Market Highlights

Despite softer wholesale beef values to start the week, signs continue pointing toward higher cash fed cattle prices.

Although there is yet any country trade to speak of, slaughter cattle traded $1-$3 higher at Sioux Falls Regional Livestock in South Dakota on Wednesday.

Sellers passed on bids of $117-$118/cwt. for a couple of lots of heifers in yesterday’s weekly Fed Cattle Exchange Auction; there were 967 head offered and no sales.

Moreover, chatter about greener cattle, regionally snug supplies and recent sturdiness in Cattle futures suggests packers need to remain aggressive buyers heading into the holidays.

Cattle futures edged mostly higher amid mixed trade, continuing the recent, tentative steps toward establishing more upside.

Except for 20¢ lower in the back contract, Live Cattle futures closed an average 49¢ higher (7¢ to 92¢ higher).

Feeder Cattle futures closed an average of 59¢ higher (15¢ to $1.07 higher).

Choice boxed beef cutout value was $2.08 lower Wednesday afternoon at $206.55/cwt. Select was $1.36 lower at $185.84.

******************************

Major U.S. financial indices closed mixed on Wednesday. Domestic economic growth (see below), a strong start to the holiday retail season and expectations for Senate passage of its tax reform proposal all offered support. Tech stocks provided drag.

Real gross domestic product (GDP) increased at an annual rate of 3.3% in the third quarter of 2017 (second estimate), according to the Bureau of Economic Analysis yesterday. That’s more than the trade expected and builds on 3.1% growth in the second quarter.

The Dow Jones Industrial Average closed 103 points higher. The S&P 500 closed fractionally lower. The NASDAQ closed 87 points lower.

Indecision may be the most apt description of Cattle futures trade on Tuesday as traders tried to sort out how much upside there is to the current oversold status, compared to sluggish wholesale beef values and increasing cattle numbers.

Cattle futures closed narrowly mixed—a touch higher for Feeder Cattle and a touch lower for Live Cattle.

Except for 7¢ higher in the back contract, Live Cattle futures closed an average 22¢ lower.

Feeder Cattle futures closed an average of 28¢ higher.

Choice boxed beef cutout value was 94¢ lower Tuesday afternoon at $208.63/cwt. Select was 8¢ lower at $187.20.

******************************

Major U.S. financial indices closed sharply higher on Tuesday, with many analysts crediting the sharp bounce to reports that the Senate is close to passing its tax reform proposal. Other support came from merger and acquisition news, including the deal for Arby’s Restaurant Group to acquire Buffalo Wild Wings (BWW) in a $2.9 billion deal (including BWW debt).

The Dow Jones Industrial Average closed 255 points higher. The S&P 500 closed 25 points higher. The NASDAQ closed 33 points higher.

******************************

“Chicken production this quarter is poised to post the biggest year-over-year increase since the summer of 2015,” say analysts with the Livestock Marketing Information Center (LMIC) in a recent Livestock Monitor. “Hatchery output has been up by as much as 5% in some weeks in recent months as the chicken industry responds to the best profitability since the middle of 2014, based on the metric of wholesale parts prices relative to feed costs.”

That’s worth pondering with increased red meat and poultry production this year, which will grow even more next year.

USDA’s Economic Research Service (ERS) estimates broiler production next year 1.8% higher at 42.3 billion lbs. That total is about 35% more than estimated beef production for next year of 27.6 billion lbs. For the record, pork production next year is projected at 26.9 billion lbs.

Back to those chickens, LMIC estimates heavier average bird weights likely will account for 1% of the estimated 3.4% year-to-year increase in fourth-quarter broiler production.

“Average bird weights in September set a record at 6.25 lbs., up from 6.18 lbs. in the prior month and 6.15 lbs. a year ago,” LMIC analysts say. “Bird weights in September 2016 were lighter than in September 2015 as the chicken industry was trying to find a solution to breast meat quality problems that were believed to be related to rapid bird growth.”

More worrying to animal protein competitors is the lack of international demand for U.S. chicken, relative to production growth.

“The increase in U.S. chicken production is not being matched by larger volumes of product moving into the export market,” LMIC analysts explain. “Consequently, domestic supplies of chicken available are up commensurately… This year’s shipments to Mexico are on course to be the smallest since 2012. Sales to Canada have run below year-earlier levels since April. Cuba had been a growth market, but exports to that destination fell in September. All told, chicken exports in September were down 12% from September 2016, the biggest monthly decline from a year ago for 2017 to-date.”

Cattle futures gained some traction on Monday with short covering and a focus on expected strength for holiday beef buying.

Live Cattle futures closed an average $1.16 higher (95¢ to $1.60 higher).

Feeder Cattle futures closed an average of $1.00 higher.

Choice boxed beef cutout value was $1.42 lower Monday afternoon at $209.57/cwt. Select was 57¢ lower at $187.28.

******************************

Major U.S. financial indices closed narrowly mixed on Monday. Support was apparently tied to a bullish view of holiday retail sales and the Senate vote scheduled later this week on its tax reform proposal.

The Dow Jones Industrial Average closed 22 points higher. The S&P 500 closed 1 point lower. The NASDAQ closed 10 points lower.

******************************

“The price outlook the next several months appear favorable for cow-calf and stocker producers,” says Andrew P. Griffith, agricultural economist at the University of Tennessee.

Griffith notes in his weekly market comments that the Jan Feeder Cattle contract has traded above $148 since the third week of September, suggesting strong support at or above that level. It closed at $154.45 on Monday.

“The current situation may offer highly leveraged producers the opportunity to lock in a profit at a minimal cost,” Griffith says. “For producers who can afford to carry the market risk, it may be beneficial to sit tight and keep a close eye on the market. At the same time producers are eyeing the first-quarter feeder cattle market, many of these same producers are thinking about early spring calf prices. The strong feeder cattle market should lead to a strong calf market in late March and early April.”

Griffith also points out Feeder Cattle contracts through Sep 2018 are trading within $2.50 of each other.

“There are several thoughts concerning the tight trading range, but the thought that is most likely to summarize it is that there is a lot of uncertainty to the number of animals coming to the market,” Griffith says.

Cattle futures settled mixed on Friday with light trade amid holiday-trimmed trading hours for futures and equities.

Cash fed cattle trade for the week was generally steady to a touch higher, with live sales at $120.00 to $120.50/cwt., except for $118 in the Southern Plains. Dressed trade was steady to $2 higher than the previous week at $190.

Live Cattle futures closed an average 50¢ lower through the front five contracts (5¢ to 90¢ lower) and then 2¢ to 10¢ higher.

Feeder Cattle futures closed an average of 68¢ higher.

Choice boxed beef cutout value was $1.98 higher Friday afternoon at $210.99/cwt. Select was 79¢ lower at $187.85.

******************************

Major U.S. financial indices closed higher on Thursday, as investors apparently are betting on strong holiday shopping.

The Dow Jones Industrial Average closed 31 points higher. The S&P 500 closed 5 points higher. The NASDAQ closed 21 points higher.

******************************

“Fed carcass weights continue to inch toward a seasonal peak but remain well below year-ago levels,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “The latest steer carcass weights were 902 lbs. compared to 913 lbs. the same week last year. Heifer carcass weights are currently 833 lbs., which is 9 lbs. lighter”

Although beef production is 4.1% more than last year (year to date), Peel points out the year-to-year increase is declining.

“In the last eight weeks, beef production is up only 1.8% compared to the same period last year,” Peel says. “…Year to date steer and heifer slaughter is up 5.5% year over year with steer slaughter up 2.5% and heifer slaughter up 12.0%. However, in the last eight weeks, steer and heifer slaughter is up just 4.4% year over year. So far this year, cow slaughter is up 7.1% led by a 10.4% year-over-year increase in beef cow slaughter and a 4.2% increase in dairy cow slaughter.”

Cash fed cattle trade on Wednesday—light trade and moderate demand—recovered the scant ground lost earlier in the week. Live prices were steady to $1 higher than last week at $120.00 to $120.50/cwt. Dressed trade was steady at $190.

Earlier in the day, sellers passed on bids of $119-$120 in the weekly Fed Cattle Exchange Auction. There were 955 head (six lots) offered for delivery at 1-9 days.

Steady to higher fed cattle prices, supported by follow-through buying helped lift Cattle futures for the second consecutive session.

Live Cattle futures closed an average 96¢ higher (72¢ to $1.42 higher).

Except for 35¢ higher in the back contract, Feeder Cattle futures closed an average of $1.27 higher ($1.10 to $1.45 higher).

Choice boxed beef cutout value was 38¢ higher Wednesday afternoon at $209.01/cwt. Select was 1¢ lower at $188.64.

******************************

Major financial indices settled mixed on Wednesday, after closing at record-high levels the previous day. The tech-driven NASDAQ closed higher again, supported by a deal between Amazon and a leading health technology company. Pressure across the broader market included worries about current market valuation expressed by the Federal Reserve in its most recent minutes.

The Dow Jones Industrial Average closed 64 points lower. The S&P 500 was down 1 point. The NASDAQ closed 4 points higher.

******************************

Frozen beef stocks continued lower year over year in October, according to the latest USDA Cold Storage report. Total pounds of beef in freezers Oct. 31 were 2% more than the previous month but 5% less than last year.

Frozen pork supplies were down 3% from the previous month and down slightly from last year.

Total red meat supplies in freezers were down 1% from the previous month and down 2% from last year.

Total frozen poultry supplies were 4% less than the previous month but 12% more than a year earlier.

Cattle feeders in the Southern Plains traded fed cattle for $118/cwt. on Tuesday, which was $1 less than last week. Though too few to trend, there were a few live sales reported in Nebraska at $118-$120, steady to $1 lower than last week; a few dressed trades $2 lower at $188.

Choice boxed beef cutout value was $2.45 higher Tuesday afternoon at $206.63/cwt. Select was 60¢ higher at $188.65.

Slightly lower to steady cash fed cattle prices, higher wholesale beef value and short covering ahead of Thanksgiving all helped Cattle futures gain a foothold, at least for a day.

Live Cattle futures closed an average $1.05 higher (47¢ to $1.30 higher).

Except for 35¢ higher in the back contract, Feeder Cattle futures closed an average of $1.69 higher ($1.00 to $2.07 higher).

******************************

Tech stocks led major U.S. financial indices to new record highs on Tuesday. Support also came from stronger than expected quarterly earnings from the likes of Hormel Foods, as well as optimism heading into Black Friday.

The Dow Jones Industrial Average closed 160 points higher. The S&P 500 closed 16 points higher. The NASDAQ closed 71 points higher.

******************************

“Producers should prepare for a good market in 2018 but not an over-the-top market,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments.

Griffith notes that calf prices typically start increasing in January before grabbing another gear higher in March and early April. He notes that steer calf prices (500-600 lbs.) last year advanced from $107/cwt. in November to $140-$145 in March, ultimately peaking later than normal in June at $161.

Given current price levels, he doubts the increase from now until March will be as dramatic as last year.

“Significant seasonal price softening has yet to occur in the calf market in the fall of 2017, and there is no indication prices will falter at this point,” Griffith says. “It is always difficult to predict, but a price on these calves in March ranging from $148 to $156 may be as optimistic as it comes at this point. These predictions cannot take into account changes in international policy and trade agreements, nor do they take into account some sudden shock to the market. The point is that the market is unlikely to make as strong of a move as it did one year ago to the upside and the downside risk is very limited moving into the spring.”

As logic suggested, futures traders pushed Cattle futures sharply lower on Monday, in the wake of Friday’s monthly Cattle on Feed report. October placements were 10.2% more than the previous year, about 3% more than average estimates heading into the report.

However, Katelyn McCullock, economist with the American Farm Bureau Federation points out feedlot marketings remain higher, too.

In the latest issue of In the Cattle Markets (see below), McCullock explains, “Marketings have continued to be aggressive, so feedlot inventories have not become burdensome even though nine of the last 12 months have shown placements over 10% ahead of the prior year. Marketings have remained 3-10% above a year ago all year.” In October, marketing were 5.2% more than a year earlier.

Live Cattle futures closed an average $1.34 lower (77¢ to $1.75 lower).

Feeder Cattle futures closed an average of $2.16 lower ($1.07 to $2.57 lower).

Choice boxed beef cutout value was $1.06 lower Monday afternoon at $206.18/cwt. Select was 20¢ higher at $188.05.

******************************

Major U.S. financial indices closed higher on Monday, with positive reads on the economy (see below) offset by uncertainty about tax reform.

The Conference Board Leading Economic Index® (LEI) for the U.S. increased 1.2% in October to 130.4 (2010 = 100), following a 0.1% increase in September, and a 0.4% increase in August.

“The US LEI increased sharply in October, as the impact of the hurricanes dissipated,” says Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board. “The growth of the LEI, coupled with widespread strengths among its components, suggests that solid growth in the US economy will continue through the holiday season and into the new year.”

The Dow Jones Industrial Average closed 72 points higher. The S&P 500 closed 3 points higher. The NASDAQ closed 7 points higher.

*******************************

“Prices for bigger feeder cattle dropped last week under the pressure of declining Feeder futures. However, heavy feeder prices have been a bit stronger relative to calves all fall and thus remain very good,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “Steer prices are realigning to a more typical rollback with heavy weights declining relative to calf prices. Heifers, however, continue to have a very flat price structure with heifers from 475 to 725 pounds all priced within $3/cwt. last week.”

Peel explains strong stocker demand continued to fuel calf prices higher and counter-seasonally through the middle of November. In Oklahoma, for instance, he points out steers calves are bringing $140-$200 per head more than last year; $100-$150 more for heifer calves.

“The strength in feeder cattle prices has been quite remarkable given increased supplies,” Peel says. “Auction volumes have been 25% higher than last year for the last four weeks.”

Katelyn McCullock, economist with the American Farm Bureau Federation notes in the latest issue of In the Cattle Markets that strong prices for 500-600 lbs. cattle also could reflect smaller, farmer-feeder lots taking advantage of low feed prices and marketing some of their grain through cattle.

“These higher than expected prices across the feeder cattle complex are likely a premonition of 2018 being another year of growth and expansion in the cattle sector,” McCullock says. “Southern plains 500-600 lbs. weights were $36/cwt. above 2016 last week, while 700-800 lb. weights were $40 higher.”

Feeder Cattle futures closed sharply lower on Friday with recent weakness, light trade, higher corn prices and defensiveness to the Cattle on Feed report (see below). Live Cattle followed along but less steeply.

Live Cattle futures closed an average 67¢ lower (45¢ to 90¢ lower).

Feeder Cattle futures closed an average of $1.67 lower ($1.00 to $2.17 lower).

Choice boxed beef cutout value was $3.00 lower Friday afternoon at $207.24/cwt. Select was 2¢ higher at $187.85.

******************************

Major U.S. financial indices closed lower on Friday with profit taking from the previous session’s sharp gains apparently one of the drivers.

The Dow Jones Industrial Average closed 100 points lower. The S&P 500 closed 6 points lower. The NASDAQ closed 10 points lower.

******************************

Placements came in higher than pre-report estimates once again—about 3% more than average expectations, according to the monthly Cattle on Feed report from USDA on Friday. The 2.39 million head placed on feed in October were 10.2% more than last year. In terms of weight composition, 52.93% went on feed weighing 700 lbs. or less and 10.46% went on feed weighing 900 lbs. or more.

“October is an important month when referencing placements as it is the largest month in regard to number of animals placed into feedyards,” say analysts with the Agricultural Marketing Service.

Marketings in October of 1.80 million head were 5.6% more than a year earlier, which was in line with pre-report estimates.

All told, there were 11.3 million head on feed Nov.1, which was 6.3% more than a year earlier, also in line with expectations.

Choice boxed beef cutout value was 11¢ higher Thursday afternoon at $210.24/cwt. Select was $2.78 lower at $187.83.

Cattle futures drifted lower on Thursday with light trade and perhaps some defensiveness ahead of Friday’s Cattle on Feed report.

Except for 10¢ higher in the back contract, Live Cattle futures closed an average 47¢ lower (22¢ to 90¢ lower).

Feeder Cattle futures closed an average of 21¢ lower. Spot Nov went off the board at $157.77.

******************************

Major U.S. financial indices closed sharply higher on Thursday, rebounding from the previous session’s losses. Support included the House passage of its tax reform proposal, as well as the likes of Walmart and Cisco beating estimates for quarterly earnings and revenue.

The Dow Jones Industrial Average closed 187 points higher. The S&P 500 closed 21 points higher. The NASDAQ closed 87 points higher.

******************************

“For most of 2017, market demand has pulled cattle through U.S. feedlots at a rapid pace, which has likely kept dressed weights lower than last year and limited the number of cattle in feedlots over 150 days,” say analysts with USDA’s Economic Research Service (ERS), in the latest monthly Livestock, Dairy and Poultry Outlook. “At present, packers may be forced to bid up prices because feedlots do not have an incentive to sell below their breakeven prices, in light of low feed costs and high futures prices for December and February. With strong demand for beef and continued firm packer margins, fed cattle prices for the fourth quarter are expected to average above last year. However, in the first half of 2018, fed prices are expected to be below those of 2017, reflecting increasing supplies of slaughter-ready cattle.”

Projected fourth-quarter fed steer prices were raised from last month to $117-$121/cwt. Forecast first-quarter prices for 2018 were raised to $116-$124.

On the other side of the trade, ERS raised the fourth-quarter projected price for medium frame No.1 feeder steers weighing 750-800 lbs. to $155-$159/cwt. Forecast prices for the first quarter of next year were raised to $144-$152; $143-153 in the second quarter.

Beef production will increase about 4.6% next year to 27.6 billion lbs., according to ERS as cattle numbers increase.

“An increase in overwinter forage availability and a larger calf crop likely support the strong placements in 2018,” ERS analysts say. “The increase in the proportion of heifers on feed on Oct. 1, 2017, may reflect that a modest retention of heifers for breeding supports more heifers to be placed on feed in the coming months. Based on strong margins at the retail and packer level, demand is expected to encourage feedlots to market cattle at a timely pace in 2018.”

Cash fed cattle traded sharply lower on Wednesday…Cattle feeding returns are projected to be positive for the next several months…coming up on your Cattle Current Market Update with Wes Ishmael.

Cash fed cattle trade got underway Wednesday with prices a solid step behind last week.

Negotiated cash fed cattle trade in the country was $1-$4 lower on a live basis at $119-$120/cwt. Dressed trade was $2-$4 lower at $188-$190.

Similarly, prices were about $119 for cattle selling in the weekly Fed Cattle Exchange auction—$119.21/cwt. for delivery at 1-9 days; $119.25 at 1-17 days. Most of the cattle offered in the sale changed hands—617 out of 969 head.

Reasons that cattle feeders were willing to take lower money early in the week likely include: a chance to sell at a profitable level, wholesale beef values running out of steam and the lack of support from Cattle futures. There was also chatter that packers have adequate inventory heading into Thanksgiving week.

Choice boxed beef cutout value was 54¢ lower Wednesday afternoon at $210.13/cwt. Select was $2.88 lower at $190.61. Week to week, that’s about $3 lower for Choice and $8 lower for Select.

Despite all of that, Cattle futures found a foothold on Wednesday amid lighter trade.

Live Cattle futures closed an average 41¢ higher in the front five contracts and then unchanged to an average of 20¢ lower.

Feeder Cattle futures closed an average of 38¢ higher except for 50¢ lower in the back contract.

******************************

Major U.S. financial indices closed lower on Wednesday. Softer oil prices and unrest over tax reform proposals contributed pressure.

The Dow Jones Industrial Average closed 131 points lower. The S&P 500 closed 14 points lower. The NASDAQ closed 31 points lower.

******************************

“Returns (feedlot) over upcoming months have improved notably reflecting expected fed cattle price increases, especially for early 2018 closeouts,” says Glynn Tonsor, agricultural economist at Kansas State University, in the latest Historical and Projected Kansas Feedlot Net Returns (KFNR).

In fact, the KFNR estimates positive closeouts for steer and heifers for the next five months—November through March.

For steers during that time period, net returns are projected at $21.39 to $114.16 per head with breakeven cost of gain at $83.04 to $98.97/cwt.

For heifers, net returns are estimated at $33.61 to $123.41 per head, with breakeven cost of gain at $89.31 to $109.49/cwt.

Tonsor emphasizes, the calculations reflect a cash market situation without price risk management.