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Wholesale beef values climb seasonally

Calves and feeder cattle traded unevenly steady, amid the heaviest auction volume since last January.

Calf and feeder steers and heifers sold from $2 per cwt lower to $2 higher this week, amid the heaviest auction volume since last January, according to the Agricultural Marketing Service (AMS).
 
“Feedlot breakevens have been running in the red and buyers have backed up incoming cattle prices as a result,” explained the AMS reporter on hand for Thursday’s sale at Billings Livestock Commission in Montana.
 
“Preconditioned calves continue to sell with the best demand, with buyers discounting most calves lacking a booster shot, or with no vaccinations at all…Transportation continues to be an issue as trucks are tight with many contract calves moving in the country. Buyers are reluctant to purchase calves without immediate transportation as heath concerns snowball the longer calves are under stress.”
 
Calf and feeder prices could get a boost from the fed cattle market, which finally broke higher after six weeks of about steady money.
 
Live prices for negotiated cash fed cattle surged mostly $3-$4 higher Friday at mostly $114-$115 per cwt. They were $2-$3 higher in the western Corn Belt at $112-$113. Dressed sales were $6 higher at $180.
 
“Market participants have been waiting on this positive price movement in the finished cattle market for several weeks, and it is adding $40 to $50 of value to each head,” explains Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments.
 
“The increase in prices can only be positive for cattle feeders, while packers are no worse off with stronger beef prices. The market will wait in angst to see if this week’s higher prices can be sustained and improved upon moving into November.”
 
Reasons for the increase include apparently shorter packer inventories, the outlook for narrowing harvest-ready cattle supplies and the seasonal boost to wholesale beef prices.
 
Week to week, Choice boxed beef cutout value was $5.54 higher Friday afternoon at $213.47 per cwt. Select was $4.59 higher at $198.83. That’s an increase of $10.76 for Choice over the last two weeks; $6.55 higher for Select.
 
“The price surge the back half of October is being driven by middle meats,” Griffith says. “Middle meat purchases in October are generally due to entities preparing for the holiday season and trying to purchase inventory before rib and loin prices reach their apex.
 
“Thus, restaurants and retailers are trying to avoid being short bought and forced into high-priced spot market purchases. At the same time, this purchasing habit generally leads to increases of beef in cold storage which generally peaks in the fourth quarter (see below).”
 
All of that came against a backdrop of resurgent extreme volatility in equity markets, tied in part to worries about rising interest rates, trade and global economic growth.
 
Week to week on Friday, the Down Jones Industrial Average was  756 points lower. The daily close ranged from 608 points lower to 401 points higher. Similarly, the broader-based S&P 500 was 109 points lower week to week, with the daily close ranging from 84 points lower to 49 points higher.
 
Cattle futures end the week higher
 
Judging by the firm to higher start in cattle futures this week, traders disregarded the fewer-than-expected September marketings in last Friday’s monthly Cattle on Feed report, instead focusing on the lower-than-expected placements.
 
Overall, Stephen Koontz, agricultural economist at Colorado State University, views the report as long-term bullish but short-term bearish.
 
“The drop in marketings, regardless of placements, suggests the need for strong slaughter volumes the next two months,” Koontz explains in the most recent issue of In the Cattle Markets. “On-feed numbers are nothing short of enormous, and placements in July and August were close to 7% above the prior year.
 
“The availability of market-ready cattle, come the end of this year and the first of next, will be substantial. However, the marketplace has handled the large volume of beef so far this year, and much of last, perfectly. Saturday slaughter volumes have been strong, packer and retailer margins have been excellent, slaughter weight increases are typical for the season but not excessive, and domestic demand is appearing to favor beef while exports have been excellent.”
 
For production perspective, year-to-date beef production is 2.8% higher than last year at an estimated 21.87 billion pounds, according to USDA. Year-to-date cattle slaughter is 2.5% more at an estimated 26.85 million head (all cattle).
 
Despite daily seesaw action throughout the week, Cattle futures closed higher.
 
Not counting expiring October or newly minted away October, Feeder Cattle futures closed an average of 88 cents higher week to week on Friday.
 
Week to week on Friday, Live Cattle futures closed an average of $1.49 higher.
 
Frozen beef supplies inch ahead
 
Considering increased beef production so far this year, frozen beef supplies underscore ongoing strong consumer beef demand.
 
Total pounds of beef in freezers Sept. 30 were 1% more than the previous month and 3% more than the same time a year earlier, according to the latest USDA Cold Storage report.
 
Frozen pork supplies were 1% more than the previous month but 5% less than the same time a year earlier.
 
Total red meat supplies in freezers were up 1% from the previous month but down 1% from last year.
 
Total frozen poultry supplies were down slightly from the previous month but up 10% from a year ago.

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