Cattle futures closed marginally mixed but mostly higher Monday, supported by last week’s friendly Cattle on Feed report and a recent bump in wholesale beef values.
Live Cattle futures closed an average of 21¢ lower through the front four contracts and then unchanged to 5¢ higher.
Other than 22¢ lower in spot Jan, Feeder Cattle futures closed an average of 24¢ higher.
Corn futures closed mostly 1¢ to 2¢ lower.
Wholesale beef values were firm to higher on fairly good demand and light offerings, according to the Agricultural Marketing Service.
Choice boxed beef cutout value was 60¢ higher Monday afternoon at $214.45/cwt. Select was $1.28 higher at $199.79.
Major U.S. financial indices rallied higher on Monday, supported by a rebound in key tech stocks like Apple and Amazon. Retail stocks and higher oil prices also provided support.
West Texas Intermediate futures (CME) closed $1.05 to $1.21 higher through the front 12 contracts.
The Dow Jones Industrial Average closed 354 points higher. The S&P 500 closed 40 points higher. The NASDAQ was up 142 points.
“The beef cow herd likely increased less than 1% year over year in 2018 to a projected Jan. 1, 2019 level of about 31.9 million head,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “This may be the cyclical peak in herd inventory or very close to it. From the 2014 low of 29.1 million head, this cyclical expansion has increased the beef cow herd by 2.8 million head or 9.6% over five years. The last full cyclical herd expansion occurred in 1990-1996 resulting in an 8.8% herd expansion in six years.”
Moreover, Peel explains beef cowherd dynamics are finally returning to normal, following the unprecedented market forces that drove volatility during the past decade. That included the drought-induced herd liquidation of 2011-2013 that took more cows out of production than would otherwise be expected, followed by the recent rapid expansion.
For instance, Peel says heifer retention projected at 19.3% this year and 18-18.5% are nearing the previous 30-year average of 17.6%. It was as low as 16.6% in 2011 and as high as 21% in 2016.
Similarly, Peel points to the steer-to-heifer ratio of the slaughter mix, which averaged 1.71 during the past 30 years. He explains the ratio increased to 2.14 in 2016, the highest since the early 1970s. It was 1.95 last year and is projected at 1.83 this year.
Finally, at its current rate, Peel says cow slaughter this year will be around 9.7%, close to the long-term average.