Aggressive increases in grain futures pushed Feeder Cattle futures sharply lower on Tuesday, which squeezed Live Cattle. Although pressure moderated as the session wore on, Cattle futures closed sharply lower.
Live Cattle futures closed an average of $1.44 lower ($1.00-$1.87 lower).
Feeder Cattle futures closed an average of $2.31 lower ($1.50 to $2.82 lower).
Choice boxed beef cutout value was $1 lower Tuesday afternoon at $208.05/cwt. Select was 56¢ lower at $195.25.
Mixed quarterly earnings report, led major U.S. financial indices to a narrowly mixed close on Tuesday. Policy makers’ inability to make headway with new health care legislation added pressure.
The Dow Jones Industrial Average closed 54 points lower. The S&P 500 closed 1 point higher. The NASDAQ closed 29 point higher.
“Steer and heifer slaughter levels have been larger than expected so far this year, while carcass (dressed) weights have been much lower than anticipated,” say analysts with the Daily National Grain Market Summary, in the most recent Livestock Monitor, where they offer a mid-year review of the fed cattle market.
Specifically, U.S. commercial cattle slaughter in the first quarter was 7.3% more than last year, according to LMIC. Average dressed weights declined 1.1% year-over-year, holding beef production to an increase of 6.1% year over year. These trends continued in the second quarter with 3.4% more beef production on 5.8% more cattle slaughter, combined with carcass weights that were 2.2% lighter.
“Due to strong beef exports and declining imported beef tonnage, U.S. per capita beef disappearance in the first two quarters of this year, in percentage terms, grew much less than production,” LMIC analysts explain. “Year over year, disappearance per person was up 3.3% in the first quarter and the LMIC projects the second quarter will be up only 0.7%.”
LMIC expects U.S. commercial beef production to increase 2%-3% in the second half of 2017. They expect year-over-year quarterly production increases of 3%-5% next year.
“If strong beef exports continue to absorb most or all of the increase in per capita domestic supply, look for fed cattle prices to remain above a year ago for the balance of 2017,” LMIC analysts say. “In 2018, larger domestic supplies will likely pressure prices lower compared to this year.”