Daily Market Highlights

Feeder Cattle futures closed sharply lower on Tuesday, leading Live Cattle along, but to a lesser degree. There continues to be plenty of uncertainty surrounding the top in fed cattle prices, as well as consumer beef demand, relative to forward-contracted beef, coming out Thanksgiving. Lower wholesale beef values also contributed pressure.

Live Cattle futures closed an average of $1.43 lower (95¢ to $1.90 lower).

Feeder Cattle futures closed an average of $2.40 lower ($1.07 to $3.07 lower).

Choice boxed beef cutout value was $2.14 lower Tuesday afternoon at $210.67/cwt. Select was 34¢ lower at $193.49.

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Major U.S. financial indices closed lower on Tuesday. Among pressures cited by analysts: slower than expected economic growth in China and uncertainty surrounding tax reform.

The Dow Jones Industrial Average closed 30 points lower. The S&P 500 closed 5 points lower. The NASDAQ closed 19 points lower.

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Stronger cattle prices than expected this year are boosting estimated cow-calf returns higher to about on par with 2011, say analysts with the Livestock marketing Information Center (LIMC).

LMIC estimates a return of about $69 per cow this year compared to -$21 last year, even though cash production costs per cow are estimated to be slightly higher. That’s based on a typical commercial full-time spring calving and fall weaning operation.

“Those estimates are not survey-based and are developed for market analysis purposes,” LMIC analysts say in the latest Livestock Monitor. “They do not represent an individual ranch/farm resource base. LMIC calculations only include cash costs of production and pasture rent. That is, return to owner management, labor, etc., are not included. The returns are useful only in a general context. For example, the LMIC uses those estimates because producer return is a key factor influencing national herd growth or contraction.”

For perspective compared to last year, LMIC projects steer calf prices (500-600 lbs.) in the Southern Plains to be in the upper $160s for the fourth quarter. That would be about 21% ($28-$29 per head) more than last year.

Although returns look to be more than anticipated this year, LMIC analysts caution that they’re likely to erode over the next couple of years.

“Cyclically, U.S. calf crops are forecast to continue increasing throughout 2019,” LMIC analysts say. “U.S. beef tonnage produced in 2018 is expected to be record-large and should rise again in 2019. Unless demand (domestic and foreign) for beef comes in much better than anticipated, calf prices are forecast to slip for the next two years. Still, calf prices in the fourth quarters of both 2018 and 2019 could remain above 2016’s depressed level. However, any faltering in demand relative to 2017’s could quickly send cattle prices back down to 2016 levels.”

Between wonderments about the top in cash fed cattle prices, how much room is left for wholesale beef values to run, and the prospects of another massive placement number in the monthly Cattle on Feed report due out Friday, Cattle futures began the week with plenty of uncertainty. That feeling was underscored by strong early support that faded by session’s end.

Live Cattle futures closed unchanged to an average of 12¢ lower.

Other than 22¢ higher in spot Nov, Feeder Cattle futures closed an average of 38¢ lower.

Choice boxed beef cutout value was $1.04 lower Monday afternoon at $212.81/cwt. Select was 68¢ lower at $193.83.

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Major U.S. financial indices closed slightly higher on Monday.

The Dow Jones Industrial Average closed 17 points higher. The S&P 500 closed 2 points higher. The NASDAQ closed 6 points higher.

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Although cash fed cattle prices were a touch softer last week, Derrell Peel, Extension livestock marketing specialist at Oklahoma State University points out that that prices remain higher than most expectations.

Likewise, even with the lower futures prices last week, Peel notes in his weekly market comments, “Live futures are still offering attractive levels to lock in fed cattle for the spring. It’s not clear if cattle futures are simply making a technical correction and some profit taking, but the long speculative position in the markets makes it vulnerable to move lower. The opportunities currently offered may be fleeting.”

The same goes for feeder cattle cash and futures prices.

“The good news is that moves lower have thus far been quite orderly and spring contracts remain at levels that offer unusual opportunities for feeder cattle producers to lock in attractive margins,” Peel explains. “As with Live Cattle futures, current Feeder futures are built on long speculative positions that could turn and allow an abrupt and sharp drop. The opportunity is there but may be passing.”

Moreover, even with sharply lower year-to-year carcass weights this year that diluted the impact of increasing cattle numbers, Peel says beef production next year is projected 4% higher, on top of an estimated 4% increase this year. Pork and broiler production are also projected higher next year.

“Strong beef demand, both domestically and internationally, has supported cattle and beef prices in 2017,” Peel says. “At the current time, retail beef prices are holding close to year-ago levels with boxed beef and cattle prices at all levels higher than this time last year.”

Negotiated cash fed cattle trade ended the week generally steady to $2 lower in the beef at $190-$192/cwt. Live sales were was $1 lower in the Southern Plains and Colorado at $124/cwt. Elsewhere, live sales were steady to $3 lower at $120-$122.

Cattle futures faded some of the heaviest selling pressure on Friday, but still closed mostly solidly lower as traders ponder the odds of whether or not the top in fed cattle is still coming or just behind.

Live Cattle futures closed an average of $1.78 lower through the front three contracts. After 77¢ lower in June, contracts were 12¢ lower to 10¢ higher.

Other than unchanged in spot Nov and 20¢ and 25¢ higher in the back two contracts, Feeder Cattle futures closed an average of 49¢ lower (32¢ to 67¢ lower).

Choice boxed beef cutout value was $1.11 higher Friday afternoon at $213.85/cwt. Select was $3.79 lower at $194.51.

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Major U.S. financial indices paddled sideways to lower on Friday, with traders taking stock of tax reform scenarios and timing of an ultimate market correction to generally over-bought conditions in equities.

The Dow Jones Industrial Average closed 39 points lower. The S&P 500 closed 2 points lower. The NASDAQ closed fractionally higher.

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“Margins remain favorable for cattle feeders with a steady price this week, but packers were looking for any way to slow the ratcheting up of finished cattle prices that have outpaced price movements in the boxed beef market,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “It is hard to tell if the early cattle trade was the reasoning for softening of December Live Cattle futures or if packers would have benefited from waiting until December futures declined about $5 from last week’s close. Regardless of what is leading the market, it would appear finished cattle prices will remain strong the next few weeks.”

Whether it was retrenching for another run or a rudderless lull, Cattle futures stabilized by session’s end on Thursday, with lower corn prices helping buoy Feeder Cattle futures.

After 45¢ and 5¢ lower in the front two contracts, Live Cattle futures closed an average of 40¢ higher (32¢ to 60¢ higher).

Feeder Cattle futures closed an average of 84¢ higher (35¢ to $1.15 higher).

Choice boxed beef cutout value was 39¢ lower Thursday afternoon at $212.74/cwt. Select was 59¢ lower at $198.30.

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Major U.S. financial indices closed lower on Thursday, pressured by a slide in tech stocks and chatter about the Senate version of tax reform potentially delaying implementation until 2019.

The Dow Jones Industrial Average closed 101 points lower. The S&P 500 closed 9 points lower. The NASDAQ closed 39 points lower.

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“The forecast for 2017 total red meat and poultry production is lowered from last month as lower beef, pork, and turkey production more than offsets higher broiler production,” say analysts with USDA’s Economic Research Service (ERS), in the latest World Agricultural Supply and Demand Estimates (WASDE). “Beef production is reduced from the previous month on a slower expected marketing pace for fed cattle in the fourth quarter and lighter carcass weights.”

For next year, however, total red meat production is forecast higher than in last month’s estimates, based on higher beef and pork production.

“Beef production (2018) is raised from last month as higher expected placements in the latter part of 2017 and first-half 2018 are expected to support higher marketings and fed cattle slaughter in 2018,” ERS analysts explain. “However, carcass weights are expected to be slightly lower.”

Projected cattle prices increased for 2017 and the first-half 2018. WASDE forecasts fourth-quarter fed steer prices at $117-$121/cwt. with the annual average price projected $2 higher at $121.80. First-quarter prices next year are forecast at $116-$124; second quarter at $112-$122.

Corn production for this year is forecast 298 million bu. higher than last month at 14.578 billion bu. The increase is based on an estimated record-high yield of 175.4 bu./acre, which is 3.6 bu./acre more than in the October forecast. Ending stocks are projected 147 million bu. more than last month. The estimated season-average corn price received by farmers was unchanged at $3.20/bu.

Soybean production is forecast 5 million bu. lower at a record 4.425 billion bu. based on an estimated fractional decrease in yield. The season-average soybean price is projected 10¢ higher at the midpoint at $9.30/bu. Soybean meal prices are estimated $5 higher at bother ends of the range at $295-$335/short ton. Soybean oil price projections are unchanged at 32.5¢ to 36.5¢/lb.

Ending wheat stocks were projected 25 million bu. lower based on increased exports. Although estimated ending stocks of 935 million bu. are 246 million bu. less than the previous year, they’re still above the 5-year average. The season-average farm price for wheat was unchanged at the midpoint at $4.60/bu.

Negotiated cash fed cattle trade got underway in earnest on Wednesday with cattle feeders apparently content with last week’s sizable jump in prices. Live sales were $1 lower than last week at $124/cwt. in the Southern Plains and Colorado. Live trade in Nebraska was $1-$3 lower at $122-$124, while dressed sales held steady at $192.

Likewise, the average weighted price was $124 at the weekly Fed Cattle Exchange auction on Wednesday. The price was for 465 head sold out of 982 head offered for delivery at 1-9 days. There was a PO at $123 and no sales for another 209 head offered for 1017-day delivery.

Despite resurgent wholesale beef values and promising fundamentals, Cattle futures closed sharply lower on Wednesday with apparent long liquidation and technical selling.

Live Cattle futures closed an average of $1.20 lower ($1.00 to $1.80 lower).

Feeder Cattle futures closed an average of $2.97 lower ($2.55 to $3.00 lower).

Choice boxed beef cutout value was 49¢ higher Wednesday afternoon at $213.13/cwt. Select was $1.13 higher at $198.89.

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Major U.S. financial churned sideways on Wednesday but to the upside. That was despite some fretting that key Republican losses in this week’s election could make tax reform tougher sledding.

The Dow Jones Industrial Average closed 6 points higher. The S&P 500 closed 3 points higher. The NASDAQ closed 21 points higher.

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Plenty of factors contribute to the current sustained strength of calf, feeder and fed cattle markets. There’s the much publicized, ongoing aggressive marketing of feedlots that continues to suppress carcass weights and mute the impact of increasing cattle numbers. There are the apparently significant profits of beef packers encouraging them to kill more cattle than less. More than anything, though, it is demand that continues to underpin higher prices.

“Feeder cattle prices the past three months have slowly and methodically made gains, which bode well for a sustained feeder cattle market,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “The anomaly in the feeder cattle market was that finished cattle prices softened much of that time. Thus, the first 10 or 11 weeks of stronger feeder cattle prices were not driven by the live cattle market indicating significantly higher prices. However, the strength in the market the past two weeks has largely been due to feeder cattle markets chasing the live cattle market run to the upside. The strong finished cattle market provides support for continued strength in the feeder cattle market moving forward. If the live cattle market makes a turn to the downside then feeder cattle will quickly and drastically follow. The calf market has also been supported by the strength in downstream markets. However, the normal seasonal tendency for calf prices to soften during the fall months is equally fighting the upward price movement, which has left calf prices fairly steady the past several weeks.”

Griffith points out that fed cattle prices in recent weeks are receiving support from increasing wholesale beef values as retailers and food service operators begin stocking up for holiday shoppers.

“The demand leading up to the holiday season is generally for higher quality beef and primarily middle meats,” Griffith explains. “The demand for higher quality beef will result in the Choice Select spread continuing to widen the next few weeks. Additionally, this means, the Choice boxed beef price will be supported primarily by middle meats the next month or so before winter purchases begin dominating the market. Once the winter purchases take over then the Choice Select spread will begin narrowing and could narrow to near zero in January or February. Packers will be more concerned with maintaining positive margins than anything else.”

Negotiated cash fed cattle trade wobbled from the blocks on Tuesday with live prices $1 lower than last week in the Texas Panhandle at $124/cwt. That was on slow trade and light to moderate demand. Perhaps today’s weekly Fed Cattle Exchange auction will provide more clarity to the price trend.

Cattle futures closed mostly narrowly mixed on Tuesday with apparent profit taking on the one side, and settling in for potentially higher cash trade on the other.

Except for 70¢ lower in spot Dec and 52¢ higher in the back contract, Live Cattle futures closed 27¢ lower to 17¢ higher.

Feeder Cattle futures closed an average of 56¢ lower (for 5¢ to 82¢ lower).

Choice boxed beef cutout value was $2.07 higher Tuesday afternoon at $212.64/cwt. Select was $2.99 higher at $197.76.

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

The Dow Jones Industrial Average closed 8 points higher. The S&P 500 closed fractionally lower. The NASDAQ closed 18 points lower.

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“Steady as she goes,” might be the most apt description of producer attitudes in the latest Purdue University/CME Group Ag Economy Barometer.

Most respondents to the latest Ag Barometer Survey (80%) expect farmland rental rates to be unchanged in 2018 compared to this year. The other 20% were split equally between those expecting rental rates to be higher and those expecting lower rates in 2018.

Similarly, compared to the last time producers were posed the question in July, fewer producers expect higher corn, soybean and wheat prices in the next 12 months. However, fewer producers also expect crop prices to decline over the next year.

Information from the monthly survey accounts for 400 agricultural producers across the U.S. and is used in calculating an index. The October index of 135 was 3 points higher than the previous month—the third-highest mark since data collection began two years ago. Expectations for the future drove the increased optimism.

Profit taking seemed to be the order of the day in Cattle futures on Monday, especially in nearby contracts, but far from aggressive.

After 40¢ to $1.97 lower in the front three contracts (an average of $1.16 lower), Live Cattle futures closed from unchanged to an average of 28¢ higher.

After 27¢ to 72¢ lower in the front three contracts (an average of 55¢ lower), Feeder Cattle futures closed from unchanged to an average of 21¢ higher except for 15¢ lower in Sep.

Choice boxed beef cutout value was $1.83 higher Monday afternoon at $210.57/cwt. Select was $1.69 higher at $194.77.

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Major U.S. financial indices edged higher on Monday amid continued positive quarterly earning reports, supported by merger and acquisition activity.

Incidentally, the nascent rally in Crude Oil (WTI) took another step higher on Monday, reportedly due to uncertainty created by a financial scandal that included a key Saudi Arabian investor in Middle Eastern markets. Front-month futures were about $3 higher week to week.

The Dow Jones Industrial Average closed 9 points higher. The S&P 500 closed 3 points higher. The NASDAQ closed 22 points higher.

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U.S. beef exports for September edged higher in volume and jumped substantially in value, according to statistics released by USDA and compiled by the U.S. Meat Export Federation (USMEF).

Although lower than the previous month, September beef export volume improved 2% from a year ago (103,552 mt), while export value topped $600 million for the fourth consecutive month ($616.9 million), which was 16% more than the previous year.

For January-September U.S. beef export volume was 9% more (926,985 mt) and value was 16% higher ($5.27 billion), which was 2% above of the record pace established in 2014.

September beef export value averaged $289.14 per head of fed slaughter, up 13% from a year ago. January-September export value averaged $277.31 per head, up 10%.

“USMEF is pleased to see solid demand continuing for U.S. beef in Japan, and this is a testament to the strong, well-established relationships with our loyal customers and the success of U.S. beef promotional campaigns in Japan,” explained Philip Seng, USMEF CEO. “But the 11.5% duty rate increase needs to be closely monitored to ascertain where market dislocation will occur. We are watching this situation carefully and remain very concerned about the widening gap in duty rates between U.S. beef and Australian beef.”

Cash fed cattle sales for the week were a staggering $4-$9 higher on a live basis at mostly $125/cwt. ($120-$122 in the western Corn Belt. Dressed trade was $7-$12 higher at mostly $192.

Aggressive gains in cash fed cattle prices late Thursday and on Friday fueled sharp gains in Cattle futures on Friday.

Live Cattle futures closed an average of $2.79 higher through the front three contracts ($2.40 to $3.00 higher) and then an average of $1.09 higher.

Feeder Cattle futures closed an average of $2.82 higher ($2.50 to $3.30 higher).

Choice boxed beef cutout value was 49¢ higher Friday afternoon at $208.74/cwt. Select was 8¢ lower at $193.08.

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Major U.S. financial indices closed higher on Friday with continued support from the Republican tax-reform proposal and strong quarterly earnings reports, including Apple.

The Dow Jones Industrial Average closed 22 points higher. The S&P 500 closed 7 points higher. The NASDAQ closed 49 points higher.

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“Cattle feeders are anxious to refill pens after selling cattle at $125/cwt., $14 higher than just two short weeks ago,” said analysts with the Agricultural Marketing Service (AMS) on Friday. “Old timers will recall fed cattle moving by leaps and bounds back in the fall of 2003 and they all remember that what goes up usually comes down.”

Of course, the fall of 2003 was a completely different situation, when Canada was locked out of the international beef marketplace due to BSE and before the U.S. followed suit in December. This time around, it appears that pure demand economics are behind the surge in prices and volume of trade.

“For the past three weeks, auction receipts averaged 316,000 head compared to 289,000 for the previous three-year average,” AMS analysts say.

Although there were too few transactions to trend, a few live sales were reported in the western Corn Belt on Thursday at $120-$121/cwt. and a few in the beef at $190-$192. On a live basis, that was $2-$3 more than the top end of last week’s prices in the region; $9-$10 more in the beef.

Cattle futures closed lower on Thursday—arguably more of a breather from the recent rally than anything else. Queasiness about-near term demand and where prices can go from here also limited trade.

After $2.27 and $1.30 lower in the front two contracts, Live Cattle futures closed an average of 17¢ lower (5¢ to 50¢ lower).

Feeder Cattle futures closed an average of $1.50 lower ($1.15 to $2.42 lower).

Choice boxed beef cutout value was 86¢ higher Thursday afternoon at $208.25/cwt. Select was 55¢ lower at $193.16.

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Major U.S. financial indices closed mostly narrowly higher on Thursday as investors sorted through a variety of news, including: details on the Republican tax-reform proposal; earnings reports; President Trump naming Jerome Powell as successor to Janet Yellen as chair of the Federal Reserve.

The Dow Jones Industrial Average closed 81 points higher. The S&P 500 closed fractionally higher. The NASDAQ closed 1 point lower.

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Although robust growth in U.S. beef exports this year is partly due to increased global beef demand, it also reflects growing market share by the U.S. in international markets.

As an example, the U.S. market share of imported beef to Japan grew from 33% in 2013 to 42% currently. In South Korea it’s grown from 34% to 45%. Joel Haggard, U.S. Meat Export Federation senior vice president for the Asia-Pacific region shared that insight during a media call last week.

Only a single lot (274 heifers in Texas) sold in the weekly Fed Cattle Exchange Auction. The weighted average price was $120/cwt. for delivery at 1-9 days. There were 1,515 head on offer.

Slaughter steers and heifers sold mostly $5-$6 higher at Sioux Falls Regional Livestock in South Dakota on Wednesday. Choice steers brought $116.00-$119.75/cwt.; $116.50-$118.25 for heifers.

Although traders backed away from stronger follow-through support early in the session, Cattle futures closed solidly higher again on Wednesday.

Live Cattle futures closed an average of 70¢ higher (32¢ to $1.17 higher).

After 27¢ higher in spot Nov, and besides 57¢ and 50¢ higher in the back two contracts, Feeder Cattle futures closed an average of $1.08 higher.

Choice boxed beef cutout value was 95¢ higher Wednesday afternoon at $207.39/cwt.; that’s $7 higher week to week. Select was 19¢ lower at $193.71.

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Major U.S. financial indices closed mainly narrowly mixed on Wednesday. Support came from recently higher energy prices and variety of positive economic news, including: a sharp rebound in monthly jobs (ADP); positive manufacturing data (ISM); strong quarterly earnings; and the Fed standing pat on interest rates.

The Dow Jones Industrial Average closed 57 points higher. The S&P 500 closed 4 points higher. The NASDAQ closed 11 points lower.

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“With fluctuating beef cow inventories over the past decade, the U.S. dairy herd has offered a stable source of both feeder cattle and cull cows to fill beef demand,” say Brenda Boetel, Extension economist at the University of Wisconsin-River Falls and research assistant, Jared Geiser.

In the most recent issue of In the Cattle Markets, Boetel and Geiser explain, “In 2016 the dairy sector contributed 5.7 billion lbs. of beef through cull cows and finished dairy steers and heifers to the U.S. beef supply chain.”

Moreover, they point out the contribution of dairy beef to total U.S. beef production, while variable, continues to grow over time. Dairy beef accounted for 17.9% of total beef production in 2002; 22.7% in 2016. During that same period, Holstein steers accounted for 32% to 60% of all of the Prime-grading beef each year.

“Continued contributions from dairy steers can be expected with the dairy cowherd surpassing 2015 levels and reaching a new high since 2002,” say Boetel and Geiser.