Fed cattle sell up to $3 higher

Bidding continues strong for weaned calves and feeder cattle

Stronger fed cattle prices and futures price opportunities continued to help buoy calf and feeder cattle demand this week.
Steers and heifers sold mostly steady to $5 per cwt higher, according to the Agricultural Marketing Service (AMS).
“Demand for weaned calves and yearlings this time of year is always good to very good, and this year is no exception,” AMS analysts say. “Feedyards are looking to take the least health risk on cattle this time of year as temperature swings in one week can range more than 50 degrees and wreak havoc on compromised immune systems. The steep un-weaned calf discounts haven't reared their ugly head yet; when November gets here, the disparity in price will be noticeable.”
“Demand for calves weighing less than 435 pounds was very good as many buyers were looking for offerings to send to wheat pastures,” said the AMS reporter on hand for Wednesday’s weekly auction at Miles City Livestock Commission in Montana. “CME positions finished higher again today adding more support to all calves. Demand for calves weighing over 600 pounds was good to very good as buyers hope to finish these calves alongside yearlings and take advantage of the April board.”
Speaking of wheat pasture, planting continues to lag behind hope in key states. According to the most recent USDA Crop Progress report, 48% of winter wheat is planted, which is 9% less than last year and 10% less than average. Only 27% is planted in Kansas compared to 59% for average. Likewise, 42% is planted in Oklahoma, which is 20% behind the average pace. Planting in Texas, however, is 2% ahead of the average at 54%.
Other than marginal gains at either end of the board, Feeder Cattle futures closed an average of $1.17 lower week to week on Friday (65¢ to $1.50 lower).
In his weekly market comments, Andrew P. Griffith, agricultural economist at the University of Tennessee notes that calf and feeder cattle prices are so far stronger than many expected. Among the reasons he cites: exemplary international demand for U.S. beef, robust domestic demand and low feed costs (more later).
Fed cattle trade higher
Cattle feeders were rewarded for their patience again this week with negotiated cash fed cattle trade $1-$3 higher—mostly on Thursday—at mainly $111-$111.50 per cwt on a live basis and $175 in the beef.
“It is still difficult to determine where fed cattle prices will peak in the fourth quarter, but optimism puts them near $117 while pessimism keeps them in the $113 to $115 range,” Griffith says. “A failure to push prices higher could put a damper on cattle feeders’ demand for feeder cattle, but demand remains strong at this time.”
In the latest monthly World Agricultural Supply and Demand Estimates (WASDE) issued this week, the fourth quarter steer price is estimated at $108-$112 per cwt. Average for this year is projected at $119.55. Prices for the first quarter of next year are forecast at $111-$119; $109-$119 in the second quarter.
Except for $1.80 higher in spot October, Live Cattle futures closed an average of 24¢ higher week to week on Friday; 12¢ lower in away October.
Choice boxed beef cutout value was $1 higher week to week on Friday at $198.22 per cwt. Select was $2.82 higher at $190.05.
Although wholesale beef values remain stagnant, Griffith explains, “It is unlikely packers will raise too much of a fuss about current price levels given the strong positive margins at the packer level. Given strong cattle supplies, the packer should maintain some leverage over cattle feeders as the market moves forward.”
Corn crop projected to be second largest
Despite all the fretting early on, if USDA is correct, corn production this year will end up being the second most in history.
Corn production is forecast at 14.3 billion bushels, up 1% from the September projection, according to the most recent WASDE. Based on conditions as of Oct. 1, yields are expected to average 171.8 bushels per acre, up 1.9 bushels from the September forecast. Although estimated corn production is 6% less than last year, if realized, it would be the second highest yield and crop production on record.
WASDE pegs the projected range for the season-average corn price received by producers at $2.80 to $3.60 per bushel.
“December corn futures prices have been hanging around the $3.50 per bushel mark for two months now,” Griffith explains. “Given expected corn production this year, there is little concern of corn prices rallying to the upside. Additionally, the cash corn price in many cattle feeding states is closer to $3 given the highly negative basis. On this note, low corn prices in cattle feeding country will result in a strong demand for feeder cattle by farmer-feeders in the Midwest.”
In the meantime, low river levels are hampering grain market flow.
“Corn basis continues to be the talk in the Northern Plains and along the Ohio and Mississippi River basins,” AMS analysts say. “Barge traffic has slowed with the lower river levels and grain companies are trying to slow the influx of grain into their facilities by increasing basis levels.”

U.S. beef imports remain lower

Sometimes overlooked in the discussion of U.S. beef and international trade is the beef imported to the U.S. from other countries, which represents another opportunity to increase the value of domestic beef.
One key opportunity, in over-simple terms, revolves around the fact that the U.S. produces too little lean trim to support the nation’s expansive ground beef market without having to grind higher value domestic beef. Importing lower-cost lean trim means more of the domestic supply can go toward higher-value markets.
Although beef imports to the U.S. increased year over year in the last few months, Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, points out they were running 2.8% less than last year through August.
In his market comments this week, Peel explains that the five largest sources of imported beef—New Zealand, Australia, Mexico, Canada and Brazil—accounted for 90.5% of the imports. Throw in Uruguay and Nicaragua and it’s 98.8%.
“Imports have regionally shifted this year,” says Katelyn McCullock, an economist with the American Farm Bureau Federation, in the latest issue of In the Cattle Markets. “While Australia and New Zealand still supply the lion’s share of imported beef, about 1 billion to 1.5 billion pounds annually [carcass weight], Central and South America have been increasing shipments this year.” She notes that through August, imports from Mexico were running 31% more than last year. Imports from Nicaragua were up 26%.
“Imports from these two countries surpassed annual imports from Brazil and Uruguay in 2010 and have not looked back, posting double-digit increases in seven out of the last 10 years,” McCullock says. “This trend will be an interesting one to watch as markets shift and new trade agreements unfold. Canada still plays a major role in imported beef to the U.S., ranked second in 2016 on a tonnage basis, larger than Mexico and Nicaragua combined.”
Live cattle imports edge higher
On the other side of the packinghouse door, live cattle imports are up slightly from last year, Peel says.
Live cattle imports to the U.S. are primarily feeder cattle and fed cattle from Canada and feeder cattle from Mexico. Year to date through August, Peel explains total live cattle imports from the two countries was 3.9% more than last year. Imports from Canada were 16.5% less. Imports from Mexico were 21.7% more.
“Canadian feeder cattle imports were down 34% through August and slaughter cattle imports were up 9.7%,” Peel says. “Slaughter cattle imports from Canada for the year to date consist of 68.8% slaughter steers and heifers and 31.2% slaughter cows and bulls.”
Looking south, feeder steers imported from Mexico were up 13.6% year over year through August, Peel says.
“Year to date, feeder heifer imports from Mexico have more than doubled from last year with heifers making up 15.3% of feeder cattle imports from Mexico,” Peel explains. “Increased heifer imports from Mexico may be a reflection of stronger domestic Mexican demand for steers to support growing feedlot production in Mexico, leaving heifers to make up a bigger share of cattle exports. It may also signal slowing heifer retention and herd growth in Mexico as heifer exports compete with domestic breeding demand for heifers.”
Total feeder cattle imports from Canada and Mexico were up 9.7% for January through August, according to Peel.

CATTLE MARKET WEEKLY by Wes Ishmael

Calf-Feeder Trade

Regional Steer Price Average

North Central

South Central

Southeast

CME Feeder Index

CME Feeder Cattle Futures

CME Live Cattle Futures

CME Corn Futures

CME Oil Futures