Cash fed cattle trade remained mostly stuck in place through Wednesday afternoon. There was no country trade to speak of. Only one lot—128 heifers—traded in the weekly Fed Cattle Exchange Auction, out of 1,063 head offered. The weighted average price was $104.75/cwt. (1-9 day delivery), which was about even with last week’s country trade.
Despite early pressure and stagnant wholesale beef values, a sense of firming market conditions helped boost Cattle futures on Wednesday.
Live Cattle futures closed an average of 84¢ higher (40¢ to $1.30 higher).
Feeder Cattle futures closed an average of 51¢ higher.
Choice boxed beef cutout value was 39¢ lower Wednesday afternoon at $190.40/cwt. Select was $2.17 lower at $188.69.
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Major U.S. financial indices closed higher on Wednesday—all three cited here closed at record-high levels for the second consecutive day. Stronger oil prices and suggestions that Congress will get to tax reform this year provided support.
The Dow Jones Industrial Average closed 39 points higher. The S&P 500 closed 1 point higher. The NASDAQ closed 3 points higher.
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Brian Williams, livestock economist at Mississippi State University points out that projected beef production for this year was reduced 140 million lbs. in the latest monthly World Agricultural Supply and Demand Estimates; reduced 85 million lbs. for next year.
“One driver is lower than expected fed cattle marketing as reflected in the last Cattle on Feed Report, although we know those cattle are still out there and will end up coming to market at some point in the future,” Williams explains, in the latest In the Cattle Markets. “Probably the biggest driver is reduced slaughter weights. Total slaughter numbers have been trending at or above last year’s numbers most of the year, however slaughter weights have been trending well below year-ago levels. When those two are put together, the lower slaughter weights outweigh the increase in the number of head, leading to lower production numbers.”
Williams notes that positive cattle feeding returns encouraged feeding and marketing more cattle quicker, which equates to lighter carcass weights.
“Now that profits (feedlot) are turning negative, that incentive is gone and feedlots will likely shift toward trying to squeeze as much gain out of each animal as possible,” Williams says. “If that happens, look for the uptick in slaughter weights to shift total beef production higher in the coming months.”