Wet weather hampers auction demand

Fed cattle and wholesale beef values continued steady ahead of what should a seasonal price boost.

Calf and feeder cattle prices softened this week, pressured in part by wintry, wet and muddy conditions across wide swaths of the nation that limited livestock movement and demand.
 
“Some areas of Missouri received 8-10 inches of rain,” explained analysts with the Agricultural Marketing Service (AMS). “Travel conditions were poor in Nebraska and South Dakota after rain and snow in some areas left backcountry roads impassable. Significant flooding has occurred in the Midwest. The swollen Mississippi River north of St. Louis is making grain shipments difficult, as well.  There were limited receipts from the Carolinas and Florida due to Hurricane Michael.”
 
Steers and heifers sold $1-$5 per cwt lower nationwide, except for weak to $2 higher in the North Central Plains, according to AMS. 
 
Moreover, Andrew P. Griffith, agricultural economist at the University of Tennessee, says in his weekly market comments, “As expected, lightweight calf prices are slowly declining as the market moves through the month of October. However, prices are not declining as rapidly as is the seasonal tendency.”
 
Cattle futures moved lower much of the week, amid technical correction, sharply lower outside markets—tied to investor fears about rising interest rates—and plenty of wonderment about near-term direction. Firming grain prices at the end of the week added more pressure to Feeder Cattle futures.
 
Week to week on Friday, Feeder Cattle futures closed an average of $3.94 lower ($3.07 to $4.62 lower).
 
Seasonally speaking, negotiated cash fed cattle and wholesale beef prices should be on the cusp of climbing higher. In the meantime, fed cattle prices continued to putter along the well-worn, mostly steady track of recent week.
 
Negotiated cash fed cattle trade was mainly steady to weak with live sales at $111 per cwt in the Northern and Southern Plains; mostly $2 lower in the western Corn Belt at $108. Dressed sales were $1 lower at $174.
 
Week to week on Friday, Live Cattle futures closed an average of $1.66 lower ($1.25 to $2.12 lower).
 
“Fed Cattle prices normally have upside potential this time of year, however muddy pen conditions in all major feeding regions have left many fed cattle owners willing sellers at steady money recently,” AMS analysts explain. 
 
At the same time, Nevil Speer, industry analysts at Bowling Green, Ky., points out fed cattle markets are showing strength and resilience in the face of growing supplies.
 
For perspective, projected beef production for this year of 26.94 billion pounds would be 757 million pounds more than last year. That’s with USDA’s Economic Research Service peeling 150 million pounds from this year’s projection, month to month, in the latest monthly World Agricultural Supply and Demand Estimates.
 
“Beef production is reduced from the previous month, largely due to lower expected fourth quarter fed cattle slaughter,” say ERS analysts. “Carcass weights are forecast lower on a higher expected proportion of cows in the slaughter mix.”
 
WASDE projects the fourth quarter fed steer price (Five Area direct) at $110-$114 per cwt. Prices for next year are projected at $117-$125 in the first quarter, $118-$128 in the second quarter and $109-$119 in the third quarter.
 
“The most favorable aspect working in the market’s favor revolves around beef demand,” Speer explains in a mid-week BEEF markets article.“It’s clear that consumers are feeling good about both the product and their pocketbook.
 
“For example, the September market averaged around $110 per cwt across a four-week beef production average of 517.1 million pounds. The same period last year pegged an average $107 fed market while averaging 509.9 million pounds weekly. So, 2018 claims better prices on bigger throughput – that’s a favorable outcome of better beef demand.”
 
On a related note, restaurant sales and traffic increased in August (latest data available), according to the National Restaurant Association’s (NRA) most recent Restaurant Performance Index (RPI). The August RPI rose 1% from the prior month to 102.0, driven mostly by more optimism surrounding current conditions.
 
“Restaurant operators reported a net increase in same-store sales for the 10th consecutive month, with customer traffic also turning positive in August,” according to the NRA report.
 
Wholesale beef values hovered close to even. Week to week, Choice boxed beef cutout value was 54centslower Friday afternoon at $202.71 per cwt. Select was 54centshigher at $192.28.

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