Cash calf and feeder cattle prices ran mostly counter to futures market expectations last week.
Steers and heifers sold from $2/cwt. lower to $3 higher, according to the Agricultural Marketing Service (AMS), with drought continuing to force some cattle to town earlier than normal.
“Looking at the rest of 2018, feeder prices are expected to be a little lower than during the same period of 2017,” says Josh Maples, Extension livestock economist at Mississippi State University, in the latest issue of In the Cattle Markets. “We typically see seasonal feeder price declines heading into September and October, and the large supplies of calves this year provide some reasoning for that seasonal pattern to hold. Looking beyond 2018, slower herd growth numbers begin to paint a brighter price picture for 2019 and 2020. If the strong domestic economy maintains or grows and exports continue to gain steam, it is not difficult to project higher prices in the fall of 2019 compared to fall 2018.”
Week to week on Friday, Feeder Cattle futures closed an average of $3.95 lower ($1.75 to $5.12 lower).
“Given that feeder cattle futures are not pricing in any price decline over the next three months, and the seasonal tendency is for cattle prices to decline, producers have a decision to make on market pricing,”says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments.“Most producers will ride the market out until time of marketing, which will likely result in receiving a lower price if the seasonal tendency holds. Other producers may take advantage of today’s market price and either hedge fourth-quarter marketings or sell cattle using a forward contract with an October or November delivery. The risk that remains is the potential for prices to move higher, but the likelihood of prices moving higher is relatively small.”
Fed Cattle Prices Soften
“Fear about the direction of the negotiated cash fed cattle trade in recent weeks mounted in the minds of traders (Futures). Analysts earlier this year were anticipating the market to be much lower than what is now, so market participants are watching very closely for any type of news that can sway the market one way or the other,” explained AMS analysts.
Negotiated cash fed cattle trade was $1-$2 lower last week at $108/cwt. (western Corn Belt) to $109.50. Dressed trade was steady to $2 lower at $171-$174.
Live Cattle futures closed an average of $3.12 lower week to week on Friday ($1.70 at the back to $4.17 lower).
“Beef demand continues to be good, even with the ample supplies,” say AMS analysts. “The large cattle harvests this summer helped packers move through large fed cattle numbers.”
Year over year, total cattle slaughter was 6% higher in July at 2.77 million head, according to the monthly USDA Livestock Slaughter report released Thursday.
U.S. beef production was 6% more than the previous July at 2.23 billion lbs.
Choice boxed beef cutout value was $1.94 higher week to week on Friday at $213.32/cwt. Select was $2.90 higher at $203.82.
“Looking at this market from a historical perspective, there continues to be downside price risk in the beef cutout,” Griffith explains. “The beef market had been on trajectory of lower prices since the spring price peak, but the past three weeks have displayed price support. This price support is primarily due to Labor Day purchasing, but restocking of shelves will soon be completed. This means wholesale beef prices are likely moving lower during September and October. Packers will likely attempt to manipulate production to maintain strong prices unless the bottom falls out of finished cattle.”
Placements Higher Than Expected
USDA’s monthly Cattle on Feed report will likely be viewed as bearish by the trade with more placements than many expected and the most cattle on feed Aug. 1 since the data series began in 1996.
Placements in July, in feedlots with 1,000 head or more capacity were 1.74 million head, which was 7.86% (+127,000 head) than the previous year. That’s about 2% more than popular expectations. In terms of weight distribution, 40.19% went on feed weighing 699 lbs. or less; 44.89% weighing 700-899 lbs.; 14.93% weighing more than 900 lbs.
Marketings in July of 1.87 million head were 4.99% (+89,000 head) more than last year.
Cattle on feed Aug. 1 of 11.09 million head were 4.61% (+489,000 head) more than last year.
Friday to Friday Change*
Weekly Auction Receipts
|
Receipts Aug. 24 |
Auction (head) (Change) |
Direct (head) (Change) |
Video/net (head) (Change) |
Total (head) (Change) |
|
163,700 (+14,200) |
60,400 (+6,700) |
249,600 (+242,500) |
473,700 (+263,400) |
CME Feeder Index
| CME Feeder Index | Aug. 23 | Change |
| $150.85 | + $1.26 |
*Thursday-to Thursday for CME Feeder Index
Cash Stocker and Feeder
North Central
| Steers-Cash | Aug. 24 | Change |
| 600-700 lbs. | $168.52 | – $3.60 |
| 700-800 lbs. | $162.31 | + $2.73 |
| 800-900 lbs. | $154.90 | + $1.26 |
South Central
| Steers-Cash | Aug. 24 | Change |
| 500-600 lbs. | $163.24 | + $0.20 |
| 600-700 lbs. | $157.36 | – $0.56 |
| 700-800 lbs. | $150.78 | – $0.31 |
Southeast
| Steers-Cash | Aug. 24 | Change |
| 400-500 lbs. | $160.85 | – $0.61 |
| 500-600 lbs. | $151.26 | + $1.84 |
| 600-700 lbs. | $141.69 | – $0.71 |
(AMS National Weekly Feeder & Stocker Cattle Summary)
Wholesale Beef Value
| Boxed Beef (p.m.) | Aug. 24 ($/cwt) | Change |
| Choice | $213.32 | + $1.94 |
| Select | $203.82 | + $2.90 |
| Ch-Se Spread | $9.50 | – $0.96 |
Futures
| Feeder Cattle | Aug. 24 | Change |
| Aug | $149.200 | – $1.750 |
| Sep | $147.475 | – $4.350 |
| Oct | $146.725 | – $5.125 |
| Nov | $146.975 | – $4.675 |
| Jan ’19 | $145.450 | – $4.550 |
| Mar | $145.000 | – $4.150 |
| Apr | $146.050 | – $3.800 |
| May | $146.675 | – $3.225 |
| Live Cattle | Aug. 24 | Change |
| Aug | $106.250 | – $3.175 |
| Oct | $106.700 | – $4.175 |
| Dec | $111.200 | – $3.425 |
| Feb ’19 | $114.600 | – $3.425 |
| Apr | $115.750 | – $3.125 |
| Jun | $109.600 | – $3.250 |
| Aug | $108.625 | – $3.275 |
| Oct | $110.875 | – $2.575 |
| Dec | $112.800 | – $1.700 |
| Corn futures | Aug. 24 | Change |
| Sep | $3.484 | – $0.158 |
| Dec | $3.626 | – $0.160 |
| Mar ’19 | $3.750 | – $0.156 |
| May | $3.822 | – $0.154 |
| Jul | $3.876 | – $0.158 |
| Sep | $3.886 | – $0.130 |
| Oil CME-WTI | Aug. 24 | Change |
| Oct | $68.72 | + $3.51 |
| Nov | $68.36 | + $3.42 |
| Dec | $68.05 | + $3.39 |
| Jan ’19 | $67.78 | + $3.35 |
| Feb | $67.47 | + $3.32 |
| Mar | $67.18 | + $3.26 |
Equities
| Equity Indexes | Aug. 24 | Change |
| Dow Industrial Average | 25790.35 | + 121.03 |
| NASDAQ | 7945.98 | + 129.65 |
| S&P 500 | 2874.69 | + 24.56 |
| Dollar (DXY) | 95.16 | – 1.05 |