Cattle Current Daily—Sept. 20, 2020

Cattle Current Daily—Sept. 20, 2020

The five-area direct weighted average steer price last week was $105.05/cwt. on a live basis, which was $1.51 higher week to week. The average price in the beef was $1.64 higher at $164.89.

After apparent positioning ahead of Friday’s monthly Cattle on Feed report, traders seemed to take increased placements in stride (see below), as Cattle futures closed narrowly mixed to higher Monday, likely buoyed by cash cattle and wholesale beef prices.

Other than an average of 21¢ lower in the back three contracts, Live Cattle futures closed an average of 36¢ higher.

Other than an average of 19¢ lower in three contracts, Feeder Cattle futures closed an average of 43¢ higher, from 15¢ higher at the back to 95¢ higher toward the front.

Choice boxed beef cutout value was $1.62 lower Monday afternoon at $217.72/cwt. Select was 56¢ lower at $206.42.

Corn futures closed 1¢ to 2¢ higher through Sep ’21 and then mostly fractionally higher.

Soybean futures closed mostly 3¢ to 6¢ lower.

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Major U.S. financial indices extended gains from the previous session Monday, with support from tech stocks, as well as renewed optimism about Congress striking a deal for another round of economic stimulus.

The Dow Jones Industrial Average closed 410 points higher. The S&P 500 closed 53 points higher. The NASDAQ closed 203 points higher.

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Although the latest Cattle on Feed report appears to be bearish, with August placements higher than expected and the most cattle on feed September 1 since the data series began, Derrell Peel says perspective is required to understand the current feedlot situation.

“Despite large placements the past two months, total feedlots placements are down 4.2% for the year to date (down 4.3% in the last six months),” says Peel, Extension livestock marketing specialist at Oklahoma State University. “Two months of large placements does not mean that we suddenly have more cattle. Over the course of the year, the total number of feeder cattle in the pipeline has not changed from what was indicated early in the year. Cattle inventories peaked in 2019 and Jan. 1 estimated feeder supplies were down 0.4% year over year. As we work through 2020 and into 2021, feeder cattle supplies should continue to tighten modestly. The indications are that September placements will not follow the pattern of July and August.” As mentioned, placements in August were 9% higher year over year; they were 11% higher in July.

In his weekly market comments, Peel explains the 12-month moving average (12MA) of feedlot inventory, placements and marketings offers valid month-to-month comparison and a longer-term view of feedlot production, due to seasonality.

“The 12MA of feedlot inventories peaked in March and, despite increasing the past two months, is currently 0.6% below the peak,” Peel says. “The 12MA of marketings peaked cyclically in March 2020 as well. The 12MA of placements peaked recently in December 2019 and is currently 2.7% below the peak. The cyclical peak in 12MA placements was in Feb 2018. All of these highlight the fact that the industry has moved past the cyclical peak in cattle numbers and will see modestly tighter supplies going forward.”

Even so, he points out atypical fluctuations in recent placements imply altered short-term dynamics.

“The July-August bulge in placements suggests higher feedlot marketings in the first quarter of 2021. July placements were skewed to the lighter weight cattle,  while August placements included more heavyweight placements, which further implies that cattle could be somewhat bunched up,” Peel says. “However, winter weather typically spreads cattle out a bit, so the exact timing is uncertain. The ripples from the first half of 2020 will extend into early 2021.”

2020-09-28T20:10:11-05:00

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