Tue, 22 May 2018
US - In the livestock futures markets last week, Live Cattle contracts declined; the June contract was $102.98 per cwt. (average of the daily closing prices), dropping $4.49 for the week, reports Steiner Consulting Group, DLR Division, Inc.
The October Live Cattle contract fell by $4.52 per cwt. week-over-week. The August Feeder Cattle contract averaged $138.38 last week, falling $5.21 from the prior week. Lean Hog contract prices were only slightly changed for the week; the July contract averaged $78.12 per cwt, up $0.86.
August Soybean Meal futures averaged $377.50 per ton last week, a decline of $3.84 week-over-week. The December corn price was $4.17 per bushel down slightly (-1 cent).
The bottom of this page has a production and cash price summary compiled from various reports by the Market News Division of USDA’s Agricultural Marketing Service (AMS), note that the data are preliminary.
We highlight the preliminary cattle slaughter data (see the first graphic). If those data are not revised significantly, at 660,000 head Federally Inspected (FI) cattle slaughter last week was the largest for any week since the week ending 22 June 2013 (659,700 head). Compared to a year ago, harvest increased 48,000 head or 7.8 per cent.
A wide basis (price difference between the current cash market and the June futures) is "doing its job" of enticing cattle into packing plants. The pull of animals out of feedlots into packing plants is not as aggressive as a year ago at this time; nonetheless, it has been impressive.
Large packer profits have kept them willing buyers and discounted futures have made owners of cattle in feedlots very interested sellers. We currently put the status of animals in feedlots as current to very current.
In comparison, last year was extremely current. That conclusion is mainly based on the FI steer dressed weights. Notably, let’s put those data into context—the long-term trend in cattle weight is heavier.
For the 25 years from 1993 through 2017, the increase in steer dressed weight averaged 5.8 pounds each year. But last year was a bit unusual, weight declined by 13-pounds. In the prior 25 years to last year, annual steer dressed weight only fell year-over-year six times. As shown in the following graphic, FI steer weights have been above 2017’s, but importantly they have been nearly identical to the prior 5-year average (2012-16).
In the past, as another gauge of how current feedlots were in their cattle inventories, market analysts looked at the Yield Grade data compiled by AMS. In contrast to Quality Grade (e.g., Prime, Choice, Select), Yield Grade (YG) estimates show the differences in the total yield of retail cuts from a beef carcass.
We expect a YG 1 carcass to have the highest percentage of boneless, closely trimmed retail cuts, or high cutability, while a YG 5 carcass would have the poorest cutability. YG 5 are often termed "over-finished", that is, animals were not marketed in a timely fashion and had excessive fat.
Unfortunately, from a market analysis perspective, those data from AMS are no longer representative of the industry. Reporting those numbers are voluntary, and the most packers no longer provide such.