When all was said and done after late trade last week, live sales were $3-$5 lower at $108-$110/cwt. in the South and $108-$109 in the North. Dressed trade was $4-$9 less at $172-$173.
Lower cash fed cattle trade, more feedlot placements in May than expected and sharply lower outside markets all pressured Cattle futures significantly lower to start the week.
Live Cattle futures closed an average of $2.61 lower through the front four contracts, and then an average of $1.74 lower.
Feeder Cattle futures closed an average of $2.70 lower ($1.57 lower to $3.42 lower in spot Aug).
Boxed beef cutout values were steady to firm on moderate demand and offerings through Monday afternoon, according to the Agricultural Marketing Service.
Choice boxed beef cutout value was 53¢ higher at $217.69/cwt. Select was 13¢ lower at $201.89.
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Major U.S. financial indices closed sharply lower Monday, shoved down by increasing trade tensions with China. Apparently, the driver was a rumor that President Trump would restrict U.S. investment in Chinese technology companies—no official word, although the White House released an op-ed by Agriculture Secretary, Sonny Perdue, indicating a strategy to protect American agricultural producers from downturns in commodity markets, tied to trade disruptions (see below).
The Dow Jones Industrial Average closed 328 points lower. The S&P 500 closed 37 points lower. The NASDAQ closed 160 points lower.
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Although May feedlot placements were slightly more year over year, and more than expected, Derell Peel, Extension livestock marketing specialist at Oklahoma State University, points out in his weekly market comments, “May feedlot placements included a 9.8% year-over-year increase in placements under 700 lbs., likely augmented by poor summer grazing conditions in some areas that likely deflected some cattle into feedlots. At the same time, placements of cattle over 700 lbs. were down 4.6% from last year. 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.
“Longer term, cattle numbers are still increasing and a general trend of growing feedlot inventories is expected for several more months at least,” Peel says. “Placement patterns the last few months have impacted the timing of feedlot production and the fed cattle market has been struggling a bit under the weight of bunched fed cattle supplies in the second quarter.”
As it is, Peel explains feedlot inventories increased 26 of the last 28 months.
“Using a 12-month moving average of feedlot inventories (which removes seasonality and allows month to month comparisons of feedlot totals) shows that the current monthly average feedlot inventory is the highest since November, 2012.”
As for marketings, Peel points out average monthly feedlot marketings for the last 12 months are at the highest level since November of 2011.
“Increased beef production in the second half of the year will depend on the how much cattle slaughter increases and on how much carcass weights rebound from last year’s decline,” Peel says. “At the current time, annual beef production is projected to be up 4.0-4.5% year over year.”