Steers and heifers sold steady to $3/cwt. higher last week, according to the Agricultural Marketing Service (AMS). In the North Central region, steers weighing 600-800 lbs. sold $6-$7 higher.
As expected, the previous week’s monthly Cattle on Feed report proved to be market-neutral. As the week progressed, though, Cattle futures softened amid technical selling and continued pressure from weakening pork prices.
Week to week on Friday, Feeder Cattle futures closed an average of $1.38 lower (75¢ to $2.37 lower).
Although demand from feedlots remains strong, the impacts of continued drought are evident.
“The last four week’s of auction receipts totaled 487,000 head, around 83,000 more than a year ago and around 20,000 more than the drought-affected
years of 2012 and 2013,” say AMS analysts. “In three weeks time, the heavy cow-calf state of Missouri went from 0% drought in D3 status to 15.56%…Cattle producers are at a crossroads and many wonder if moisture will help as the grass appears to be in dormancy. Some herd dispersals have already happened and many other producers are in the process of picking around the edges by culling open and underperforming cows and those with less than desirable qualities.”
“July 1 inventory numbers, along with heifer and cow slaughter numbers for the first half of the year would certainly indicate a slowing of the expansionary phase of the beef cattle herd,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “However, these numbers do not necessarily mean the herd is contracting. Moving through the second half of 2018, the picture will become clearer as the fall run of calves come to market and as producers continue to cull cows. It is almost certain calf and feeder cattle prices will deteriorate moving into the fourth quarter of 2018, which will result in fewer heifers retained and more cows going to market. However, the January 1, 2019 cattle inventory report will most likely show an increase in total cattle inventory in the 0.3% to 0.8% range compared to January 1, 2018. This means prices will be pressured lower in 2019 and 2020, which will lend itself to contraction of cattle inventory.”
Negotiated cash fed cattle trade remained undeveloped through late Friday afternoon, following the previous week’s heavy volume at higher money.
“Packers have been losing dollars in the wholesale market and cattle feeders are marketing cattle that are doing well to break even in some cases,” Griffith explains. “The struggle between the two brought price determination to a standstill, and it is doubtful that prices will test the $100 price mark this summer. It appears both the packer and the cattle feeder think they hold leverage over the other in the current market, which is why trade is slow to occur. The key for both groups will be to keep cattle marketings current and keep beef moving.”
Except for 22¢ higher in near Oct, week to week on Friday, Live Cattle futures closed an average of 67¢ lower (5¢ lower to $1.20 lower at the back of the board).
Wholesale beef values should begin helping, with the bottom apparently near or just now coming into the rearview mirror.
Choice boxed beef cutout value was 97¢ higher week to week on Friday at $205.14/cwt. Select was $1.27 higher at $198.27. The Choice-Select spread narrowed 30¢ to $6.87.
Griffith explains Choice wholesale values declined nine consecutive weeks before last week’s turnaround.
“The nine-week price decline saw the Choice box price decline more than $27/cwt., but it has yet to really test the $200 mark,” Griffith says. “…Current prices are still slightly below prices from the same week one year ago, but they have shown considerable strength compared to last year. Looking at prices from 2017, the Choice cutout peaked at nearly $251 in the middle of June and collapsed to $191 in the middle of September, which is a loss of $60. Thus, the decline in 2018 has only been 45% of the summer decline in 2017. Historical price data would imply there is still potential for downside price risk in the wholesale beef market. However, if packers can hold current prices or push them higher next week, then the risk may be very small.”
Friday to Friday Change*
Weekly Auction Receipts
|
Receipts July 27 |
Auction (head) (Change) |
Direct (head) (Change) |
Video/net (head) (Change) |
Total (head) (Change) |
|
141,600 (-16,700) |
67,700 (-11,000) |
100,700 (+95,300) |
310,000 (+67,600) |
CME Feeder Index
| CME Feeder Index | July 26 | Change |
| $149.57 | + 1.55 |
*Thursday-to Thursday for CME Feeder Index
Cash Stocker and Feeder
North Central
| Steers-Cash | July 27 | Change |
| 600-700 lbs. | $174.10 | + $7.07 |
| 700-800 lbs. | $162.65 | + $6.58 |
| 800-900 lbs. | $154.20 | + $0.18 |
South Central
| Steers-Cash | July 27 | Change |
| 500-600 lbs. | $163.13 | + $2.12 |
| 600-700 lbs. | $158.48 | + $2.07 |
| 700-800 lbs. | $151.01 | + $0.63 |
Southeast
| Steers-Cash | July 27 | Change |
| 400-500 lbs. | $156.57 | + $1.03 |
| 500-600 lbs. | $151.37 | + $1.76 |
| 600-700 lbs. | $143.00 | + $1.18 |
(AMS National Weekly Feeder & Stocker Cattle Summary)
Wholesale Beef Value
| Boxed Beef (p.m.) | July 27 ($/cwt) | Change |
| Choice | $205.14 | + $0.97 |
| Select | $198.27 | + $1.27 |
| Ch-Se Spread | $6.87 | – $0.30 |
Futures
| Feeder Cattle | July 27 | Change |
| Aug | $152.300 | – $1.375 |
| Sep | $152.175 | – $2.375 |
| Oct | $152.750 | – $2.025 |
| Nov | $152.500 | – $1.750 |
| Jan ’19 | $150.800 | – $1.000 |
| Mar | $149.450 | – $0.875 |
| Apr | $149.900 | – $0.750 |
| May | $149.700 | – $0.850 |
| Live Cattle | July 27 | Change |
| Aug | $108.625 | – $0.300 |
| Oct | $110.475 | + $0.225 |
| Dec | $114.150 | – $0.050 |
| Feb ’19 | $117.375 | – $0.675 |
| Apr | $118.700 | – $0.475 |
| Jun | $112.075 | – $0.450 |
| Aug | $110.800 | – $1.125 |
| Oct | $112.025 | – $1.125 |
| Dec | $112.850 | – $1.200 |
| Corn futures | July 27 | Change |
| Sep | $3.620 | + $0.068 |
| Dec | $3.762 | + $0.072 |
| Mar ’19 | $3.866 | + $0.066 |
| May | $3.924 | + $0.062 |
| Jul | $3.976 | + $0.056 |
| Sep | $3.986 | + $0.052 |
| Oil CME-WTI | July 27 | Change |
| Sep | $68.69 | + $0.43 |
| Oct | $67.73 | + $1.09 |
| Nov | $67.36 | + $1.18 |
| Dec | $67.04 | + $1.17 |
| Jan | $66.78 | + $1.21 |
| Feb | $66.37 | + $1.20 |
Equities
| Equity Indexes | July 27 | Change |
| Dow Industrial Average | 25451.06 | + 392.94 |
| NASDAQ | 7737.42 | – 82.78 |
| S&P 500 | 2818.82 | + 16.99 |
| Dollar (DXY) | 94.68 | + 0.22 |