Monday, December 12, 2016

CATTLE OUTLOOK – Ron Plain and Scott Brown Ag Economics, MU December 9, 2016

CATTLE OUTLOOK – Ron Plain and Scott Brown
Ag Economics, MU   December 9, 2016

USDA made modest changes to 2017 beef projections in today’s monthly
WASDE release. The 2017 average mid-point fed steer price is now
projected at $107/cwt., up $1 from the projection made in November.
Despite the slightly higher projection, USDA still pegs next year’s
fed steer price more than 10% lower than 2016. Beef production is
estimated at 26 billion pounds for 2017, up 800 million pounds from
this year and the largest since 2011.

Cattle and beef prices lost some ground this week. Through Thursday,
the 5-area average price for slaughter steers sold on a live weight
basis was $110.31/cwt, down $4.07 from last week's average, and $8.14
lower than a year ago. The 5-area dressed steer price averaged
$170.50/cwt, down $4.87 from the week before, and $16.87 below last
year’s level. These losses erased last week’s gains and then some.

Beef cutout values were down this week, though not as much as the
cattle. This morning, the choice boxed beef cutout value was
$190.25/cwt, down just $0.04 from the previous Friday, but $12.80
lower than a year ago. The select carcass cutout this morning was
$171.85/cwt, down $1.74 from last week. At $18.40/cwt, the
choice-select spread remains relatively high, even accounting for
holiday beef demand.

Beef exports in October were at the highest level since August 2014.
Shipments to Japan and Korea continue to run well above last year’s
levels, with the YTD growth in those two markets now near 23 percent.
Total U.S. beef exports are now nine percent higher on the year, with
further gains needed to support prices as beef production increases

Preliminary December consumer confidence numbers were just shy of the
highest levels since 2004, with much of the consumer optimism centered
on expectations for President-elect Trump’s economic policies. This
bodes well for domestic meat demand moving forward, a necessary
condition to move heavy meat supplies for the next couple of years.

This week's cattle slaughter totaled 611,000 head, down 5,000 head
from last week but up 5.3% from a year ago. The average steer dressed
weight for the week ending on November 26 was 916 pounds, 2 pounds
lighter than the week before, and down 7 pounds from a year ago.

Cattle prices were steady to lower this week at the Oklahoma City
auction. Feeder steer prices were steady to $5 lower with steer calves
steady to $3 lower compared to the week before. Prices for medium and
large frame #1 steers by weight group were: 400-450# $169.50-180,
450-500# $150-$170, 500-550# $140-$165, 550-600# $136-$151, 600-650#
$120-$141.50, 650-700# $124.50-$137, 700-750# $119-$133, 750-800#
$125.50-$133.50, 800-900# $120-$135, and 900-1000# $124-$132.75/cwt.

Cattle futures were higher this week even as cash prices declined. The
December live cattle futures contract settled at $108.90/cwt today, up
$0.68 for the week. February live cattle gained $1.88 this week and
closed at $110.75/cwt. The April contract settled at $110.22.

The January feeder cattle futures contract ended the week at
$125.97/cwt, up $1.37 from a week earlier. March feeder cattle gained
$1.08 this week to settle at $122.60/cwt. April feeder cattle settled
at $121.90/cwt.

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