As suspected, Cattle futures dove on Monday, squeezed hard by reaction to Friday’s Cattle on Feed and Cattle inventory reports.
Live Cattle futures closed an average of $2.21 lower ($1.35 to $3.00 lower).
Feeder Cattle futures closed an average of $4.09 lower ($3.37 to $4.50 lower).
Choice boxed beef cutout value was 55¢ higher Monday afternoon at $207.46/cwt. Select was $3.09 higher at $197.89.
Major U.S. financial indices closed mostly lower on Monday with pressures including lower home sales in June (see below). The exception was tech stocks with traders betting strong earnings will be revealed later this weak from folks like Amazon and Facebook.
Existing-home sales slipped in 1.8% in June (compared to May) as low supply kept homes selling at a near record pace but ultimately ended up muting overall activity, according to the National Association of Realtors® (NAR).
“Closings were down in most of the country last month because interested buyers are being tripped up by supply that remains stuck at a meager level and price growth that’s straining their budget,” says Lawrence Yun, NAR chief economist. “The demand for buying a home is as strong as it has been since before the Great Recession. Listings in the affordable price range continue to be scooped up rapidly, but the severe housing shortages inflicting many markets are keeping a large segment of would-be buyers on the sidelines.”
The Dow Jones Industrial Average closed 66 points lower. The S&P 500 closed 2 points lower. The NASDAQ closed 23 points higher.
“Feeder cattle demand has been extremely strong based on very good feedlot profitability recently. Placements were up across all regions suggesting that placements were driven by industry-wide factors rather than regional factors,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, referring to Friday’s Cattle on Feed report. “However, the Northern Plains drought likely contributed a bit to larger placements, especially the strong placements in South Dakota, up 67% year over year. In total, I don’t believe that drought was the major reason for the large June placements.”
In his weekly market comments, Peel points out lighter weights of more cattle placed the last two months suggests feedlots are dipping deeper into supplies. In other words, feedlots remain current in marketing.
“The lightweight placements in May and June will not be on top of earlier heavy placements,” Peel explains. “Moreover, placements have clearly pulled cattle ahead, meaning that more cattle placed now imply fewer relative placements later. However, overall feeder supplies are larger and will continue to grow into 2018.”