Cattle futures took another step lower on Tuesday after a glimmer of promise in early trade. Demand uncertainty seems to be the main driver, while funds largely retain their long positions.
Other than 5¢ higher in spot Dec, Live Cattle futures closed an average of 55¢ lower (15¢ to 87¢ lower).
Feeder Cattle futures closed an average of $1.50 lower (55¢ to $2.12 lower) except for marginally higher in the back two contracts.
Choice boxed beef cutout value was 89¢ higher on Tuesday afternoon at $209.08/cwt. Select was $1.09 higher at $186.63.
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Major U.S. financial indices closed lower on Tuesday, with part of the pressure presumably tied to fretting over whether or not Congress can get its act together to avoid a government shutdown with current funding set to expire on Friday.
The Dow Jones Industrial Average closed 109 points lower. The S&P 500 closed 9 points lower. The NASDAQ closed 13 points lower.
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“For the next two years, the major market outlook issue or headwind for all the U.S. livestock and poultry markets is the sheer tonnage of product that will be produced,” say analysts with the Livestock Marketing Information Center (LMIC). “In both 2018 and 2019, forecasts call for record-large total U.S. red meat and poultry output. It is important to note that even though many consumers do some substituting between categories, it is not one-for-one. That is, for example, in the overall retail marketplace one pound of beef does not substitute for that same amount of chicken.”
U.S. beef production this year is projected to be the largest since 2011, according to LMIC. Pork and poultry production are estimated to the most ever.
“On a retail weight basis, 2017’s total red meat and poultry disappearance is projected by the LMIC at 215.5 lbs. per person, up 1.6 lbs. from a year ago,” say LMIC analysts in the most recent Livestock Monitor. Forecasts for 2018 and 2019 are for 218.5 and 220.9 lbs. per capita, respectively. If realized, both those years would be the largest since 2007’s. Those levels are not unprecedented, but the 2019 forecast is only 1 lb. below the record high set in 2004.”