Daily Market Highlights

Feeder Cattle futures continued to gain ground on Tuesday with support from recent cash markets, lending support to Live Cattle. Plenty of folks will be looking for a hint of direction from this morning’s weekly Fed Cattle Exchange auction.

Live Cattle futures closed an average of 51¢ higher through the front four contracts and then an average of 20¢ higher.

Feeder Cattle futures closed an average of 70¢ higher.

Choice boxed beef cutout value was 51¢ lower Tuesday afternoon at $192.11/cwt. Select was $1.13 higher at $188.83.

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Major U.S. financial indices closed higher again on Tuesday, with few expecting the Fed to raise interest rates this week, and shrugging off increased geopolitical tension with North Korea.

The Dow Jones Industrial Average closed 39 points higher. The S&P 500 closed 2 points higher. The NASDAQ closed 6 points higher.

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“Buyer interest in preconditioned calves is expected to continue to grow as increases are realized in calf prices and the cost to finish cattle,” says Brenda Boetel, Extension economist at the University of Wisconsin-River Falls. “In the current environment, preconditioning may become even more important, not necessarily due to the premium received for preconditioning, but because the cow-calf producer can avoid the discount received for calves with the unknown health status of non-preconditioned calves.”

Last fall’s wreck comes to mind: it was difficult to peddle un-weaned calves for any price.

With that said, in the most recent issue of In the Cattle Markets, Boetel explains there’s lots to consider in deciding whether or not it makes economic sense to keep calves a spell. For instance: how much weight calves can gain and the value of gain of those added pounds, versus the cost of gain.

Cattle feeders won the battle last week in late trade. Live prices were $1 higher at $106/cwt., except for $2 higher in the western Corn Belt at $105-$107. Dressed trade was generally steady at $165-$168.

The CME Feeder Cattle Index edged above $150.00 for the first time since early August.

Live Cattle futures closed mostly marginally higher on Monday (12¢ to 65¢ higher) except for 17¢ lower in spot Oct, 25¢ lower in Feb and unchanged in Aug.

Feeder Cattle futures closed an average of $1.09 higher (57¢ to $1.47 higher).

Choice boxed beef cutout value was $1.20 higher Monday afternoon at $192.62/cwt. Select was $1.85 higher at $187.70.

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Major U.S. financial indices closed higher again on Monday, helped along by Northrup Grumman’s multi-billion acquisition of Orbital ATK.

The Dow Jones Industrial Average closed 63 points higher. The S&P 500 closed 3 points higher. The NASDAQ closed 6 points higher.

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“Although improved forage conditions in the Southern Plains may increase incentives to background calves, placements in feedlots during the fourth quarter are expected to remain relatively large, given the availability of cattle outside feedlots,” say analysts with USDA’s Economic Research Service (ERS), in the monthly Livestock, Dairy and Poultry Outlook released yesterday. “However, expected declines in cattle feeding margins will likely encourage feedlots to bid down the price of calves in the coming months.”

The projected fourth-quarter 5-area fed steer price is $107-$113/cwt.

“Fed steer prices may possibly be pressured in the short-term as ample supplies of cattle are available to be marketed in the fourth quarter. In addition, an abundant supply of competing meats are also available,” ERS analysts say.

Fed steer prices are forecast at $110-$120 in the first quarter of 2018.

In the meantime, those analysts suggest improved forage conditions—allowing folks to keep cattle and wait for higher prices—are helping lift feeder cattle prices, following the month-to-month decline in August.

The price forecast for feeder steers (750-800 lbs.) in the fourth quarter is $140-$146/cwt. First-quarter prices are projected at $132-$140.

Cash fed cattle trade was still undeveloped for the week through mid Friday afternoon. There was a few trades on either side of steady during the week, but too few transactions to trend. Prices the previous week were mainly $105 per cwt on a live basis and $165-$168 in the beef.

Cattle futures closed higher on Friday, apparently buoyed by hopes for stronger cash fed cattle prices and lingering thoughts that the bottom is near.

Other than 2¢ lower in the back contract, Live Cattle futures closed an average of $1.01 higher through the front four contracts and then an average of 46¢ higher.

Feeder Cattle futures closed an average of $1.12 higher (92¢ to $1.42 higher).

Choice boxed beef cutout value was 42¢ higher Friday afternoon at $191.42/cwt. Select was 87¢ lower at $185.85.

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Major U.S. financial indices closed higher on Friday as investors ignored anything that might otherwise be considered negative, like a decline in retail sales and industrial production.

After six consecutive months of gains, industrial production declined 0.9% in August, according to the Federal Reserve, reflecting, in part, the impact of Hurricane Harvey.

Retail and food service sales declined 0.2% in August from the previous months, according to the U.S. Department of Commerce.

The Dow Jones Industrial Average closed 64 points higher. The S&P 500 closed 4 points higher. The NASDAQ closed 19 points higher.

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“It is fairly clear to see at this point that the last official grilling holiday of the summer did little to spur boxed beef prices,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “…With the large quantity of beef being produced and placed on the meat counter, coupled with transitioning out of the grilling season, a sudden price escalation is unlikely.”

At least retail beef prices are trending lower. The Choice retail beef price last months was 13¢ lower than the previous month at $5.97/lb., according to Griffith. The all-fresh retail beef price was just 2¢ lower at $5.79.

“Retail beef prices are likely to soften the next two to three months as the market moves through the large quantities of beef and as the market moves through large quantities of pork,” Griffith says. “If the domestic market is forced to absorb the increased meat production then lower prices can be expected.”

Cash fed cattle trade for the week had yet to develop through Thursday afternoon. There were a few dressed trades at $168/cwt.—the upper end of last week’s range—in Nebraska, but too few to trend.

Although fundamentals remained unchanged, Cattle futures settled mostly modestly lower on Thursday, after early support, then significant pressure, followed by easing pressure.

Other than 5¢ lower in the back contract, Live Cattle futures closed an average of 55¢ lower (27¢ to $1.07 lower).

Other than 20¢ higher in spot Sep and 2¢ lower in Oct, Feeder Cattle futures closed an average of 39¢ lower (25¢ to 47¢ lower).

Choice boxed beef cutout value was 60¢ higher Thursday afternoon at $191.00/cwt. Select was $1.97 lower at $186.72.

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

The Dow Jones Industrial Average closed 45 points higher. The S&P 500 closed 2 points lower. The NASDAQ closed 31 points lower.

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“Cow-calf producers that are set-up to economically add some weight to cull cows and then sell in the first few months of 2018 instead of this fall at the seasonal price low, might want to put a pencil to that soon,” say analysts with the Livestock Marketing Information Center (LMIC), in the latest Livestock Monitor.

LMIC analysts explain that over the course of a typical cattle inventory cycle (usually 10-12 years), cull cow prices are typically seasonally lowest in the fourth quarter—about a 10% decline between September and November for the long-term average.

“Several factors underpin the seasonal pattern in cull cow prices,” LMIC analysts explain. “First, the supply of cull beef cows is largest in the fall, which dampens prices; after those large supplies are marketed, prices increase. Second, fed cattle prices are typically highest in the winter and early spring months (i.e., February through May), which supports slaughter cow prices. Other factors that can significantly influence cull cow prices are the level of dairy cow slaughter and the amount of beef imported from Australia and New Zealand, which competes mostly in the cow-beef market and not as much with meats from fed steers and heifers.”

LMIC expects the average seasonal decline in cull cow prices through the fourth quarter this year, then an increase into early 2018. Along the way, they expect cull cow prices to be lower year over year.

Cash fed cattle trade remained mostly stuck in place through Wednesday afternoon. There was no country trade to speak of. Only one lot—128 heifers—traded in the weekly Fed Cattle Exchange Auction, out of 1,063 head offered. The weighted average price was $104.75/cwt. (1-9 day delivery), which was about even with last week’s country trade.

Despite early pressure and stagnant wholesale beef values, a sense of firming market conditions helped boost Cattle futures on Wednesday.

Live Cattle futures closed an average of 84¢ higher (40¢ to $1.30 higher).

Feeder Cattle futures closed an average of 51¢ higher.

Choice boxed beef cutout value was 39¢ lower Wednesday afternoon at $190.40/cwt. Select was $2.17 lower at $188.69.

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Major U.S. financial indices closed higher on Wednesday—all three cited here closed at record-high levels for the second consecutive day. Stronger oil prices and suggestions that Congress will get to tax reform this year provided support.

The Dow Jones Industrial Average closed 39 points higher. The S&P 500 closed 1 point higher. The NASDAQ closed 3 points higher.

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Brian Williams, livestock economist at Mississippi State University points out that projected beef production for this year was reduced 140 million lbs. in the latest monthly World Agricultural Supply and Demand Estimates; reduced 85 million lbs. for next year.

“One driver is lower than expected fed cattle marketing as reflected in the last Cattle on Feed Report, although we know those cattle are still out there and will end up coming to market at some point in the future,” Williams explains, in the latest In the Cattle Markets. “Probably the biggest driver is reduced slaughter weights. Total slaughter numbers have been trending at or above last year’s numbers most of the year, however slaughter weights have been trending well below year-ago levels. When those two are put together, the lower slaughter weights outweigh the increase in the number of head, leading to lower production numbers.”

Williams notes that positive cattle feeding returns encouraged feeding and marketing more cattle quicker, which equates to lighter carcass weights.

“Now that profits (feedlot) are turning negative, that incentive is gone and feedlots will likely shift toward trying to squeeze as much gain out of each animal as possible,” Williams says. “If that happens, look for the uptick in slaughter weights to shift total beef production higher in the coming months.”

Steep declines in nearby Lean Hog futures, pressure in the corn market and continued skittishness over near-term supply and demand helped pressure Live Cattle futures on Tuesday, leading Feeder Cattle lower, too.

Other than 17¢ and 25¢ higher at the back of the board, Live Cattle futures closed an average of 81¢ lower (35¢ to $1.32 lower).

Feeder Cattle futures closed an average of 42¢ lower.

Choice boxed beef cutout value was 77¢ lower Tuesday afternoon at $190.79/cwt. Select was 48¢ higher at $190.86. You read those prices correctly, the Choice-Select spread turned negative. If my records are right, that’s the first time since January in 2014.

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Major U.S. financial indices closed sharply higher on Tuesday. Easing concerns about North Korea—if only for a day—less damage from Hurricane Irma than expected and bullish treasury yields (10 years) all provided support.

The Dow Jones Industrial Average closed 61 points higher. The S&P 500 closed 8 points higher. The NASDAQ closed 22 points higher.

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The Livestock Marketing Information Center (LMIC) forecasts calf prices (500-600 lbs. steer) prices in the Southern Plains for the fourth quarter will average above last year’s depressed price level.

However, in the latest Livestock Monitor, LMIC analysts emphasize that does not suggest continued year-over-year price increases in 2018 and 2019.

“The fundamentals of the cattle and beef supply for the next two years will be the size of the U.S. calf crops,” LMIC analysts explain. “As reported by USDA-NASS, the size U.S. calf crops have increased each of the last three years and in 2017 looks to be the largest since 2008. Based on the cowherd, both the 2018 and 2019 calf crops are expected to be even bigger. All else equal, that is a challenging environment to keep raising prices.”

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Odds continue for lower feed prices, according to the monthly World Agricultural Supply and Demand Estimates (WSADE) released yesterday.

All told, WASDE says the outlook for the 2017-18 U.S. corn crop is for increased production, greater feed and residual use, higher ending stocks, and lower prices.

The projected range for the season-average corn price received by producers was lowered 10¢ on both ends to a range of $2.80 to $3.60/bu.

Soybean production is forecast at a record 4.43 billion bu.

The 2017-18 U.S. season-average soybean price is forecast at $8.35 to $10.05/bu. Soybean meal prices are projected at $290 to $330 per short ton. Soybean oil prices are projected higher at 32.5¢ to 36.5¢ per pound.

The season-average wheat price at the farm price is forecast to be $4.30 to $4.90/bu.

WASE forecasts less total meat production for this year than a month earlier, with estimated decreases in beef and broiler production more than offsetting increased pork and turkey production.

Second-half beef production was reduced on the slower expected marketing pace for fed cattle. For 2018, the beef production forecast is lowered from the previous month on the slower rate of placements during the second-half of 2017, which are expected to result in reduced steer and heifer slaughter in the first half of next year.

The fourth-quarter fed steer price is projected at $107-$113/cwt., compared to $110-$113 estimated for the third quarter. The annual price was reduced $2 on both ends of the range from the previous month’s forecast to $118-$120. The projected first-quarter price for next year is $110-$120.

Climbing futures prices later last week and firming wholesale beef values helped hold the line on cash fed cattle trade, when it finally opened up late on Friday. Prices were mainly steady to $1 higher than the previous week at $105/cwt. on a live basis and $165 in the beef, up to $168. Many would say that’s a victory, considering that expectations earlier in the week were for lower money.

Although the degree of support softened, Cattle futures closed mostly higher on Monday with Feeder cattle in the lead once again.

Other than 12¢ lower in spot Oct and 7¢ lower in Feb, Live Cattle futures closed an average of 59¢ higher (2¢ to $1.15 higher).

Feeder Cattle futures closed an average of 84¢ higher (57¢ to $1.07 higher).

Choice boxed beef cutout value was 32¢ lower Monday afternoon at $191.56/cwt. Select was 41¢ higher at $190.38.

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Major U.S. financial indices closed sharply higher on Monday. One popular notion for the bounce was a relief rally based on Hurricane Irma, though severe, appearing less so than traders anticipated.

The Dow Jones Industrial Average closed 259 points higher. The S&P 500 closed 26 points higher. The NASDAQ closed 72 points higher.

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Despite increased cattle slaughter, lighter carcass weights, strong beef exports, reduced beef imports and steady domestic consumer beef demand continue to bolster cattle and beef prices at higher levels than many anticipated. That’s how Derrell Peel, Extension livestock marketing specialist at Oklahoma State University sums up the price outlook heading into the fourth quarter.

“Calf and feeder prices peaked in June, a later-than-usual seasonal peak for calves and earlier than typical for the heavy feeders,” Peel explains in his latest weekly market comments. “Calf prices will likely decline a bit more to a seasonal low in October but are expected to remain higher year over year through the fourth quarter. Strong stocker demand for fall and winter grazing may limit seasonal price pressure this fall. Heavyweight feeder cattle prices typically decline seasonally through the end of the year but are also expected to remain above year-ago levels. While prices may weaken seasonally, I don’t expect a repeat of last year’s October crash in cattle prices.”

Although fed cattle prices are currently about 5% less compared to the same time last year, Peel expects them to stabilize near current levels before increasing seasonally in the fourth quarter and remaining above year-earlier levels.

Similarly, Peel explains, “Boxed beef prices have dropped sharply from June highs but appear to have stabilized recently. Choice boxed beef prices are currently very close to year-ago levels, while Select boxed beef prices are slightly higher year over year. Boxed beef prices are expected to increase some in the fourth quarter and average higher year over year for the balance of the year.”

Although there were too few transactions to trend, a few cattle traded in Nebraska through Friday afternoon at $105/cwt. on a live basis, which was steady with the previous week.

Feeder Cattle futures continued to rally on Friday, also leading Live Cattle to another day of gains.

Live Cattle futures closed an average of $1.26 higher (90¢ to $1.72 higher).

Feeder Cattle futures closed an average of $2.01 higher ($1.37 to $2.32 higher).

Choice boxed beef cutout value was 25¢ lower Friday afternoon at $191.88/cwt. Select was 19¢ lower at $189.97.

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

The Dow Jones Industrial Average closed 13 points higher. The S&P 500 closed 3 points lower. The NASDAQ closed 37 points lower.

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“Several weeks ago there seemed to be a dichotomy between feeder cattle prices and finished cattle prices as feeder cattle prices remained relatively strong while finished cattle prices were taking a nose dive,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “This dichotomy appears to have ceased as both Feeder Cattle and Live Cattle futures contracts have begun to move to the upside. A point that further points to the contrast between prices a few weeks ago is that the Live Cattle contracts have gained nearly as many dollars per hundredweight as the Feeder Cattle contracts. Another point of interest in the Feeder Cattle market is the narrow price spread among the eight actively traded contracts from September 2017 to August 2018. The eight contracts are all within a $5/cwt. price range, with the remaining 2017 contracts trading within a $1 range. Similarly, the 2018 contracts are all within $2 of each other. The information from the narrow spreads across months can be difficult to decipher. In the near term, it likely means traders are not sure how many cattle are still on pasture and that they may question some of the information reported earlier in the year.

Growing chatter that wholesale beef values may have finally found the seasonal bottom, significantly more trade and short covering helped Cattle futures rally on Thursday. That’s despite the lower cash fed cattle trade last week and undeveloped trade so far this week.

Except for 27¢ higher in the back contract, Live Cattle futures closed an average of $1.11 higher (65¢ to $1.52 higher).

Feeder Cattle futures closed an average of $2.03 higher ($1.50 to $2.45 higher).

Choice boxed beef cutout value was 80¢ lower Thursday afternoon at $192.13/cwt. Select was 51¢ lower at $190.16.

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

The Dow Jones Industrial Average closed 22 points lower. The S&P 500 closed fractionally lower. The NASDAQ closed 4 points higher.

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U.S. beef exports in July were among the highest monthly totals on record, according to data from USDA and compiled by the U.S. Meat Export Federation (USMEF).

July beef exports totaled 104,488 metric tons (mt), were 5% more year over year. Export value for the month was 18% more than a year earlier at $623.7 million.

For January through July, exports increased 11% in volume (711,364 mt) and 15% in value ($3.97 billion) compared to the first seven months of last year.

Export value per head of fed slaughter in July averaged $299.21, up more than $35 (or 13%) from a year ago. Through July, per-head export value this year was up 9% to $273.52.

“July was certainly a solid month, especially for beef exports, but these results remind us that the U.S. red meat industry operates in an intensely competitive global environment,” says USMEF CEO Philip Seng. “At a time when some of our most essential trade agreements are under review, we must be mindful of how these agreements have helped make U.S. beef, pork and lamb more readily available and more affordable for millions of global customers, to the benefit of U.S. producers and everyone in the U.S. supply chain.”

Among beef export highlights for the month:

Beef export volume to Japan was most in four years; value was the highest of post-BSE era. Keep in mind that Japan’s frozen beef safeguard was triggered in late July, increasing the duty on frozen beef imports from suppliers without a trade agreement with Japan, including the U.S., from 38.5% to 50%. The impact of the safeguard is not likely to surface until the September export data is available, according to USMEF.

July was the first full month for exports to China, with exports of 137 mt valued at $1.3 million.

Just a single lot (125 head) sold out of the 1,240 head offered in the weekly Fed Cattle Exchange auction. The heifers sold for a weighted average price of $163/cwt. on a dressed basis for delivery at 1-17 days. That was $3 less than steers selling in the beef there last week.

Another day of firmer wholesale beef values, reports of renewed commercial interest and hopeful notions that packers need to acquire inventory helped lift Cattle futures on Wednesday.

Live Cattle futures closed an average of 57¢ higher.

Feeder Cattle futures closed an average of $1.09 higher (80¢ to $1.50 higher).

Choice boxed beef cutout value was 48¢ higher Wednesday afternoon at $192.93/cwt. Select was 20¢ higher at $190.67.

Corn futures closed 2¢ higher through Sep ’18 and then fractionally higher to 1¢ higher.

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Major U.S. financial indices rebounded from the previous session’s steep losses to close moderately higher on Wednesday, on mixed economic news.

The Dow Jones Industrial Average closed 54 points higher. The S&P 500 closed 7 points higher. The NASDAQ closed 17 points higher.

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Weekly cattle slaughter was running 3-10% higher year over year through July and early August, and it needs to keep up the pace, says Stephen Koontz, agricultural economist at Colorado State University, in the latest issue of In the Cattle Markets.

“Strong packer margins and Saturday kills show no problems as of yet, but what plays out over the months of September and October will be important for fed and feeder cattle prices well into next year,” Koontz explains. “Weekly fed slaughter and monthly fed cattle marketing need to be watched closely. The slowing of either will lead cattle prices lower.”

Compared to beef retail featuring for Memorial Day, Koontz adds that the lack of news about Labor Day featuring poses concern.

“Late summer featuring is present but not as strong as that of early summer,” Koontz says. “Retail prices rebounded sharply upward through May and June after months of softening last fall. This summer’s retail prices are similar to last year and the retailer margin strengthened a lot last month. Strong consumer demand will be needed in the fall and it is not clear that’s likely.”