When all was said and done in last week’s light volume of negotiated fed cattle trade, live sales were $2-$3 lower in the Southern Plains at $112-$113/cwt., $4-$5 less in Nebraska at $110 and $3-$5 less in the western Corn Belt at $110-$112. Dressed sales were $3-$6 lower at $176-$181.
Week to week on Monday, the 5-area weekly weighted average was $3.18 lower on a live basis at $111.28 and $5.20 lower in the beef at $177.55.
Cattle futures closed mixed on Monday, amid light trade and declining open interest in Live Cattle. Support in the front months included the surge to end last week. Pressure included lower fed cattle prices and wonderments about the impact of the U.S.-China tariff battle.
Live Cattle futures closed mixed from 45¢ lower to 55¢ higher.
Feeder Cattle futures closed an average of 77¢ higher across the front half of the board (47¢ higher to $1.00 higher in spot Aug) and then an average of 26¢ lower.
Boxed beef cutout values were lower for Choice and higher for Select with light to moderate demand and offerings, according to the Agricultural Marketing Service.
Choice boxed beef cutout value was 88¢ lower in the afternoon at $220.71/cwt. Select was $1.47 higher at $204.20.
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Major U.S. financial indices closed mainly lower Monday, with pressure continuing from the brewing trade war between the U.S. and China.
The Dow Jones Industrial Average closed 103 points lower. The S&P 500 closed 5 points lower. The NASDAQ closed fractionally higher.
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“In 2017, unexpectedly strong domestic and international beef demand provided extra support for cattle and beef prices in the face of growing beef supplies. To some extent, that has continued in 2018, though not as pronounced as a year ago,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “After holding quite firm through May, boxed beef prices were under pressure into mid-June with Choice boxed beef price dropping about $5/cwt. last week…Fed cattle prices have declined seasonally but are holding generally better than expected. Remember in early April when June Live Cattle futures dropped under $100/cwt. and have since traded as high as $110/cwt. and now are trading about $108.”
A silver lining to the seasonal decline in fed cattle prices, is that wider packer margins provide ongoing incentive to keep harvesting cattle aggressively.
Year-to date cattle slaughter is 3.8% more than last year, driven by increases in female slaughter, according to Peel. He explains, “Heifer slaughter is up 8.0% year over year and cow slaughter is up 8.1%. Beef cow slaughter is up 12.2% and dairy cow slaughter is 4.5% more than last year. Steer slaughter is up a scant 0.1% year over year.”
Beef production is 3.6% more so far this year, but lighter year-to-year carcass weights, in part due to the aggressive marketing, mean slightly less production that originally anticipated.
“There are a variety of supply and demand factors to watch in the second half of the year,” Peel says. “Beef production will be determined by slaughter rates, but even more by carcass weights moving forward. Drought conditions do not appear to be causing significant herd liquidation at this time, but the threat is still there. Further, slowing of heifer retention and herd growth (in part due to drought conditions) continues to add to female slaughter and could continue through the end of the year.”
Ultimately, the outcome of current trade trials will also have plenty to say about beef’s fortunes.
“The uncertainty, volatility and reality of a trade war will likely have greater negative impacts on beef and other markets in the second half of the year,” Peel says. “Beef trade in early 2018 has been very supportive to cattle and beef markets, but this could change going forward. Beef markets may be directly impacted in terms of exports, but significant, if not bigger impacts, may be the indirect result, for example, of reduced pork exports and increased domestic supplies of competing meats.”