As logic suggested, futures traders pushed Cattle futures sharply lower on Monday, in the wake of Friday’s monthly Cattle on Feed report. October placements were 10.2% more than the previous year, about 3% more than average estimates heading into the report.
However, Katelyn McCullock, economist with the American Farm Bureau Federation points out feedlot marketings remain higher, too.
In the latest issue of In the Cattle Markets (see below), McCullock explains, “Marketings have continued to be aggressive, so feedlot inventories have not become burdensome even though nine of the last 12 months have shown placements over 10% ahead of the prior year. Marketings have remained 3-10% above a year ago all year.” In October, marketing were 5.2% more than a year earlier.
Live Cattle futures closed an average $1.34 lower (77¢ to $1.75 lower).
Feeder Cattle futures closed an average of $2.16 lower ($1.07 to $2.57 lower).
Choice boxed beef cutout value was $1.06 lower Monday afternoon at $206.18/cwt. Select was 20¢ higher at $188.05.
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Major U.S. financial indices closed higher on Monday, with positive reads on the economy (see below) offset by uncertainty about tax reform.
The Conference Board Leading Economic Index® (LEI) for the U.S. increased 1.2% in October to 130.4 (2010 = 100), following a 0.1% increase in September, and a 0.4% increase in August.
“The US LEI increased sharply in October, as the impact of the hurricanes dissipated,” says Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board. “The growth of the LEI, coupled with widespread strengths among its components, suggests that solid growth in the US economy will continue through the holiday season and into the new year.”
The Dow Jones Industrial Average closed 72 points higher. The S&P 500 closed 3 points higher. The NASDAQ closed 7 points higher.
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“Prices for bigger feeder cattle dropped last week under the pressure of declining Feeder futures. However, heavy feeder prices have been a bit stronger relative to calves all fall and thus remain very good,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “Steer prices are realigning to a more typical rollback with heavy weights declining relative to calf prices. Heifers, however, continue to have a very flat price structure with heifers from 475 to 725 pounds all priced within $3/cwt. last week.”
Peel explains strong stocker demand continued to fuel calf prices higher and counter-seasonally through the middle of November. In Oklahoma, for instance, he points out steers calves are bringing $140-$200 per head more than last year; $100-$150 more for heifer calves.
“The strength in feeder cattle prices has been quite remarkable given increased supplies,” Peel says. “Auction volumes have been 25% higher than last year for the last four weeks.”
Katelyn McCullock, economist with the American Farm Bureau Federation notes in the latest issue of In the Cattle Markets that strong prices for 500-600 lbs. cattle also could reflect smaller, farmer-feeder lots taking advantage of low feed prices and marketing some of their grain through cattle.
“These higher than expected prices across the feeder cattle complex are likely a premonition of 2018 being another year of growth and expansion in the cattle sector,” McCullock says. “Southern plains 500-600 lbs. weights were $36/cwt. above 2016 last week, while 700-800 lb. weights were $40 higher.”