October 14, 2017
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.”
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