Some stability returned to Cattle futures on Tuesday…new beef demand indices indicate strengthening consumer beef demand…coming up on your Cattle Current Market Update with Wes Ishmael.
Although pressure continued for nearby Cattle futures on Tuesday, the rest of the board showed some stability, perhaps helped along by two consecutive days of strong gains in wholesale beef values.
After an average of 95¢ lower in the front two contracts, Live Cattle futures closed 20¢ higher (2¢ to 40¢ higher), except for 12¢ lower in Jun.
Other than an average of 90¢ lower in Oct and Nov, Feeder Cattle futures closed an average of 58¢ higher (10¢ to 90¢ higher).
Choice boxed beef cutout value was $2.82 higher Tuesday afternoon at $196.78/cwt. Select was $2.22 higher at $193.11. That’s a little over $5 higher for Choice in the last two days, and a little more than $4 higher for Select.
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Corn futures closed mostly fractionally lower.
Cash grain and soybean bids were mixed to lower on Tuesday, according to the Daily National Grain Market Summary.
“Soybeans were pressured by favorable weather in South America and lighter export demand than the previous week,” according to Market Summary analysts. “Forecasts show potential rainfall near the southwestern plains, however there doesn’t seem to be much concern that this will effect winter wheat plating significantly.”
Soybean bids were mostly 11¢-12¢ lower. Wheat bids were mostly 1¢-2¢ lower. Sorghum bids were 2¢ lower. Corn bids were mostly steady to 1¢ to 2¢ lower.
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Major U.S. financial indices closed narrowly mixed on Tuesday. Pressure included a decline in new home sales last month. Sales of new, single-family homes were 3.4% less in August than the prior month, according to data released yesterday by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.
Year to date, new homes sales are 7.5% higher than the same period last year, according to the National Association of Home Builders (NAHB).
“This month’s report is another reminder that builders need to manage rising supply-side costs to meet consumer demand for affordably priced homes,” says Granger MacDonald, NAHB chairman and a homebuilder and developer from Kerrville, Texas.
The Dow Jones Industrial Average closed 11 points lower. The S&P 500 closed fractionally higher. The NASDAQ closed 9 points higher.
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New indexes indicate growing consumer beef demand.
“The June 2017 index of 113 indicates retail beef prices in June were 13% higher than they would have been had demand not improved since January 2011,” says Glynn Tonsor, agricultural economist at Kansas State University. “Given this index was 101 for November of 2016, sizeable demand improvement over the seven months captured in this update is evident.”
Tonsor is referring to nine updated beef demand retail indexes recommended to the Cattlemen’s Beef Board. Tonsor and fellow KSU agricultural economist, Ted Schroeder, developed the indexes for industry consideration with funding from the beef checkoff.
You’ll note that observed gains in demand run counter to commonly used industry beef demand indexes that rely on aggregate data. For instance, according to the All-fresh Beef Demand Index (AFBI) maintained by Tonsor, beef demand declined in the first two quarters compared to a year earlier. The same for the Choice Beef Demand Index (CBI).
This paradox underscores the need for the new indexes.
In broad terms, Tonsor explains that aggregate data utilized in traditional beef demand indexes like the AFBI and CBI rely on beef disappearance data—retail and food service—from USDA and prices reported by the U.S. Bureau of Labor Statistics—the same folks who track prices and provide the Consumer Price Index. In other words, such indexes cannot account for actual prices paid, regional differences, etc.
Conversely, the updated indexes mentioned at the outset utilize grocery store scanner data—actual prices paid at retail for specific beef cuts and packages.