Weekly Market Highlights

Calves and feeder cattle continued to trend higher, buoyed by winter grazing prospects and higher Cattle futures. Nationwide, steers traded $1-$6/cwt. higher, according to the Agricultural Marketing Service (AMS). Except for $4-$6 higher in the North Central region, heifers sold steady to $3 higher.

“The feeder supply was moderate as the fall run will be upon us shortly and most auctions will go to weekly sales in the coming months,” said AMS analysts. “Long strings of yearlings are still making their way to market in the Northern Plains as the grass has been abundant.”

“Feeder cattle prices have shown strength through the summer, but seasonal pressures will likely take hold, moving prices lower in the fourth quarter,” say analysts with USDA’s Economic Research Service (ERS), in the latest monthly Livestock, Dairy and Poultry Outlook. “Prices typically decrease when the spring-born calves (about two-thirds of the annual calf crop) are brought to market in the fall. Assuming normal weather in the Great Plains, availability of winter forages for backgrounding could bolster prices in fourth-quarter 2018.”

Cattle futures meandered mostly sideways throughout the week but were able to keep much of the previous week’s sharp gains that pushed prices beyond the months-long, narrow channel.

Feeder Cattle futures closed an average of 37¢ lower week to week on Friday.

Live Cattle futures closed mixed from an average of 32¢ lower to an average of 25¢ higher.

That was with plenty of uncertainty about the direction of negotiated cash prices for fed cattle. By late afternoon Friday, the only region with a reportable trend was Nebraska with live sales $1 lower than the previous week at $110.00-$110.50 and dressed trade steady at $175.

Similarly, late Friday, the Texas Cattle Feeders Association reported its members trading cattle at steady money of $111.

Choice boxed beef cutout value was 53¢ higher Friday afternoon at $204.80 per cwt. Select was $1.76 lower at $194.71.

“Cattle slaughter has been clicking along this summer with larger harvests than a year ago. Packer margins have been advantageous to them this summer and they’ve been willing to pay the overtime for a six-day week production,” explained AMS analysts. “YTD fed cattle slaughter at the end of August was 2.3% larger than 2017 and 8.3% above the previous 3-year average.”

AMS analysts also point out cow slaughter through August was 11.6% more than last year and 24.2% more than the 3-year average. During the same period, heifer slaughter was 8.6% more than last year and 17% more than the 3-year average.

Friday to Friday Change*

Weekly Auction Receipts

CME Feeder Index

*Thursday-to Thursday for CME Feeder Index

Cash Stocker and Feeder

North Central

South Central

Southeast

(AMS National Weekly Feeder & Stocker Cattle Summary)

Wholesale Beef Value

Futures

Equities

Cattle markets ended the week on a strong note, with Cattle futures surging higher, busting beyond the interminable sideways range of recent months. Along the way, calves and feeder cattle traded steady to higher, defying the expected seasonal trend.

Specifically, calves and yearlings sold fully steady to $5/cwt. higher, according to the Agricultural Marketing Service (AMS). Given the previous week’s holiday, the trend is compared to two weeks earlier.

Though plenty of calves will be heading to market over the next two months, AMS analysts pointed to low feed prices and the promise of wheat pasture as two supportive factors behind the price trend.

Feeder Cattle futures closed an average of $4.94 higher week to week on Friday ($3.97 to $6.17 higher). That’s an average of $8.15 higher in the last two weeks.

Still, Andrew P. Griffith, agricultural economist at the University of Tennessee, cautions the move higher in both cash and futures prices in counter-seasonal.

“The calf and feeder cattle market have remained strong through the late summer months and the futures market is suggesting continued strength, while seasonal price trends would suggest lower prices, Griffith explains, in his weekly market comments. “Prices are strong now with most of the price risk being to the downside.”

Cash fed cattle trade remained mostly undeveloped through Friday afternoon, based on USDA reports. Live prices the previous week were mostly $107-$108/cwt. on a live basis and $170 in the beef.

Notions of ultimately higher money seemed well founded, though, given the futures rally.

Live Cattle futures closed an average of $2.73 higher week to week on Friday ($1.27 higher at the back to $3.85 higher in spot Oct). That makes for an average increase of $4.34 over the past two weeks.

Wholesale beef values continued their seasonal decline. Week to week, Choice boxed beef cutout value was $2.29 lower Friday afternoon at $204.27/cwt. Select was 62¢ lower at $196.47.

“Demand in 2018 appears to be rounding into form similar to the previous two years with continued strong demand that has supported beef and cattle prices through the entire production chain,” Griffith says. “Several factors are contributing to strong beef demand, with the most likely being increased income levels, consumers preference for beef, and exports.”

Friday to Friday Change*

Weekly Auction Receipts

CME Feeder Index

*Thursday-to Thursday for CME Feeder Index

Cash Stocker and Feeder

North Central

South Central

Southeast

(AMS National Weekly Feeder & Stocker Cattle Summary)

Wholesale Beef Value

Futures

Equities

Calves and feeders traded steady to $4/cwt. higher last week, according to the Agricultural Marketing Service (AMS). That was amid lighter receipts borne by the holiday-shortened week.

“Demand for feeders was good, although buyers are showing a stronger preference for cattle with good health programs as fall temperature swings become a concern,” AMS analysts say. 

Feeder Cattle futures closed an average of $3.21 higher  week to week on Friday.

“Coupled with last week’s increase, the front three Feeder Cattle contracts are $5.50 to $6.22 higher than two short weeks ago and auction feeder cattle have been following that trend pretty closely,” note AMS analysts.

Based on the past couple of weeks, Andrew P. Griffith, agricultural economist at the University of Tennessee says it’s likely the seasonal price decline for calves and feeders has begun.

“At the same time prices are declining, cow-calf producers will begin sending spring-born calves to town at a rapid pace, which further depresses prices. Similar to calf prices, slaughter cow prices continue to trade in a steady range, but they are sitting on the bottom of that range,” Griffith says, in his latest weekly market comments. “Alternatively, Feeder Cattle futures have displayed a little resilience the past couple of weeks and found footing to push prices higher…the futures market is telling industry participants that prices are not going to decline to the degree many thought possible a few months earlier.”

Pasture and range conditions improved slightly last week, according to the latest weekly Crop Progress report (week ending Sept. 2).

Nationally, 42% of pasture and range is in Good (36%) or Excellent (6%) condition, 2% more than a week earlier, but 5% less than a year earlier. 28% is rated as Poor (18%) or Very Poor (10%), which is 2% less than a week earlier and 7% more than last year.

Among states with 35% or more of pasture and range rated as Poor or Very Poor, week-to-week conditions improved in Arizona, Colorado, Missouri, New Mexico and Texas.

“According to the National Drought Mitigation Center, slow-moving bands of showers and thunderstorms moved over a vast area of the Midwest and dumped an abundant amount of rain, with widespread totals of 3-8 in.; in some areas, up to 15 in.,” AMS analysts explained. “The drought has improved in some areas of drought in the Midwest.”

Cash Fed Prices Hold Steady

Negotiated cash fed cattle prices were generally steady with the previous week, with live sales at mostly $107/cwt. on a live basis and at $170 in the beef. Earlier in the week, it looked possible for cattle feeders to claw back another dollar or two. Heading into next week, that seems possible, given indications that packers need to replenish inventory.

Live Cattle futures closed an average of $1.61 higher week to week on Friday.

Wholesale beef values continued to ride the seasonal trend lower. Week to week, Choice boxed beef cutout value was $3.13 lower Friday afternoon at $206.56/cwt. Select was $4.18 lower at $197.09.

With that said, international demand for U.S. beef continues to provide stout price support.

As noted in Cattle Current, U.S. beef exports posted another near-record month in July, according to data released by USDA and compiled by the U.S. Meat Export Federation (USMEF).

U.S. beef exports in July climbed 12% in volume compared to the previous year at 116,575 metric tons (mt). Value for July was 16% more than the previous year at $722 million. For January through July, beef exports established a record pace in both volume (10% more) and value, which was 20% more than the same period year ago at $4.76 billion.

Beef export value in July averaged $326.18 per head of fed slaughter, up 9% from a year ago. Through July this year, per-head export value was up 16% to $318.31.

Friday to Friday Change*

Weekly Auction Receipts

CME Feeder Index

*Thursday-to Thursday for CME Feeder Index

Cash Stocker and Feeder

North Central

South Central

Southeast

(AMS National Weekly Feeder & Stocker Cattle Summary)

Wholesale Beef Value

Futures

Equities

Although Cattle futures closed mostly higher week to week, cash markets turned softer, pressured by seasonal trends, continued heavy supplies and ongoing trade uncertainty.

Steers and heifers sold $1-$5/cwt. lower, amid significantly lighter week-to-week offerings according to the Agricultural Marketing Service (AMS). In Missouri, for instance, AMS analysts say feeder cattle auction volume was the least for a non-holiday week since the week ending Sept. 15, 2017.

Week to week on Friday, Feeder Cattle futures closed an average of $2.13 higher through the front three contracts and then 22¢ lower to 35¢ higher. That was thanks to a surge Monday, tied to the announced trade pact between the U.S. and Mexico (more later)

Negotiated cash fed cattle trade remained undeveloped through Friday afternoon, with too few transactions to trend on limited trade and light demand up north—a standstill in Colorado and the Texas Panhandle. There were a few early live sales reported in the western Corn Belt Thursday at $106.00-$108.50/cwt.; a few early dressed sales at $170.

“It appears that packers may be willing to pull inventory cattle,” said AMS analysts Friday afternoon. “Packers are not quite ready to give up their triple-digit margins and they were expecting another drop in fed cattle prices moving forward into fall.”

Except for 55¢ and 35¢ higher at either end of the board, Live Cattle futures closed an average of $1.77 higher week to week on Friday.

“The strength in the cattle market is largely due to strong beef demand. If it were not for strong beef demand, prices of most classes of cattle would be moving lower and at a fairly quick clip,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “The classes of cattle with the most downside risk at this point in the year are freshly weaned calves and slaughter cows. As marketings of these two classes of cattle begin to increase through September and then peak in October and November, prices will most likely decline due to calf supply and forage availability.”

While that’s no guarantee, Griffith explains, the probability of prices declining is much higher than prices increasing.

Beef Prices Move Seasonally Lower

“Boxed beef cut-out value appears to have found a top with resistance from retailers that have been content to buy hand-to-mouth recently,” say AMS analysts.

Choice boxed beef cutout value was $3.63 lower week to week on Friday at $209.69/cwt. Select was $2.55 lower at $201.27.

“Beef exports have been a bright spot in the marketing year so far,” say AMS analysts. “Net beef export sales last week was reported at 20,600 metric tons (mt), unchanged from the previous week, and up 13% from the previous four-week average. During the same time period, actual beef exports totaled 17,800 mt, up 5% from the previous week, but unchanged from the prior four-week average.”

“Demand for beef can and likely will remain strong, but wholesale beef prices will still succumb to downward pressure,” says Griffith. “Lower wholesale prices should not be interpreted negatively as this is a seasonal trend and prices are expected to be relatively strong for the time of year and the quantity of beef products available. The market will also be hampered by large pork production in the fourth quarter, but holiday beef buying will provide a lifeline in December.”

Recent misfortune in China could boost U.S. pork exports, though.

Chinese authorities culled more than 24,000 pigs in four provinces so far, in efforts to control the spread of African Swine Fever (AFS), according to the UN’s Food and Agriculture Organization (FAO). That organization warned that the rapid onset of the virus in China, and its detection in areas more than 1,000 kilometers apart could mean AFS may spread to other Asian countries anytime.

There is no effective vaccine to protect swine from the disease. And, while the disease poses no direct threat to human health, outbreaks can be devastating with the most virulent forms lethal in 100% of infected animals.

China accounts for approximately half the global population of swine, estimated at 500 million.

Moreover, the new trade pact between the U.S. and Mexico should bolster U.S. exports to that nation, while renewing hopes for a resolution to the trade dispute with Canada sooner rather than later.

“After a year of tough negotiations, the United States and Mexico reached a trade agreement that is fair and reciprocal and will strengthen both nations’ economies,” according to a statement from U.S. Vice President Mike Pence. “The U.S.–Mexico Trade Agreement is a win for American ranchers, manufacturers, and auto workers. Our nations have agreed to new rules that will maintain duty free access for agricultural goods on both sides of the border. In addition, we have agreed to eliminate non-tariff barriers and take other steps to encourage more agriculture trade between our two countries…”

Friday to Friday Change*

Weekly Auction Receipts

CME Feeder Index

*Thursday-to Thursday for CME Feeder Index

Cash Stocker and Feeder

North Central

South Central

Southeast

(AMS National Weekly Feeder & Stocker Cattle Summary)

Wholesale Beef Value

Futures

Equities

Cash calf and feeder cattle prices ran mostly counter to futures market expectations last week.

Steers and heifers sold from $2/cwt. lower to $3 higher, according to the Agricultural Marketing Service (AMS), with drought continuing to force some cattle to town earlier than normal. 

“Looking at the rest of 2018, feeder prices are expected to be a little lower than during the same period of 2017,” says Josh Maples, Extension livestock economist at Mississippi State University, in the latest issue of In the Cattle Markets. “We typically see seasonal feeder price declines heading into September and October, and the large supplies of calves this year provide some reasoning for that seasonal pattern to hold. Looking beyond 2018, slower herd growth numbers begin to paint a brighter price picture for 2019 and 2020. If the strong domestic economy maintains or grows and exports continue to gain steam, it is not difficult to project higher prices in the fall of 2019 compared to fall 2018.”

Week to week on Friday, Feeder Cattle futures closed an average of $3.95 lower ($1.75 to $5.12 lower).

“Given that feeder cattle futures are not pricing in any price decline over the next three months, and the seasonal tendency is for cattle prices to decline, producers have a decision to make on market pricing,”says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments.“Most producers will ride the market out until time of marketing, which will likely result in receiving a lower price if the seasonal tendency holds. Other producers may take advantage of today’s market price and either hedge fourth-quarter marketings or sell cattle using a forward contract with an October or November delivery. The risk that remains is the potential for prices to move higher, but the likelihood of prices moving higher is relatively small.”

Fed Cattle Prices Soften

“Fear about the direction of the negotiated cash fed cattle trade in recent weeks mounted in the minds of traders (Futures). Analysts earlier this year were anticipating the market to be much lower than what is now, so market participants are watching very closely for any type of news that can sway the market one way or the other,” explained AMS analysts. 

Negotiated cash fed cattle trade was $1-$2 lower last week at $108/cwt. (western Corn Belt) to $109.50. Dressed trade was steady to $2 lower at $171-$174.

Live Cattle futures closed an average of $3.12 lower week to week on Friday ($1.70 at the back to $4.17 lower).

“Beef demand continues to be good, even with the ample supplies,” say AMS analysts. “The large cattle harvests this summer helped packers move through large fed cattle numbers.” 

Year over year, total cattle slaughter was 6% higher in July at 2.77 million head, according to the monthly USDA Livestock Slaughter report released Thursday.

U.S. beef production was 6% more than the previous July at 2.23 billion lbs.

Choice boxed beef cutout value was $1.94 higher week to week on Friday at $213.32/cwt. Select was $2.90 higher at $203.82.

“Looking at this market from a historical perspective, there continues to be downside price risk in the beef cutout,” Griffith explains. “The beef market had been on trajectory of lower prices since the spring price peak, but the past three weeks have displayed price support. This price support is primarily due to Labor Day purchasing, but restocking of shelves will soon be completed. This means wholesale beef prices are likely moving lower during September and October. Packers will likely attempt to manipulate production to maintain strong prices unless the bottom falls out of finished cattle.”

Placements Higher Than Expected

USDA’s monthly Cattle on Feed report will likely be viewed as bearish by the trade with more placements than many expected and the most cattle on feed Aug. 1 since the data series began in 1996.

Placements in July, in feedlots with 1,000 head or more capacity were 1.74 million head, which was 7.86% (+127,000 head) than the previous year. That’s about 2% more than popular expectations. In terms of weight distribution, 40.19% went on feed weighing 699 lbs. or less; 44.89% weighing 700-899 lbs.; 14.93% weighing more than 900 lbs.

Marketings in July of 1.87 million head were 4.99% (+89,000 head) more than last year.

Cattle on feed Aug. 1 of 11.09 million head were 4.61% (+489,000 head) more than last year.

Friday to Friday Change*

Weekly Auction Receipts

CME Feeder Index

*Thursday-to Thursday for CME Feeder Index

Cash Stocker and Feeder

North Central

South Central

Southeast

(AMS National Weekly Feeder & Stocker Cattle Summary)

Wholesale Beef Value

Futures

Equities

Seasonal trends and weaker cash fed cattle trade pressured calf and feeder cattle prices last week. Steers and heifers sold steady to $3/cwt. lower, according to the Agricultural Marketing Service (AMS). 

“Drought conditions, culminating in low water levels and poor hay production, are motivating producers to sell cattle,” say AMS analysts. “Not only are feeders making their way to town, but mature cattle as well…Missouri is the epicenter of drought in the Midwest; some parts have been dry for the last year or longer. As of the latest report near 98% of the state is showing on the drought monitor. Ratings continue to worsen each week and there is now 5.5% designated in the exceptional (D4) category; approximately 30% of cattle inventory (state) is within an area that is experiencing drought.”

Auction receipts for the week were 7.7% more than the 5-year average, likely due at least in part to sales forced by drought.

In the Panhandles of Oklahoma and Texas, though, AMS analysts say recent rains have producers gearing up to plant winter wheat, hoping stocking rates this fall can be more typical than last year when drought derailed plans.

Week to week on Friday, Feeder Cattle futures closed an average of $1.48 higher (80¢ to $2.37 higher).

“There will be weeks moving through the fall marketing period where week-over-week prices are higher, but producers should be cognizant of the seasonal decline that looms over the market,”says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “The one group of producers that may find good news in this outlook is stocker and backgrounding operations. Lower overall investment costs reduce financial risks, while margins generally stay about the same. The market does appear to be favorable toward margin operators this fall and through the winter with favorable value of gains on the table.”

Negotiated cash fed cattle sales were at $109.00-$110.50/cwt. in Nebraska through Friday afternoon. That was steady to $2 less than previous week. Dressed trade was at mostly $173, which was $2 less than the prior week. Elsewhere, trade remained undeveloped for the week, based on USDA reports.

“Packers still need to buy fed cattle, but it appears that inventory is plentiful enough that competition for fed cattle is lacking,” AMS analysts say. “Fed cattle supplies through August and September should remain plentiful. At this time there seems to be limited positive news to encourage CME cattle futures and move the fed cattle market higher.”

With that said, after pressure early in the week—not to mention extremely light trade and declining open interest—Cattle futures gained some ground week to week. Stronger late-week action was supported by stronger wholesale beef values reports and renewed hopes that the U.S. and China plan to renew trade talks.

Choice boxed beef cutout value was $4.77 higher week to week on Friday at $211.38/cwt. Select was $3.15 higher at $200.92.

Live Cattle futures closed an average of $1.21 higher week to week on Friday.

“Weekly finished cattle prices have been below weekly 2017 price levels for 22 consecutive weeks with an average difference of $11.46/cwt. during that time period,” Griffith says. “This week may or may not result in the 23rd consecutive week of year-over-year declines. However, the streak is likely to end before the end of August if cattle feeders can keep prices over $107 next week or $105 the following week. The finished cattle market has been amazingly flat since the beginning of July as cattle feeders did not succumb to leverage generally held by packers, but the last two weeks of trading suggest that cattle feeders need to move cattle. Finished cattle prices continue to have downside price risk pressure, but cattle feeders will attempt to hold their ground.”

Friday to Friday Change*

Weekly Auction Receipts

CME Feeder Index

*Thursday-to Thursday for CME Feeder Index

Cash Stocker and Feeder

North Central

South Central

Southeast

(AMS National Weekly Feeder & Stocker Cattle Summary)

Wholesale Beef Value

Futures

Equities

Calves and yearlings sold fully steady to $5/cwt. higher, supported by the previous week’s higher cash fed cattle market, according to the Agricultural Marketing Service (AMS). 

“Despite cattle futures whipsawing back and forth, a large corn crop looming ahead has many producers wanting calves and yearlings to feed or background, especially farmer feeders,” say AMS analysts. “Several auctions, especially in Missouri, noted that many calves that normally come to town in the fall are finding their way to the auction earlier as pasture conditions are deteriorating due to drought conditions.” 

Week to week on Friday, Feeder Cattle futures closed an average of $3.21 lower.

“Despite strong demand, it may be difficult for calf and feeder cattle prices to maintain the current level as the seasonally strong supply makes its way to town,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “This comment is made due to the seasonal tendency of calf prices to decline during the fall months and the expected larger calf crop compared to a year ago. Contrary to this line of thought, the fall 2017 marketing time period had strong calf and feeder cattle marketings, and prices remained extremely strong throughout the entire period. Despite not having seasonal price movement in the calf market in 2017, producers should not be betting the farm on the same price action in 2018. Most of the fundamental information, including fed cattle prices, calf numbers, reduced forage availability in many areas and traditional marketing patterns are suggesting lower calf prices this fall.”

Griffith also points to weaker feedlot returns as a source of potential price pressure.

Cash fed prices were mainly $2-$3 lower last week on a live basis at mostly $110-$111/cwt. Dressed prices were generally $3-$4 lower at $174-$176.

Live Cattle futures closed an average of $2.13 lower week to week on Friday ($1.12 to $2.75 lower).

Choice boxed beef cutout value was $1.86 higher week to week on Friday at $206.61/cwt. Select was 68¢ higher at $197.77.

Beef demand continues to support cattle price strength.

“Unemployment is very low and GDP growth is strong, meaning that consumers are ready to spend money on good cuts of meat at the retail shelf and in their favorite restaurants,” says Levi Russell, Extension livestock economist at the University of Georgia, in the most recent issue of In the Cattle Markets. He explains first-quarter domestic demand was 4 points higher year over year.

Moreover, Griffith points out retail beef prices remain close to last year’s levels.

That’s with surging beef production. Through last week, year-to-date estimated total cattle slaughter under federal inspection 19.83 million head, which was 2.9% more than the same period last year.

Total red meat production under federal inspection last week (ending Aug. 11)

was an estimated at 1007.7 million lbs, according to AMS. That’s 1.8% more than the previous week and 1.1% more than the prior year. Cumulative meat production for the year to date was 3.2% more than a year earlier.

At the same time, U.S. beef exports continue to defy expectations, in light of global trade turmoil. In fact, U.S. beef exports continue on a record pace, according to the latest data released by USDA and compiled by the U.S. Meat Export Federation (USMEF).

June beef exports of 115,718 metric tons (mt), including variety meats, were 6% more than the previous year. The value of June beef exports was 19% more year over year at $722.1 million, just slightly less than the new record set the previous month.

Beef exports for the first half of this year were also record large in both volume and value. Export volume for the first two quarters was 9% more than the same period last year at 662,875 mt. Export value was up 21% at just over $4 billion.  In previous years, export value never topped the $4 billion mark before August.

Beef export value averaged $313.56 per head of fed slaughter in June, up 19% from a year ago. The first-half average was $316.94 per head, up 18%.

Grain Markets Under Pressure

Calf and feeder cattle prices could get a shot in the arm next week from the monthly World Agricultural Supply and Demand Estimates released Friday.

“The grain market over the last couple of weeks was starting to find some stability, with dry areas around the globe,” say AMS analysts. “That was until Friday’s Crop Production report was released with corn production forecast at 14.6 billion bu., down less than 1% from last year, with yields expected to average 178.4 bu./acre up 1.8 bu. from last year, with an estimate of 81.8 million acres to harvest. Soybeans were forecast at 4.59 billion bu., up 4% from last year with yields expected to average 51.6 bu./acre up 2.5 bu. from last year.”  

Friday to Friday Change*

Weekly Auction Receipts

CME Feeder Index

*Thursday-to Thursday for CME Feeder Index

Cash Stocker and Feeder

North Central

South Central

Southeast

(AMS National Weekly Feeder & Stocker Cattle Summary)

Wholesale Beef Value

Futures

Equities

Cattle prices continued mainly steady to higher last week, amid roiling clouds of trade uncertainty, but boosted by increasing Futures market optimism.

Steers and heifers sold steady to $2/cwt. higher, according to the Agricultural Marketing Service (AMS). Week to week on Friday, Feeder Cattle futures closed an average of $1.18 higher (27¢ to $1.87 higher).

“Auction supplies of feeders was somewhat higher again this week, even though we are in the dog days of summer,” AMS analysts explained. “Beef demand has remained on solid ground for a couple weeks now as the market has traded sideways on plentiful supplies,” say AMS analysts.  “Widespread drought areas brought many mature cattle to auctions this year. Year to date, beef cow slaughter is 10.7% above a year ago and 12.7% above the previous five-year average. Herd liquidation or culling is well upon the mid-section of the country’s cow-calf sector. In addition to mature cattle slaughter increasing, year-to-date heifer slaughter is 8.2% above a year ago and 9.0% above the previous five-year average.”

Andrew P. Griffith, agricultural economist at the University of Tennessee notes in his weekly market comments that in his part of the country—also true in many areas—calf and feeder cattle prices remain similar to last year, offering opportunities for positive returns.

“This calendar year, calf and yearling prices are projected to be similar to 2016’s and 2017’s. In the fourth quarter of this year, calf prices may average slightly below 2017’s, but substantially above 2016’s,” say analysts with the Livestock Marketing Information Center (LMIC), in the latest Livestock Monitor. “If the general trends of the first half of 2018 persist, as of January 1, 2019, the U.S. cowherd likely will be up well less than 1.0% year over year. That suggests cyclically stronger calf prices are ahead (e.g., calf prices in the fall of 2020). Pre-planning may position a cattle operation to take advantage of this market transition.”

“No one knows for sure which way the market will move going forward, but the expectation is for lower prices to consume the market due to increased production,” Griffith says. “However, market analysts have consistently undervalued beef demand, which has supported cattle prices all year. One aspect of the market that has appeared to slow down is the purchase of open heifers for beef cow replacement. There have been several feeder cattle sales in which the auction price made it seem apparent that the heifers were destined to be bred because they were valued tremendously higher than same-weight feeder heifers. However, many of the high quality open heifers in today’s market are only bringing a moderate premium compared to average quality heifers destined for the feedlot.”

Weekly negotiated cash fed cattle trade was another late-week affair, but at prices reportedly $1-$2 higher than the previous week on a live basis at $113-$114/cwt. and as much as $4 high in the beef at $178.

Live Cattle futures closed an average of $1.76 higher ($1.35 to $2.15 higher).

Wholesale beef value continued to search for the seasonal bottom last week. Choice boxed beef cutout value was 39¢ lower week to week on Friday at $204.75/cwt. Select was $1.18 lower at $197.09.

“There has been considerable media coverage of the latest Cold Storage report from USDA, but this information can be misleading if not put in context,” Griffith says. “Beef in cold storage at the end of June totaled 449 million lbs., which is 33 million more lbs. than the same time last year, but in line with expectations for June. To put this quantity in perspective, weekly beef production in 2018 has averaged 501 million lbs., which means there is less than one week’s worth of beef production in cold storage.”

Friday to Friday Change*

Weekly Auction Receipts

CME Feeder Index

*Thursday-to Thursday for CME Feeder Index

Cash Stocker and Feeder

North Central

South Central

Southeast

(AMS National Weekly Feeder & Stocker Cattle Summary)

Wholesale Beef Value

Futures

Equities

Steers and heifers sold steady to $3/cwt. higher last week, according to the Agricultural Marketing Service (AMS). In the North Central region, steers weighing 600-800 lbs. sold $6-$7 higher. 

As expected, the previous week’s monthly Cattle on Feed report proved to be market-neutral. As the week progressed, though, Cattle futures softened amid technical selling and continued pressure from weakening pork prices.

Week to week on Friday, Feeder Cattle futures closed an average of $1.38 lower (75¢ to $2.37 lower).

Although demand from feedlots remains strong, the impacts of continued drought are evident.

“The last four week’s of auction receipts totaled 487,000 head, around 83,000 more than a year ago and around 20,000 more than the drought-affected

years of 2012 and 2013,” say AMS analysts. “In three weeks time, the heavy cow-calf state of Missouri went from 0% drought in D3 status to 15.56%…Cattle producers are at a crossroads and many wonder if moisture will help as the grass appears to be in dormancy. Some herd dispersals have already happened and many other producers are in the process of picking around the edges by culling open and underperforming cows and those with less than desirable qualities.”

“July 1 inventory numbers, along with heifer and cow slaughter numbers for the first half of the year would certainly indicate a slowing of the expansionary phase of the beef cattle herd,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “However, these numbers do not necessarily mean the herd is contracting. Moving through the second half of 2018, the picture will become clearer as the fall run of calves come to market and as producers continue to cull cows. It is almost certain calf and feeder cattle prices will deteriorate moving into the fourth quarter of 2018, which will result in fewer heifers retained and more cows going to market. However, the January 1, 2019 cattle inventory report will most likely show an increase in total cattle inventory in the 0.3% to 0.8% range compared to January 1, 2018. This means prices will be pressured lower in 2019 and 2020, which will lend itself to contraction of cattle inventory.”

Negotiated cash fed cattle trade remained undeveloped through late Friday afternoon, following the previous week’s heavy volume at higher money.

“Packers have been losing dollars in the wholesale market and cattle feeders are marketing cattle that are doing well to break even in some cases,” Griffith explains. “The struggle between the two brought price determination to a standstill, and it is doubtful that prices will test the $100 price mark this summer. It appears both the packer and the cattle feeder think they hold leverage over the other in the current market, which is why trade is slow to occur. The key for both groups will be to keep cattle marketings current and keep beef moving.”

Except for 22¢ higher in near Oct, week to week on Friday, Live Cattle futures closed an average of 67¢ lower (5¢ lower to $1.20 lower at the back of the board).

Wholesale beef values should begin helping, with the bottom apparently near or just now coming into the rearview mirror.

Choice boxed beef cutout value was 97¢ higher week to week on Friday at $205.14/cwt. Select was $1.27 higher at $198.27. The Choice-Select spread narrowed 30¢ to $6.87.

Griffith explains Choice wholesale values declined nine consecutive weeks before last week’s turnaround.

“The nine-week price decline saw the Choice box price decline more than $27/cwt., but it has yet to really test the $200 mark,” Griffith says. “…Current prices are still slightly below prices from the same week one year ago, but they have shown considerable strength compared to last year. Looking at prices from 2017, the Choice cutout peaked at nearly $251 in the middle of June and collapsed to $191 in the middle of September, which is a loss of $60. Thus, the decline in 2018 has only been 45% of the summer decline in 2017. Historical price data would imply there is still potential for downside price risk in the wholesale beef market. However, if packers can hold current prices or push them higher next week, then the risk may be very small.”

Friday to Friday Change*

Weekly Auction Receipts

CME Feeder Index

*Thursday-to Thursday for CME Feeder Index

Cash Stocker and Feeder

North Central

South Central

Southeast

(AMS National Weekly Feeder & Stocker Cattle Summary)

Wholesale Beef Value

Futures

Equities

Markets this week had the feel of a turning point from focus on the summer’s heavy supply to what comes next: potentially snugger supplies heading into fall, given early placements and aggressive feedlot marketing so far this year.

For instance, although the action was sideways much of the week, Cattle futures gained to start the week and the surged at mid week, even as open interest in Live Cattle continues to decline.

Week to week on Friday, Feeder Cattle futures closed an average of $2.76 higher.

Week to week on Friday, Live Cattle futures closed an average of $2.52 higher ($1.17 to $4.37 higher in spot Aug).

“Feeder cattle futures have been showing strength and the cash market is in tow, though at a slower pace,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “The August Feeder Cattle contract has been trading in the low to mid $150s, which is $15-$18 higher than where it was trading two months ago. This same pattern exists for most of the fall and winter marketing months.”

Nationwide, cash prices for calves and feeders were $3/cwt. lower to $2 higher than the previous week, according to the Agricultural Marketing Service (AMS).

Improved estimates of cattle feeding returns through the rest of the year appear to be providing some current support.

“Despite firm feeder cattle prices in June and early July, the projected feedlot margin for feeding out a 750-lb. calf that is purchased today appears to have improved, and with lower corn price forecasts for the current and following marketing years, demand for calves for finishing may increase, supporting higher feeder calf prices,” say analysts with USDA’s Economic Research Service, in the latest monthly Livestock, Dairy and Poultry Outlook.

This year’s average feeder cattle price for steers weighing 750-850 lbs. (basis Oklahoma City) is estimated at $141-$144/cwt., compared to last year’s average of $145.08, according to ERS. The July LDPO pegs feeder prices in the third quarter at $140-$144. That’s $6 more on the lower end of the range than the previous month’s estimate and $4 more on the upper end. The fourth-quarter estimate is $136-$144, compared to the previous month’s projections of $134-$142. First-quarter feeder steer prices next year are projected at $133-$143.

Friday’s monthly Cattle on Feed report shouldn’t apply any pressure. It matched almost perfectly estimates ahead of the report with 1.30% more June placements, 0.85% more June marketings and a July 1 on-feed inventory that was 4.26% more than the previous year.

Fed Cattle Prices Appear Stronger

Other than some scattered trade in the beef Friday, negotiated cash fed cattle trade remained undeveloped through late afternoon, in terms of USDA reports.

“Market participants were expecting higher prices as packers replenish much- needed inventory, with cattle slaughter of 635,000 head for the week and 650,000 last week,” AMS analysts explained. 

Fed cattle slaughter in June was 0.6% more than last year and 6.9% more than the 5-year average, according to AMS. Total cow slaughter continues higher, too: 2.3% more in June than last year and 12.1% more than the 5-year average.

“Carcass weights for the week ending July 7 were reported at 867 lbs. for steers, which was 1 lb. higher than a year ago but 2 lbs. below the 5-year average,” AMS analysts say. “Carcass weights reported in line with historical numbers bode well for the industry as it indicates that front-end supplies have been marketed aggressively by feedyard managers.”

If seasonal trends hold sway, wholesale beef prices should soon be moving beyond a summer ebb, providing more support to fed cattle prices.

Choice boxed beef cutout value was 3¢ higher week to week on Friday at $204.17/cwt. Select was 63¢ higher at $197.00. The Choice-Select spread narrowed 60¢ to $7.17.

Commercial red meat production so far this year is 4% more than the same period a year ago at 26.3 billion lbs., according to the latest Livestock Slaughter report from USDA.

Friday to Friday Change*

Weekly Auction Receipts

CME Feeder Index

*Thursday-to Thursday for CME Feeder Index

Cash Stocker and Feeder

North Central

South Central

Southeast

(AMS National Weekly Feeder & Stocker Cattle Summary)

Wholesale Beef Value

Futures

Equities