Weekly Market Highlights

Despite the soft start for most commodities and outside markets, in reaction to more U.S. tariffs levied on Chinese imports, calf and feeder cattle prices continued mostly higher nationwide. According to the Agricultural marketing Service (AMS), steers and heifers sold $1-$4/cwt. higher, with instances of $6-$7 higher. Receipts for the week of 604,300 head were the most since July of 2010. That includes an estimated 217,000 selling in Superior Livestock Video Auction’s Week in the Rockies sales.

“Active markets were evident this week in spite of hot and humid weather scorching the center of the country, with no end in sight for drought stricken areas,” say AMS analysts. “The water situation in some areas is at critical levels…A consequence of the extra dollars being spent this summer on water and feed is leading to cattle being sold at auction more than in a normal year when receipts get light in the summer.” 

Week to week on Friday, Feeder Cattle futures closed an average of $1.12 lower through the front half of the board and then narrowly mixed from 20¢ lower to 15¢ higher.

“The market has shown considerable strength from late spring through the early weeks of summer,” saysAndrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “The question now is if prices will continue to strengthen or if there is any reason for prices to be pressured. Feeder cattle prices certainly have enough juice in the tank to gain $3-$5/cwt. more from mid-July through the middle of August. Alternatively, there is enough political unrest across the nation and the world to disrupt such gains, which then could lead to a softer market. If the current political rhetoric persists, then very little change is expected, but an escalation of said rhetoric could be a market mover.”

By and large, negotiated cash fed cattle trade remained undeveloped through late Friday afternoon, at least in terms of trends from USDA. The Texas Cattle Feeders Association reported its members in the Southern Plains trading cattle at $111/cwt., which was $2 less than the previous week.

“It is difficult to say if the summer price low for fed cattle has already been established at just below $107/cwt., but the risk of going much lower than that is extremely low,” says Griffith. “The best odds are for finished cattle to trade fairly flat the next several weeks, though the term flat may actually look more like a saw blade. Some of the price pressure on live cattle should be alleviated moving into fall.”

Week to week on Friday, Live Cattle futures closed an average of $2.12 lower through the front three contracts and then an average of 82¢ lower.

The monthly World Agricultural Supply and Demand Estimates (WASDE) released during the week projects, third-quarter steer prices (5-area Direct) at $107-$111. For the fourth quarter, prices are forecast at $108-$116.

Wholesale beef values continued to coast seasonally lower.

Choice boxed beef cutout value was $3.89 lower week to week on Friday at $204.14/cwt. Select was $2.34 lower at $196.37. The Choice-Select spread narrowed $1.55 to $7.77.

“This time of year, domestic consumers are beginning to shy away from grilling middle meats, strictly due to increasing temperatures,” Griffith says. “At the same time, many consumers move towards hamburgers and hotdogs for grilling purposes.”

International demand for U.S. beef continues on a record-setting pace, according to data released by USDA and compiled by the U.S. Meat Export Federation (USMEF). May beef exports set a new monthly value record in at $722.1 million, which was 24% more than a year earlier and 4% more than the previous record. Volume for the month of 117,871 metric tons was the sixth most on record.

Beef export value averaged $313.39 per head of fed slaughter in May, up 18% from a year ago. The January-May average was $317.69 per head, also up 18%.

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

There were no price trends for calves and feeder cattle last week, with most auctions closed in observance of Independence Day. At the few auctions that did take place, trends were mainly higher, sharply higher in some cases.

“Moisture is much needed in the heart of the country as 49% of the U.S. is now classified as a D0 drought designation or worse,” noted analysts with the Agricultural Marketing Service (AMS). 

Feeder Cattle futures closed an average of $1.93 higher week to week on Friday (87¢ higher in spot Aug to $3.25 higher in the back contract).

Calf and feeder prices may get a boost from Friday’s sharply higher cash fed cattle trade.

Live trade was $5-$6 higher in the Southern Plains at mostly $112-$113/cwt. In Nebraska and the western Corn Belt, it was $3-$7 higher at $112-$114. Dressed trade was $5-$11 higher at $175-$180.

Not counting recently minted away-Dec, week to week on Friday, Live Cattle futures closed unchanged to 40¢ lower through the front three contracts and then an average of 85¢ higher (20¢ to $1.05 higher).

“Fed cattle movement in June was strong as cattle slaughter continues moving along at a pretty good clip averaging 655,000 head for the four full weeks in the month,” explained AMS analysts.

Wholesale beef values continued their seasonal decline. Choice boxed beef cutout value was $3.93 lower week to week on Friday at $208.03/cwt. Select was 14¢ higher at $198.71. The Choice-Select spread narrowed $4.07 to $9.32.

Total red meat production under federal inspection this week was estimated at 868.9 million lbs., according to AMS. That was 12.2% less than last week, but 3.9% more than a year ago. Year-to-date cumulative meat production was estimated 3.5% more than last year.

Heading into next week, plenty of eyes will be turned toward the potential impact of U.S. and Chinese counter-tariffs that went into effect Friday.

“Despite beef production up nearly 4% so far this year, beef demand has been quite strong and has limited beef and cattle price pressure in the first half of the year,” explained Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “Domestic beef demand has been buoyed by strong macroeconomic performance, including a declining unemployment rate. Foreign demand for U.S. beef has boosted total beef demand with a 13% year-to-date increase in beef exports through April. Strong year-to-date beef export increases have been led by South Korea, Mexico, Hong Kong, and Taiwan with number one Japan up slightly this year.”

Moreover, Tanner Ehmke, manager of CoBank’s Knowledge Exchange Division (KED) explains, “Trade concerns pose the single greatest risk to the projected global economic growth of 3-4%. The U.S. and China have been driving the growth, benefitting emerging markets around the globe. A trade war between the two is dangerous for economies around the world.”

The most recent Rural Economic Review from CoBank’s KED, notes 70% of U.S. agriculture exports go to destinations that are in current negotiation or trade disputes.

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

Shadowed by outside markets driven sharply lower by trade issues, cattle markets ended the week, month and quarter on a positive note Friday, with spot Cattle futures popping up to their highest levels since March.

Steers and heifers sold mostly $1-$4 lower last week, according to the Agricultural Marketing Service (AMS). The exception was steady to $4 higher at North Central auctions. Hot weather limited auction receipts in some areas.

“Much speculation occurred over the week after the Cattle on Feed report showed much higher placements than first imagined,” said the AMS reporter on hand for Superior Livestock’s video auction. “Receipts at auctions in the Southern Plains have been very large over the month of June and many drought stricken areas have received a good amount of moisture. However, the high placements number may indicate many calves have been marketed already due to the drought wreaking its havoc.” That reporter added that demand was especially good for fall-delivery cattle.

Except for 65¢ lower in the back contract, Feeder Cattle futures closed an average of $1.03 higher week to week on Friday (60¢ higher to $2.12 higher in spot Aug).

“Cattle futures bookended the week with opposite moves on the Board. Monday was a dramatically down day coming off a Cattle on Feed report that many viewed as bearish,” said AMS analysts. “However, after more scrutiny of the reported large placement numbers and the largest June on-feed number since the data series started in 1996, market watchers reevaluated the data. Placements of feeders in May of cattle under 700 lbs. were 10% larger than a year ago, so fed cattle supplies are not going to be affected as much as the first reaction implied.”

Noting the increased percentage of lighter-weight placements, Derell Peel, Extension livestock marketing specialist at Oklahoma State University noted in his weekly market comments, “This suggests that feedlot cattle supplies will tighten relatively in the third quarter. Fed cattle prices are expected to be lower year over year in the second half of the year, but the timing of fed cattle marketings will reduce the price pressure relative to the second quarter.”

Peel emphasizes early placements don’t change the number of cattle available, just the timing of when they hit the market.

Perhaps growing realization of that fact was at least partly responsible for the late-week nudge in negotiated cash fed cattle prices.Though still lower than the previous week, negotiated prices for fed cattle were $1-$2 higher on Friday than earlier in the week: $107-$108/cwt. in the Texas Panhandle and $107.50 in Nebraska. Until then, prices were mainly $105-$106/cwt. on a live basis and $170 in the beef.

Except for $1.27 lower in expiring June, Live Cattle futures closed an average of 59¢ higher week to week on Friday (17¢ to 82¢ higher).

Wholesale Values Continue Lower

“Boxed-beef cutout continues its normal seasonal decline, as July can be a sluggish month for overall beef demand and not necessarily a rally month for fed cattle prices with the extreme hot weather,” explained AMS analysts. 

Choice boxed beef cutout value was $5.20 lower week to week on Friday at $211.96/cwt. Select was $3.45 lower at $198.57.

“The Choice cutout peaked at just under $232/cwt. in the middle of May and has declined nearly $15 in a matter of six weeks,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “The apex in the beef cutout came just prior to the Memorial weekend holiday and was closely followed by Father’s Day, which continued supporting the market.”

Although Independence Day is usually supportive to beef demand, there’s some question about whether there will be much of a boost this year, considering that it occurs in the middle of the week, and that extreme heat is expected across wide swaths of the nation.

“Looking deeper into the summer months, the dog days of summer will hamper cutout prices, as will a strong beef supply,” Griffith says. “Following the restocking of meat counters next week, packers will turn their attention to Labor Day, which is more than two months down the road. Could Choice beef test the $200 mark? It is more likely than not.”

Heading into the new week, trade issues will continue as a market focus. On Friday, Canada announced surtaxes on $16.6 billion worth of U.S. imports—including $170 million worth of beef products—beginning Jul. 1. That’s in retaliation for new tariffs imposed by the U.S. on steel and aluminum imported from Canada.

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

Despite pressure on grains, hogs and outside markets from the brewing trade war with China, aggressive feedlot marketing helped improve demand for calves and feeder cattle. Steers and heifers sold steady to $4/cwt. higher, according to the Agricultural marketing Service (AMS). 

“Cattle feeders have been selling their fed cattle in a timely manner and have been aggressively filling their empty pens,” AMS analysts say. “Auction receipts are spotty this time of year…Direct trading receipts in the South Plains were heavy with future-delivery contracts as producers capitalized on the strong CME cattle complex. In the Northern Plains, some upcoming large video sales in the next several weeks will gauge buying interest, as buyers are content at this time to take a wait and see approach on what direction the market will move when dealing with summer and fall-delivery cattle.”

Feeder Cattle futures closed an average of $1.44 higher week to week on Friday (1.02 to $2.10 higher).

For the second week in a row, negotiated cash fed cattle trade volume appeared to be anemic through Friday afternoon, as packers continued to exploit sold-ahead cattle and the raw numbers available. The only prices reported by USDA at the end of the day Friday was $109-$110/cwt. on a live basis in the Texas Panhandle. That was $3 lower than the previous week.

Except for 17¢ lower in spot June, Live Cattle futures closed an average of 84¢ higher week to week on Friday (10¢ higher in the back contract to $2.37 higher).

“One bright spot for cattle feeders is lower feed costs as corn futures are 40¢ to 50¢/bu. lower than they were one month ago. Soybean meal is nearly $50/ton lower,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “There remains a legion of cattle on feed that will be coming to market in the next few months, which will keep fed cattle prices in check. It will be important for cattle feeders to keep marketings current.”

Feedlot Placements Higher

Markets will likely view Friday’s monthly Cattle on Feed report as a touch bearish. Rather than a third consecutive month of declining placements, they were a touch higher in May (+0.24%) at 2.124 million head.

Marketings for May were in line with expectations at 2.056 million head (+5.38%). 

That left the on-feed inventory (feedlot with 1,000 head or more capacity) June 1 at 11.553 million head, which was 4.12% more than the same time a year ago, the largest June 1 inventory since the data series began in 1996.

Wholesale Beef Values Decline Seasonally

Choice boxed beef cutout value was $4.43 lower week to week on Friday at $217.16/cwt. Select was 71¢ lower at $202.02.    

“In the midst of a strong beef export market, there is concern among many people in the agricultural industry as trade war talks continue to be stoked with the threats of tariffs,” Griffith says. “Tariff threats have contributed to a major decline in soybean prices, but the beef market has yet to fill any major effects.”

Increasing beef production is beginning to show up in freezer inventory, as well. According to the monthly Cold Storage report released Friday, beef in freezers May 31 was 1% less than the previous month, but 13% more than the same time last year.

Total red meat supplies in freezers were 2% less than the previous month, but 9% more than last year.

Drought Ending Herd Expansion

“Cowherd expansion appears to have come to a screeching halt as the three states (TX, OK, MO) with the most beef cows in the U.S. are experiencing an average of 45% of their land mass being D1 or worse drought designation,” say AMS analysts.“Year-to-date heifer slaughter ending May 31 is 7.9% above a year ago and 13.5% above the 3-year average. Beef cow slaughter is 12.6% more than last year and 21.7% more than the previous three-year average. With deteriorating pastures conditions in the central part of the country, many more cows will find their way to the marketplace in some capacity this summer. If conditions worsen, some producers may be looking into an early-weaning program to save as much stored water as possible.”

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

Rains in some drought-stressed areas helped boost calf and feeder demand, but futures volatility and growing uncertainty about international trade capped advances.

Steers sold $3/cwt. lower to $3 higher, while heifers sold steady to $3 higher, according to the Agricultural Marketing Service (AMS). 

Except for 70¢ higher in spot Aug and $1.47 lower in the back contract, Feeder Cattle futures closed an average of 55¢ lower week to week on Friday.

“As the market moves through the summer, the seasonal trend is for calf prices to soften, while heavier feeder cattle prices strengthen, says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “Calf prices are expected to soften through the summer and be pressured more moving into the fall marketing time period.”

Negotiated cash fed cattle trade remained undeveloped through late Friday afternoon. The previous week’s stronger prices, as well as the surge in Cattle futures Friday likely added to seller reluctance. On the other end of the trade, it could be that heavy out-front purchases in recent weeks enabled packers to be more patient.

Live Cattle futures closed an average of 96¢ lower week to week on Friday (32¢ lower in the back contract to $1.57 lower in spot Jun).

“May 2018 steer and heifer slaughter is poised to be the largest since 2011 when final numbers are released next week,” AMS analysts say. “According to preliminary numbers, approximately 2.304 million head of steers and heifers were harvested in May 2018, 5.1% above a year ago and 13% higher than the previous three-year average. This week’s cattle harvest, estimated at 654,000 is 4,000 head lower than last week and 15,000 higher than a year ago. Year-to-date cattle slaughter is 3.1% above a year ago. With packer margins per head into triple digits, there will have to be convergence of boxed beef prices and fed cattle prices to slow down chain speeds.”

 Projected beef production for this year was lowered by 90 million lbs. in the most recent World Agricultural Supply and Demand Estimates (WASDE), on lower carcass weights more than offsetting increased steer, heifer and cow slaughter in the second quarter. Estimated beef production for this year is 27.125 billion lbs. Estimated beef production next year is 27.175 billion lbs.

WASDE projects the average 5-area Direct fed steer price at $116-$119/cwt. for the second quarter, $106-$112 for the third quarter and $108-$116 for the fourth quarter.

Choice boxed beef cutout value was $4.62 lower week to week on Friday at $221.59/cwt. Select was 45¢ lower at $202.73.    

“Demand for boxed beef continues to be strong, even though prices have declined since the most recent highs in May,” AMS analysts say. 

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 moved higher last week, amid promising signs that aggressive marketing and consumer beef demand are muting the impact of increased beef production.

Steers and heifers sold $1-$5 higher, with instances of $6-$8 higher, according to the Agricultural Marketing Service (AMS).

Feeder Cattle futures closed an average of $2.36 higher week to week on Friday (95¢ to $3.70 higher). That’s an average of $4.11 higher over the last two weeks.

“Demand was reported moderate to good nationwide as more optimism was evident in the marketplace,” explained AMS analysts. “The CME Cattle Complex rebounded from the most recent downturn in mid-May. The June Live Cattle contract is trying to converge with the negotiated cash trade. Cash trading

is pulling the futures higher.”

By late Friday afternoon, cash fed cattle trade remained mostly undeveloped. Although too few transactions to trend, higher money was reported in Nebraska at $114/cwt. on a live basis, which was $2.50-$3.00 higher than the previous week. Early live sales in the western Corn Belt were at $114-$115 ($3-$4 higher); early dressed sales were $4-$6 higher at $182. Late in the day, the Texas Cattle Feeders Association reported its members trading live cattle at $115, which was $5 higher than the previous week.

Live Cattle futures closed an average of $1.93 higher week to week on Friday ($1.12 higher to $5.12 higher in spot Jun).

Optimism came this week with continued indicators that cattle feeders remain current in their marketing, even as fed cattle supplies increase. Part of that came with basis opportunities and a willingness to sell more cattle out front in recent weeks.

“Starting the middle of March, after 10 consecutive weeks of 20,000 head or more (marketed) for 15-30-day delivery on fed cattle, the past couple weeks have cooled to 19,000 and 9,900 head, respectively, for cattle bought out front,” explain AMS analysts. “In addition, packer margins have been rather large, with some being reported around $300-plus per head recently, due to boxed beef prices higher than expected, and consumer demand, both domestically and internationally.”

Beef export volume in April was 11% more than a year earlier and export value was 23% higher at $676.7 million, the fourth highest on record, according to data released by USDA and compiled by the U.S. Meat Export Federation (USMEF). Through the first four months of 2018, exports were up 10% in volume. Export value was 20% more than last year’s record pace at $2.59 billion. Beef export value averaged $328.46 per head of fed slaughter in April, up 16% from a year ago. Through April, per-head export value averaged $318.91, up 17%.

Choice boxed beef cutout value was $1.32 lower week to week on Friday at $226.21/cwt. Select was $1.62 lower at $203.18.

“Choice Boxed Beef in May did not post a price lower than $226 and averaged $229.70 for the month,” AMS analysts say. “Packers are selling as much product out front as they can at these elevated levels and are content to harvest as many as they can.” 

Beef production under federal inspection for the week ending June 9 was estimated at 523.1 million lbs., which was 3.6% more than a year earlier, according to AMS. That was on an estimated 3.5% year-over-year increase in cattle (all) slaughter of 658,000 head. Total red meat production under Federal inspection of 1,010 million lbs. was 4.2% more than a year earlier. Cumulative red meat production for the year to date was estimated 3.7% higher.

According to AMS, total weekly cattle slaughter—for the four weeks prior to Memorial Day—were running more than 53,000 head more per week than the five-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

Steers and heifers sold $2/cwt. lower to $2 higher last week, amid reduced receipts during the holiday-shortened week, according to the Agricultural Marketing Service (AMS).

Feeder Cattle futures closed an average of $1.75 higher week to week on Friday.

“Feeder cattle prices are in the process of making a spring low. Prices have been pressured by forced early movement of cattle due to weather, escalating feed costs and weakness in deferred Live Cattle futures,” according to Rabobank’s Beef Quarterly for the second quarter. “Prices are expected to make a seasonal low, and the early forced placements of calves has reduced available supplies of cattle outside feedyards, which should be price supportive for summer and the second half of the year.”

Negotiated cash fed cattle trade for the week ended up steady to either side of steady with extremely light trade.

There were some live sales at $111/cwt. in Nebraska, compared to $109.00-$110.50 the previous week. A few sold in the beef at $177, compared to $176-$180 the previous week. Live sales the previous week were at $110-$114. Scattered sales in the Southern Plains were generally steady at $110. In the western Corn Belt, dressed sales were mostly $2-$4 lower than the previous week at $178.

“In three weeks, live cattle prices declined $14 to $15/cwt., which goes without mentioning that prices for the week were $26 lower than the same week one year ago,” explains Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “Adding insult to injury, basis for fed cattle was near $20/cwt. and now sits near $5 with nearly all of the narrowing resulting from lower cash prices. The narrowing of the basis means that most hedging strategies did little to nothing to protect against the expected price decline. It may be several weeks before cattle feeders escape red closeouts.”

Live Cattle futures closed mostly narrowly mixed week to week on Friday (67¢ lower to 47¢ higher, except for $1.32 higher in near Aug).

Lower outside markets contributed to market uncertainty early in the week, associated with the potential global economic impact of political upheaval in Italy. Later in the week, pressure on outside markets came from announced retaliations from Canada, Mexico and the European Union to President Trump imposing tariffs on steel and aluminum imported from those countries.

“It is unlikely the summer and fall cattle markets will experience the extreme volatility that has been a mainstay the past few years,” Griffith says. “However, volatility is sure to exist as the market hears of trade wars and rumors of trade wars. The unsettled political climate will impact agricultural markets; the cattle and beef markets are not immune to the impacts as trade agreements are restructured.”

The short week and previous bought-ahead purchases also diluted packer urgency.

“Packers didn’t need to get aggressive as they procured enough the previous week to get through the holiday week,” AMS analysts explained. “Weekly volume of fed

cattle trading was considered very light with only 50,680 head trading on a negotiated cash basis nationwide; the eleventh lowest weekly trading volume since MPR started reporting this series in November 2002. This trading volume was also the lowest since September 2016 when 50,074 were swapped with packers.”

Futures and market psychology did receive a boost mid-week. There were 7,589 boxed beef loads reported for the week ending May 25, according to the weekly National Comprehensive Boxed Beef Cutout report. That was the most since the first week of September.

Choice boxed beef cutout value was 10¢ higher week to week on Friday at $227.53/cwt. Select was 18¢ higher at $204.80.   

“Now that Memorial weekend has passed, many retailers will focus on Father’s Day grilling items. Father’s Day continues to be a key holiday for middle meat movement, which generally helps the loin and rib primal to maintain value,” Griffith explains. “A good portion of the support leading up to Father’s Day is restocking the meat counter following Memorial weekend. Looking at individual wholesale cut prices, beef ribeye prices outperformed year-ago prices every week through the middle of April. However, the last five weeks have seen year-over-year declines, as the week’s price ($8-$9/lb.) was about $1.50 lower than the same week one year ago. Such a price difference may catch some by surprise, but ribeye prices were extremely strong in May and June of 2017. Loin strip prices, on a weekly basis, have been in line with year-ago prices, while considerable support has been provided by the chuck roll. Also notable, fresh 90% lean beef has traded in a $10 range in 2018 compared to a $30 range the same weeks 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 markets appeared to turn a near-term corner as futures markets rallied back to recover most of the previous week’s decline.  

Feeder Cattle futures closed an average of 5.56 higher week to week on Friday (3.81 higher in expiring May to $7.30 higher in Aug).

Incidentally,CME will delay listing the May 2019 Feeder Cattle futures and options contracts until June 10, 2018 for a trade date of June 11, 2018. 

Live Cattle futures closed an average of $3.32 higher week to week on Friday (2.25 to $4.12 higher).

That was despite the seasonal ebb in fed cattle prices, amped up by increased supplies.

Estimated total cattle slaughter was 647,000 head for the week; it was 660,000 head the previous week, according to the Agricultural Marketing Service (AMS). Based on the April livestock slaughter report issued during the week, beef production of 2.12 billion lbs. was 8% more than the previous year. Cattle slaughter of 2.64 million head was 7% more.

Through late Friday afternoon, negotiated cash fed cattle trade remained undeveloped.

“Finished cattle trade was thin at best,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “This could be because of significant delayed-delivery trade in previous weeks. Additionally, it could be due to the holiday shortened slaughter week next week.”

Calf and Feeder Prices Trend Steady to Higher

Firmer futures markets helped lift cash calf and feeder cattle prices.

Steers and heifers sold steady to $5/cwt. higher, with good demand nationwide, according to the AMS.

“Supply was described as moderate to heavy at some livestock auctions in the midsection of the country,” AMS analysts say. “However, most in Nebraska and the Dakotas either took the week off or will be moving to a summer schedule in the near future due to lighter receipts.”

Logic suggests the market will view Friday’s Cattle on Feed report as neutral to perhaps a touch bearish, with numbers mostly in line with expectations ahead of the report.

Placements in April of 1.695 million head were 8.28% less than the previous year (153,000 head fewer). That’s about 1% more than estimates ahead of the report.

Marketings in April of 1.803 million head were 5.87% more than last year (100,000 head more).

Total cattle on feed May 1—feedlots with 1,000 head or more capacity—of 11.558 million head were 5.09% more than the previous year (560,000 head more). That’s the second most cattle on feed May 1 since the series began in 1996, according to the National Agricultural Statistics Service.

“The number of cattle on feed remains elevated compared to last year, but the number of cattle placed in feedlots during April has slowed tremendously,” Griffith says. “Much of the reduction in placements is due to cattle being placed earlier than normal, which means cattle will likely be coming off feed earlier than normal and likely at lighter weights than would be expected.”

Wholesale Beef Values Soften

“Based on beef cutout prices, it would appear the wholesale beef market is beginning to experience some fatigue,” Griffith says.

Choice boxed beef cutout value was $3.78 lower week to week on Friday at $227.43/cwt. Select was $3.84 lower at $204.62.

“Year-to-date federally inspected beef production is 3.5% higher than one year ago. There have been five weeks this year with greater than a 6.0% increase in production compared to the same week one year ago,” Griffith explains. “The last three weeks of data make up three of those five weeks. It is expected that many of the weeks in the next couple of months will far surpass production from the previous year, as many of the cattle that entered the feedlot earlier than normal will be marketed to packers. Another influence for softer prices is that Memorial Day buying is complete. There may be some post-holiday purchasing, but it will likely be limited in nature.”

Pastures Struggle

“The arrival of grass in the Plains states was late due to lower than normal temperatures through April; many areas are still experiencing drought conditions,” AMS analysts say. “Anticipation of hay tonnage being lighter than normal in many areas leaves producers with a conundrum: sell fall calves or sell cows, as grazing conditions are not conducive to do both this year.” 

Overall pasture and range improved ever so slightly last week, according to the most recent USDA Crop Progress report (week ending May 20).

43% of pasture and range was in Good or Excellent condition, compared to 62% last year. 19% was rated as Poor or Very Poor compared to 10% 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

Calf and feeder cattle prices sagged lower this week—sharply lower in some cases—amid plunging cash fed cattle prices and a break lower in futures markets.

Overall, steers and heifers traded $2-$7/cwt. lower, according to the Agricultural Marketing Service (AMS).

Feeder Cattle futures closed an average of $5.47 lower week to week on Friday (3.67 to $6.27 lower).

“Feeders (futures) would’ve been even lower on the week if not for the correction on Thursday, when the deferred contracts were $1.50-$2.00 higher,” says AMS analysts.

“It is very apparent that lightweight calf prices are beginning to wane as summer inches closer. These lightweight calf prices will continue to grind lower as summer heat takes the place of spring rains and as demand softens,” says Andrew. P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “Alternatively, heavy feeders generally begin strengthening through the summer months as calf-fed cattle come off feed and supplies of long yearling cattle dwindle.”

Even so, with futures prices struggling currently, Griffith adds gaining price ground this summer could be a tough slog for yearlings.

USDA’s Economic Research Service forecasts feeder steer prices for this year at an average of $138-$144.

Fed Cattle Prices Succumb to Supply

“Steer and heifer slaughter ramped up in recent weeks to the tune of 523,789 head (week ending May 5), the largest fed cattle slaughter since August of 2011,” explained AMS analysts on Friday. “Estimated cattle slaughter of 660,000 head last week, if realized, will be the largest since June 2013 when the actual slaughter was reported at 659,702.” 

Negotiated cash fed cattle trade finished the week generally $7-$10 lower, depending on the region, at $112 to $117/cwt. Dressed prices were $4 to $10 lower than the previous week at $180-$185.

“Packers bought a significant number cattle for 15-30 day delivery in recent weeks: an average of over 32,000 head per week for the last 10 weeks,” AMS analysts say. “That 10-week average is the largest since AMS started tracking the data point in 2010.” 

Live Cattle futures closed an average of $4.12 lower week to week on Friday ($2.92 to $6.20 lower).

“Looking back one year, finished cattle prices declined $30 from May through late August and early September,” Griffith says. “It is doubtful cattle feeders are concerned with a similar price decline at this time, but it is well within reason for prices to reach year-ago levels in the $104 to $106 range.”

Wholesale Beef Values Remain Strong

“Choice cut-out looks to be topping, with current production and anticipation of upcoming slaughter rates weighing on prices in the coming weeks,” AMS analysts say. 

In the meantime, Griffith explains, “Wholesale beef prices are at their highest level since June of last year when Choice beef eclipsed the $250 mark. Though the march of wholesale beef to higher prices has slowed the past couple of weeks, it is reasonable to expect prices to continue escalating the next couple of weeks. Even if prices do not advance much more, they will likely stay elevated through May and much of June.”

Choice boxed beef cutout value was 24¢ higher week to week on Friday at $231.21/cwt. Select was 23¢ lower at $208.46.

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 paddled mostly sideways amid still-snug front-end fed cattle supplies and murkiness about the ultimate impact of the much-anticipated surge in beef production.

“Price uncertainty in the feeder cattle market continues to stem from the finished cattle market and uncertainties concerning how many head of cattle will be harvested in the next couple of months,” explains Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “The uncertainty also stems from not knowing how many feeder cattle are still on pasture that will fill the pen space once the ‘glut’ of cattle in the feedlot is harvested.”

Dry conditions in the Southern Plains pushed more cattle to feedlots earlier than normal throughout the fall and winter. Unless conditions improve, marketing patterns will shift further.

“Drought still persists in the Southwest with the Exceptional Drought classification in seven states,” AMS analysts explain. “Ranchers in Moderate to Severe Drought areas are very concerned about limited livestock water.”

Earlier in the week, Derrell Peel, Extension livestock marketing specialist at Oklahoma State University noted in his weekly market comments, “…hay supplies are tight; if summer pastures do not develop in the next month, the situation will be much more critical. Significant removal of cattle could begin by June. The total D3 and D4 drought area in Kansas, Oklahoma and Texas is currently 53.5 million acres. This area has a carrying capacity of 2.0-2.5 million animal units. The drought area and the number of cattle impacted could expand rapidly in the coming weeks.”

Overall, steers and heifers sold steady to $2/cwt. lower, according to the Agricultural Marketing Service (AMS). Analysts there note that farmer-feeders were mostly and understandably absent in the market as weather finally allowed some opportunity to catch up on planting.

Feeder Cattle futures closed an average of $2.21 lower week to week on Friday.

There was no direction from cash fed cattle trade, which remained undeveloped through late Friday afternoon. AMS analysts suggest increased packer buying the last couple of weeks may have given that side of the trade room for patience.

“Analysts were encouraged with the previous week’s slaughter rate of 647,000 head and were anticipating a larger rate as large boxed-beef movement is helping to keep the supply chain moving to meet seasonal peak beef demand,” AMS analysts say. “However, industry had other plans and the estimated slaughter was reported at 645,000 head for the week.”

Other than $1.57 higher in spot Jun, Live Cattle futures closed an average of 80¢ lower week to week on Friday.

Griffith notes recent market uncertainty also stems from recent beef supply and demand estimates.

Noting the monthly World Agricultural Supply and Demand Estimates (WASDE) released on Thursday, Griffith explains, “The report noted a 5.4% increase in beef production in the second quarter of 2018 compared to last year, a far cry from last month’s report which had an expectation of a 10% increase. Similarly, projected third-quarter production growth was revised from 4.3% to 2.9%, while fourth-quarter growth declined from 5.1% to 4.9%.

Choice wholesale beef values continued to climb—led by the rib and loin—but at a slower rate than in recent weeks. Choice boxed beef cutout value was $2.67 higher week to week on Friday at $230.97/cwt. Select was 80¢ lower at $208.69.

“There is no doubt consumer demand for middle meats is beginning to hit its stride as spring and summer-like temperatures have people on the patio grilling Choice grade beef,” Griffith explains. “The early grilling season is one of the primary reasons the Choice Select spread begins to widen. The second reason for a widening Choice-Select spread is a seasonal increase in the number of cattle grading Select. Moving from March into April, the five-year average increase in cattle grading Select was 1.8%, while the increase from March to May is only 1.3%. Based off of weekly data, the number of cattle grading Select increased nearly 2.2% from March to April (this year), which will likely continue widening the spread.”

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