Cattle markets paddled mostly sideways amid still-snug front-end fed cattle supplies and murkiness about the ultimate impact of the much-anticipated surge in beef production.
“Price uncertainty in the feeder cattle market continues to stem from the finished cattle market and uncertainties concerning how many head of cattle will be harvested in the next couple of months,” explains Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “The uncertainty also stems from not knowing how many feeder cattle are still on pasture that will fill the pen space once the ‘glut’ of cattle in the feedlot is harvested.”
Dry conditions in the Southern Plains pushed more cattle to feedlots earlier than normal throughout the fall and winter. Unless conditions improve, marketing patterns will shift further.
“Drought still persists in the Southwest with the Exceptional Drought classification in seven states,” AMS analysts explain. “Ranchers in Moderate to Severe Drought areas are very concerned about limited livestock water.”
Earlier in the week, Derrell Peel, Extension livestock marketing specialist at Oklahoma State University noted in his weekly market comments, “…hay supplies are tight; if summer pastures do not develop in the next month, the situation will be much more critical. Significant removal of cattle could begin by June. The total D3 and D4 drought area in Kansas, Oklahoma and Texas is currently 53.5 million acres. This area has a carrying capacity of 2.0-2.5 million animal units. The drought area and the number of cattle impacted could expand rapidly in the coming weeks.”
Overall, steers and heifers sold steady to $2/cwt. lower, according to the Agricultural Marketing Service (AMS). Analysts there note that farmer-feeders were mostly and understandably absent in the market as weather finally allowed some opportunity to catch up on planting.
Feeder Cattle futures closed an average of $2.21 lower week to week on Friday.
There was no direction from cash fed cattle trade, which remained undeveloped through late Friday afternoon. AMS analysts suggest increased packer buying the last couple of weeks may have given that side of the trade room for patience.
“Analysts were encouraged with the previous week’s slaughter rate of 647,000 head and were anticipating a larger rate as large boxed-beef movement is helping to keep the supply chain moving to meet seasonal peak beef demand,” AMS analysts say. “However, industry had other plans and the estimated slaughter was reported at 645,000 head for the week.”
Other than $1.57 higher in spot Jun, Live Cattle futures closed an average of 80¢ lower week to week on Friday.
Griffith notes recent market uncertainty also stems from recent beef supply and demand estimates.
Noting the monthly World Agricultural Supply and Demand Estimates (WASDE) released on Thursday, Griffith explains, “The report noted a 5.4% increase in beef production in the second quarter of 2018 compared to last year, a far cry from last month’s report which had an expectation of a 10% increase. Similarly, projected third-quarter production growth was revised from 4.3% to 2.9%, while fourth-quarter growth declined from 5.1% to 4.9%.
Choice wholesale beef values continued to climb—led by the rib and loin—but at a slower rate than in recent weeks. Choice boxed beef cutout value was $2.67 higher week to week on Friday at $230.97/cwt. Select was 80¢ lower at $208.69.
“There is no doubt consumer demand for middle meats is beginning to hit its stride as spring and summer-like temperatures have people on the patio grilling Choice grade beef,” Griffith explains. “The early grilling season is one of the primary reasons the Choice Select spread begins to widen. The second reason for a widening Choice-Select spread is a seasonal increase in the number of cattle grading Select. Moving from March into April, the five-year average increase in cattle grading Select was 1.8%, while the increase from March to May is only 1.3%. Based off of weekly data, the number of cattle grading Select increased nearly 2.2% from March to April (this year), which will likely continue widening the spread.”
Friday to Friday Change*
Weekly Auction Receipts
|
Receipts May 11 |
Auction (head) (Change) |
Direct (head) (Change) |
Video/net (head) (Change) |
Total (head) (Change) |
|
216,400 (-33,900) |
54,700 (-10,300) |
6,000 (-55,000) |
216,400 (-159,900) |
CME Feeder Index
| CME Feeder Index | May 10 | Change |
| $137.21 | – 0.69 |
*Thursday-to Thursday for CME Feeder Index
Cash Stocker and Feeder
North Central
| Steers-Cash | May 11 | Change |
| 600-700 lbs. | $169.33 | + $1.36 |
| 700-800 lbs. | $148.09 | – $4.09 |
| 800-900 lbs. | $137.91 | + $0.02 |
South Central
| Steers-Cash | May 11 | Change |
| 500-600 lbs. | $168.86 | – $0.65 |
| 600-700 lbs. | $155.61 | – $1.07 |
| 700-800 lbs. | $140.91 | – $1.40 |
Southeast
| Steers-Cash | May 11 | Change |
| 400-500 lbs. | $169.98 | – $2.73 |
| 500-600 lbs. | $158.66 | + $0.01 |
| 600-700 lbs. | $144.20 | – $0.99 |
(AMS National Weekly Feeder & Stocker Cattle Summary)
Wholesale Beef Value
| Boxed Beef (p.m.) | May 11 ($/cwt) | Change |
| Choice | $230.97 | + $2.67 |
| Select | $208.69 | – $0.80 |
| Ch-Se Spread | $22.28 | + $3.47 |
Futures
| Feeder Cattle | May 11 | Change |
| May | $138.425 | – $1.975 |
| Aug | $143.900 | – $2.425 |
| Sep | $143.975 | – $2.800 |
| Oct | $144.475 | – $2.525 |
| Nov | $144.925 | – $2.425 |
| Jan ’19 | $141.500 | – $2.275 |
| Mar | $139.025 | – $2.300 |
| Apr | $138.700 | – $0.950 |
| Live Cattle | May 11 | Change |
| Jun | $107.625 | + $1.575 |
| Aug | $104.425 | – $0.650 |
| Oct | $107.475 | – $0.975 |
| Dec | $111.800 | – $0.850 |
| Feb ’19 | $114.600 | – $0.250 |
| Apr | $115.025 | – $0.875 |
| Jun | $108.775 | – $1.025 |
| Aug | $108.200 | – $1.025 |
| Oct | $109.250 | – $0.750 |
| Corn futures | May 11 | Change |
| May | $3.896 | – $0.090 |
| Jul | $3.964 | – $0.098 |
| Sep | $4.050 | – $0.086 |
| Dec | $4.144 | – $0.066 |
| Mar ’19 | $4.232 | – $0.052 |
| May | $4.280 | – $0.050 |
| Oil CME-WTI | May 11 | Change |
| Jun | $70.70 | + $0.98 |
| Jul | $70.68 | + $1.10 |
| Aug | $70.47 | + $1.31 |
| Sep | $70.09 | + $1.47 |
| Oct | $69.66 | + $1.61 |
| Nov | $69.24 | + $1.72 |
Equities
| Equity Indexes | May 11 | Change |
| Dow Industrial Average | 24831.17 | + 568.66 |
| NASDAQ | 7402.88 | + 193.26 |
| S&P 500 | 2727.72 | + 64.20 |
| Dollar (DXY) | 92.55 | – 0.02 |