February 16, 2019                                  







Cash Cattle.


Packers pared the slaughter this past week to 598,000 cattle and kept enough trade leverage to hold the cash market steady. Cattle sold for $125 live and $200 dressed -- steady with the previous week's market.


The skill with which the processors are managing the numbers is masterful to watch. A look back to last year would see processing margins in the red but this year margins are close to $100/head with steady cash and steady box prices.


NASS will release the January 1 Cattle on Feed report on February 22 (originally scheduled for January 25). In addition, the February 1 Cattle on Feed report will be published on March 8 (originally scheduled for February 22). February 28th will be the release date for the annual year end cattle inventory report. The prospect of another shutdown is not ruled out but is unlikely.


Cattle Futures. Futures were mostly lower excepting the spot February contract. The basis remains slightly out of line but will likely correct next week when either the cash moves higher or the futures lose ground.


The Comprehensive Fed Cattle Weekly Report offers more current carcass weight information in a slightly different format. Steers and heifers are grouped together. The latest report shows carcass weights up 2# to 860# down 8# from last year. Carcass weights continue a rather steep decline seasonally into May.


Forward Cattle Contracts: Forward sales were light with most sales from par to $2 over the board for summer deliveries. The May forwards were at $3-5 premium the board with small volumes.


Weekly graphs on the Comprehensive Weekly Fed Cattle Report break down the categories of trade for the week according to 1) formula cattle; 2) negotiated live; 3) negotiated dressed; 4) and forward contracts. Some cattle included in the formula category are week to week negotiated grids and not committed cattle to one plant. Other cattle designated as formula are "over the tops".


The Cutout. Choice box prices were lower in late week trading. Select plays second fiddle to choice cuts for dollar volume because select grade cattle are such a small percentage of the weekly slaughter. This week's slaughter volume is anticipated to be lower. The choice/select spread will stay narrow during the next month.


Imports of beef continue to exceed year ago levels with exports now attempting to revive the robust sales of last year. Trade policies will have a large impact on both as the political negotiations heat up in the coming weeks.


Beef Feature Activity Index. The impact of the severe winter weather on consumption and demand is yet to be told. Certainly in much of the northeastern U.S., the food service business will suffer. People simply don't eat out as much. Movement of beef off the supermarket shelves is uneven and will be difficult to evaluate in isolation.


Cutout Values as of Friday, February 15, 2019
Choice CutoutChoice Price Change
216.85Up $0.78
Select CutoutSelect Price Change
210.99Up $0.58
Choice/Select Spread


Replacement markets


Spring contracts are becoming more active for feeder cattle. The large feeding companies are lowering their basis bids as close outs on the current cattle are suffering from poor basises and high cost of gain. Placement patterns this year will be more erratic because of the harsh winter conditions that have plagued the northern plains. Light early year placements will likely be followed by heavier late spring placements.


The stocker operations are complaining of poor basis bids for feeder cattle. This mirrors the complaints of the feedlot operators until this week on fed cattle. Hedged stocker operators are finding large discounts to more normalized basis bids.


Calf prices are moving higher quickly. Good moisture in some grazing areas has sparked demand for light cattle. Even the desert southwest has received rain and some cattle are being placed on the desert for winter grazing. 


Oklahoma City. Prices were uneven across both sex and quality classes.                     


Feeder futures. Feeder futures were sharply lower Friday as the index has trailed the futures and now they align.


Feeder Cattle Cash Index. The index will now track the March contract to expiration.


Forward cattle contracting. The basis bids that exist are $3-5 back for 800# spring steers delivered to the southern plains feedyards. 


National Weekly Feeder Summary released on Friday of each week tracks the national prices by region for last week.   


Grain Futures. Corn futures moved lower in late week trading. The basis is currently at 50 over the December board in Guymon, Oklahoma. Corn is now pricing into rations at $7.90 cwt. in the Oklahoma Panhandle.




The announcement of a winner in the auction of Sam Kane Packing Company was JDH Capital Company of Houston, Texas. The principal behind the new ownership is Jeffrey Hildebrand, a wealthy Houston businessman. The new owner announced plans to reopen the plant as soon as possible.





 The EAT-LANCET Commission quantitively describes a universal healthy reference diet, based on an increase in consumption of healthy foods (such as vegetables, fruits, whole grains, legumes, and nuts), and a decrease in consumption of unhealthy foods (such as red meat, sugar, and refined grains) that would provide major health benefits, and also increase the likelihood of attainment of the Sustainable Development Goals.


The British Medical Journal, Lancet, has expanded its scope to cover many issues beyond medicine. The most recent endeavors have targeted diet and global warming with the objective of reducing consumption of red meat by 50% during the coming decades. The journal has a great deal of respect among intellectuals and some government officials. The views, expressed in the reports issued by the Lancet Commission, have the ability to influence thought leaders throughout the world eventually filtering out to the public through various channels. The recent report on diet was released and disseminated by all of the major news outlets providing a threat to future beef demand if left unchallenged.  


The most glaring error of this report is the flawed categorical grouping of foods into healthy foods and unhealthy foods. Red meat is grouped into the unhealthy foods – a view contradicted by most expert nutritional opinion and a reckless action that risks repercussions to human health. In fact, thousands of years of consumption of red meat has led to just the opposite conclusion.


Beef should beef an important part of every balanced diet and provides important nutrients not available from other sources. Beef is a high-density energy food that has allowed humans to develop larger brains than other animals. The iron, zinc, riboflavin, and vitamins available from beef have a centerpiece of healthy diets forever. There is strong support for beef as a cure for the anemia suffered by many vegans for a proper balance of nutrients.


Global warming concerns are not going away. The livestock industry needs to include plans to reduce its carbon imprint on the planet in the years ahead but not by producing less beef. Millions of acres of high quality grasslands can only be utilized by ruminants in the mission to provide affordable protein to the world. Reducing the toll on our resources of water and land for corn production can start with eliminating the wrongheaded ethanol program. Science will continue to be the friend of beef producers as they provide improved genetics and feed conversions. Sustainability must be an important watchword for all global food objectives and certainly beef is included. Sustainability is not new to the beef industry.


Challenging the proper respect and position of beef in the diet is the foremost job of the beef industry. Many young people attend school and then college and upon graduation have formed an opinion of the value of beef in the diet and too often the view is not favorable. This misperception must be corrected through outreach to our educators by expert nutritionists who can place the proper value on beef and its place in the diet.


The beef industry also must realize that many of the reports like EAT-LANCET might find financial support by an emerging lab protein industry that has drawn on investment capital from some of the wealthiest people in the world. Lab proteins are here to stay, and beef must learn to compete with lab proteins and not just through a labeling as FAKE BEEF. Lab proteins deserve a right to compete, but the competition will be based on taste, nutrition and cost and not on buzz. Beef can hold its own based on these criteria. It has a proven track record over thousands of years.


Finally, the beef industry needs to continue to fund their own independent studies establishing the value of beef in diet based on food safety, taste, costs, and nutritional value. These studies should strike at the heart of misperceptions classing beef as an unhealthy foodstuff.  





Below are links to articles published in the Cattle Report pertaining to industry change. Two important changes are on the table for progress -- supply chain management and animal ID. Both applications will transform and disrupt the industry.






The Case for National ID for Cattle


Reforming the Futures Contract and Cash Trading of Cattle





Sections of the newsletter are redesigned with hyperlinks to the appropriate source pages. The hyperlinks are in light blue within the report.







Regional differences in grain and cattle basises create a difficulty in modeling a national composite for current close outs or a proforma forward look at a breakeven. Readers should consider your own area for adjustments to these models. 




The Cattle Report introduces the FEEDER METER. The report estimates profit or loss for currently purchased feeder steers and projects a result 150 days out.  The chart is interactive and updated every 15 minutes in real time based on changes in futures markets in grain and cattle. Corn basis information is based on current trade prices adjusted every two weeks. Feeder prices and fed cattle sales are par the appropriate futures contract.

750 # Feeder Steer1,071.00142.80
Cost of Gain 600 pounds467.910.78
Estimated Interest(Prime + 1%)41.85 
Current Breakeven1,572.69116.50
Current Futures1,543.73114.35
Net Profit / Loss-28.96-2.15


The Cattle Report estimates current profit or loss on cattle placed on feed 150 days ago. This report generated from industry averages attempts to simulate a typical close out based on prevailing purchase prices for a feeder steer 150 days ago. The close out assumes grain was purchased at market each month. Selling prices and interest rates are based on prevailing benchmark quoted prices. This chart will change weekly.

750 # Feeder Steer OKC 150 days ago1,080.00144.00
Cost of Gain 600 pounds509.720.85
Estimated Interest(Prime + 1%)35.66 
Resulting Breakeven1,625.38120.40
Current Texas Panhandle Cash1,687.23124.98
Net Profit / Loss61.854.58



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