July 19, 2019                                







Cash Cattle.


Cattle continued to trade at $111 -- south and $113-114- Nebraska and $115 Iowa. Dressed prices in the north ranged from $183-185. Trading is mostly concluded for the week.


This afternoon's cattle reports will include the monthly COF report plus the semi-annual herd inventory.


Severe heat is not the friend of the beef business. Almost 2/3rd of the country is suffering from excessive hear with areas like Chicago and NYC well over 100 with high humidity. Consumers tend to avoid some beef purchases during periods of high heat.


Cattle Futures. Some futures traders were taking protection before tomorrow's COF and bi-annual cattle inventory reports. Live cattle futures were weak on the close falling almost a dollar. There exists a large gap between August live cattle and the current asking prices. Hedged feeders are enjoying a extremely favorable positive basis for selling cattle. 


The Comprehensive Fed Cattle Weekly Report offers the most current carcass weight information. Steers and heifers are grouped together. The latest report shows carcass weights up 6# at 841# -- 4# under last year. Year to year weights are important for the tonnage of beef produced. 


Forward Cattle Contracts: The trades for forward deliveries were mainly dairy cattle.


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. The cutout moved higher at week's end anticipating cooler temperatures next week.  The choice/select spread is $24.  The national grading percentage has fallen -- widening the spread.


Beef Feature Activity Index. The weather is turning warm to hot across much of the nation. All meats are in ample supply. Beef will face off against pork and chicken - both have seen price fall instead of move higher.


Cutout Values as of Thursday, July 18, 2019
Choice CutoutChoice Price Change
213.34Up $0.77
Select CutoutSelect Price Change
188.61Up $0.27
Choice/Select Spread


Replacement markets


The influence of grain prices on replacement costs will continue to be felt through fall harvest. Conflicts between government reports and private companies that monitor the crop progress will compete with each other for price discovery. Higher grain cost will encourage pasture operations, where feed is plentiful and gains are cheap, to hold cattle on pasture as long as possible. Look for more heavy cattle placed on feed this fall.


More perspective on the shape of the market will be available after the reports this afternoon.


Oklahoma City. Feeder steers and heifers were $4-6 higher. 


Feeder Cattle Futures. Feeder futures tanked before today's reports. A more pessimistic view of future fed prices is spilling over into the replacement market. Prices are flat line from August on for currently traded contracts.


Feeder Cattle Cash Index. Feeder cattle are being yanked around from the run up in grain prices and government trade policies. The futures are currently pulling the cash.


Forward cattle contracting. Feedlots are moving into more forward contracts on fall cattle but basis levels are narrowing as feedlots compete for supplies.  Fall cattle are selling premium to current offerings encouraging many owners to hold to sell inventory.   


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


Grain Futures. Corn futures were lower. Wheat also is falling and causing many feeding operations to switch grains. Widespread wheat feeding will cause the corn basis to fall and adjust corn stocks before new crop harvest in the fall. The basis levels are rising and currently at 70 over the July board in Guymon, Oklahoma. Corn is now pricing into rations at $9.20 cwt. in the Oklahoma Panhandle.


COF Pre-release estimates


                   IN YARDS WITH MORE THAN 1,000 CAPACITY
                                                  AVERAGE            RANGE
                                   ACTUAL       OF ESTIMATES     OF ESTIMATES
CATTLE ON FEED           July                          101.8      100.9-103.2
PLACED DURING            June                           97.9       93.2-105.7
MARKETED DURING          June                           97.0        95.8-98.3





There is no question antibiotics use is an issue that will not disappear and one approach, to attack its use and beef consumption at the same time, is regulation. In San Francisco consumers are about to gain a rare window into the use of antibiotics in the food system, an issue of skyrocketing concern among public health groups, some shoppers and some physicians.


Critics have argued that the agricultural industry abuses these medicines, administering antibiotics to animals which do not need them and contributing to the rise of “super bugs.” Consumer groups have complained that the public knows too little about how their food is raised — an issue compounded by a range of confusing labels. Some labels certify NO antibiotics, other labels claim no antibiotics for 100 days prior to slaughter.  This backdrop sets the stage for the industry to provide a disclosure labeling requirement that is supported by consumer groups and food purveyors.


In San Francisco a city ordinance requires a number of the country's top meat brands to deliver far more details about their antibiotic use. Under the rule, which passed the city's Board of Supervisors unanimously, grocery stores will be required to document antibiotic use in the meat and poultry brands they sell and make the information available, via a city website, to consumers. This is a big and expensive task and will skyrocket cost of beef in that city and present a price barrier to beef consumption.


Information to be provided from producers would include: Average number of days of antibiotic use per animal; Percentage of animals treated with antibiotics; Number of animals raised; and, Total volume of antibiotics administered. The fact the beef industry has failed to digitally identify the national cattle herd presents an obstacle both to compliance and cost of this obligation. It also presents its own roadblock to beef consumption by making beef cuts so expensive to drive consumers to alternative meats that are better able to provide the information.


The ordinance was first passed in 2017 with a comment period and implementation period over the past two years with full compliance soon to take effect. The law will force many beef vendors into a NO antibiotic program to avoid the reporting requirements. This will ratchet up the cost of beef for many consumers beyond the affordability bar. Many beef sellers will chose to sell "all natural" instead with no antibiotics but a healthy price tag.


This ordinance might be introduced in multiple cities across the country and the industry would be unable to comply from a practical standpoint on a large scale without animal identification and even with animal ID, providing the software to capture antibiotic treatment information on all beef and dairy animals would be a herculean task.  The best solution is an industry led solution negotiated with consumer groups that allows a labeling window to antibiotic use and is supportive of reduced use in the future.







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 Steer1,042.88139.05
Cost of Gain 600 pounds483.410.81
Estimated Interest(Prime + 1%)41.23 
Current Breakeven1,559.18115.49
Current Futures1,568.03116.15
Net Profit / Loss8.850.66


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 ago1,102.50147.00
Cost of Gain 600 pounds529.830.88
Estimated Interest(Prime + 1%)36.53 
Resulting Breakeven1,668.86123.62
Current Texas Panhandle Cash1,510.52111.89
Net Profit / Loss-158.34-11.73



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