Cattle feeders and beef packers continued their weekly standoff through late Friday afternoon, based on USDA reports. However, the strong rally in Cattle futures had most betting for higher fed prices when all was said and done.
In fact, Live Cattle futures for spot Oct closed at the highest level since March, finally breaking out of the month’s long, sideways trend. That dragged the rest of the complex higher.
There didn’t seem to be a simple explanation for the surge in futures prices. Looking beyond the third quarter, supply fundamentals improve, of course. There was also chatter that some of the spark came from reports that more Foot and Mouth Disease had been confirmed in a Chinese cattle herd.
Except for 60¢ and 37¢ higher in the back two contracts, Live Cattle futures closed an average of $1.93 higher ($1.12 higher to $3.00 higher in spot Oct).
Feeder Cattle futures closed an average of $2.58 higher ($1.77 to $3.47 higher).
“This week’s price movement is working against the seasonal tendency of calf prices as are feeder cattle futures contracts,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “The calf and feeder cattle market have remained strong through the late summer months and the futures market is suggesting continued strength while seasonal price trends would suggest lower prices. Prices are strong now with most of the price risk being to the downside.”
Wholesale beef values were steady on Choice and lower on Select, with light to moderate demand and offerings, according to the Agricultural Marketing Service.
Choice boxed beef cutout value was 23¢ higher Friday afternoon at $204.27/cwt. Select was 77¢ lower at $196.47.
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Major U.S. financial indices closed narrowly mixed Friday, between strength from chipmakers and more angst about U.S.-China trade.
The Dow Jones Industrial Average closed 8 points higher. The S&P 500 closed fractionally higher. The NASDAQ was down 3 points.
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Wholesale beef values continue to ride seasonal trends lower, but Andrew P. Griffith, agricultural economist at the University of Tennessee, points out demand remains relatively strong in the face of increased beef production.
“Beef demand the past several years has been relatively strong based on the demand index computed by the Livestock Marketing Information Center (LMIC). Demand for beef in 2015 was at its highest level since 1991, based on LMIC calculations. Demand softened slightly in 2016 and 2017 based on the same calculations, but remained relatively strong compared to the previous decade,” Griffith explains, in his weekly market comments. “Demand in 2018 appears to be rounding into form similar to the previous two years with continued strong demand that has supported beef and cattle prices through the entire production chain. Several factors are contributing to strong beef demand, with the most likely being increased income levels, consumers preference for beef, and exports.”