Apparently, futures traders priced in a gloomier monthly Cattle on Feed report than what it wound up being Friday, or they’re beginning to price in something else. After early and expected pressure, Limit-up moves in nearby Feeder Cattle futures led Live Cattle higher, as both pits expanded on gains established at the end of last week.
Except for 60¢ higher in newly minted away Oct, Live Cattle futures closed an average of $2.52 higher ($2.20 to $3.00 higher).
Feeder Cattle futures closed an average of $3.92 higher ($3.17 to limit-up $4.50 higher).
Choice boxed beef cutout value was $1.18 lower Monday afternoon at $238.57/cwt. Select was 94¢ higher at $217.66.
Major U.S. financial indices closed narrowly mixed on Monday.
The Dow Jones Industrial Average closed 14 points higher. The S&P 500 closed fractionally higher. The NASDAQ closed 18 points lower.
“Beef and cattle markets have defied gravity by staying stronger, longer than most expected this spring. However, with seasonal pressure prevailing, beef and cattle markets have weakened and will likely struggle seasonally for the next six plus weeks,” says Derrell Peel, Extension livestock marketing specialist, in his weekly market comments. “Beef markets often weaken during the summer doldrums, that period of summer heat between Independence Day and Labor Day. The summer slump may be mitigated somewhat if July 4 beef sales are strong, prompting follow-up beef sales. Wholesale markets will likely struggle until August when Labor Day purchases will pick up to support beef features for Labor Day, the last big grilling holiday of the summer.”
Peel points out that lighter year-to-year carcass weights continue to dilute the impact of increasing cattle numbers. Beef production is up 3.8% so far this year while cattle slaughter is 5.7% more. Even though steer and heifer carcass weights reached a seasonal nadir in early May, he explains a typical seasonal increase in carcass weights heading into the fourth quarter would still leave carcass weights significantly lower year over year.
“Strong beef demand has helped make the first half of 2017 a pleasant surprise to all cattle industry sectors,” Peel says. “Strong demand in the third and fourth quarters may help significantly, but supply pressures are likely to weigh a bit more heavily on cattle and beef markets in the second half of the year, holding markets generally to a sideways pattern for the remainder of the year.”