July 20, 2017. 



BOC Loan





Cash Cattle. The online exchange completed trades on less than half of the offerings at $118.25-118.50. These were followed in the country by trades in the north at #118 live and $188 dressed. Both prices were $2 lower than last week. Packers failed to gain sufficient inventory for next week and no cattle were sold in Texas and Kansas other than the online offerings. Futures rallied on the expectation that packers were going to need to raise bids to finish purchasing for the week.


Show lists were larger than last week but smaller than last year. The delicate balance between cattle supplies and processing capacities is determinative of leverage for buyers or sellers and ultimately determines price. The large incentive created by deep discounts in futures prices is gone and the new mode of feeding will be taking cattle to heavier weights in order to lower breakevens. The impact will be negative and will create more tonnage and more cattle later this summer and fall. Carcass weights have moved from 30# under last year to 9# currently.


Cattle Futures. Futures prices higher reacting to the positive news on the BSE cow and higher expectations for cash cattle. A new pattern of a discounted spot month prices followed by premiums in the deferred months is present. Hedged feeders have benefited by a unusually large basis spread of cash over futures and now the prospect of reversing that trend will compel longer feeding periods and heavier weights to reach a par selling price.


Carcass weights are released each Thursday and are a closely watched barometer indicating the position of cattle feeders in the nation's feedlots. The last report released for the week of June 30th, had steer carcass weights were up 4# at 859# remaining 9# under prior year. Heifers were 12# under last year. 


Forward Cattle Contracts: 6500 cattle sold last week at $2.50 premium to the August board for August delivery. Purchases continue to be misreported by USDA as to delivery period and basis status. The errors consist of placing 15-30 sales in the spot market sales, and reporting flat price forward sales as a Par basis sales.


The weekly breakdown of fed cattle moving to the beef processing plants is as follows. 1) formulas 55%; 2) negotiated 20% [both live and flat dressed]; 3) forward contracts 25%. Some of the formula arrangements are week to week negotiated prices and not committed cattle to one plant.


The Cutout. Box prices are mixed but trending lower. The problem of reduced processing capacities is the remaining facilities are vulnerable to breakdown. Most plants are old and band aide repairs keep them running and the mission is to reduce down time. This operating mode lends the business to suffer from periodic breakdowns that are unforeseen and force lapses in production. Last week's slaughter was pared back from 637,000 to 629,000 head.


Nothing is more favorable for beef demand than lower prices at the store. Recent declines in price of beef cuts has revived retail purchases for both the spot market and out front contracts. Volumes out front were large last week and indicate a willingness on the part of retailers to reinvest in beef inventories. Consumers will ultimately be rewarded in the form of cheaper cuts at the store prompting late summer beef/early fall beef features.



Choice CutoutChoice Price Change
207.73Down $0.32
Select CutoutSelect Price Change
195.49Up $0.24
Choice/Select Spread

Replacement markets


The overheated replacement market is moving in yo-yo fashion with little rhyme or reason. Hot and dry is becoming a factor in the southern plains. More cattle are being offered for current and fall delivery. Heat in all areas of the country will force some cattle off pasture and in the Dakotas drought is a factor in cattle movements. A change in the direction of the corn market may be a catalyst for a reset for feeder prices both directions.  


Oklahoma City. Feeder cattle were $4-8 higher with calves $5-10 higher early week but moderated and fell back at midweek. Receipts at auctions in Oklahoma will trend downward for the summer months then increase into the fall.  


Feeder futures. Feeder futures recovered the previous days losses and trading ranges were wide and volatility large. The change in market direction supported by higher grain prices has the prospect to change the feeding landscape. Heavy monthly placements continue and are likely to pose dangers for cattle prices later this year. All eyes will be on the COF report later this week.   



                        U.S. CATTLE ON FEED ESTIMATES
                   IN YARDS WITH MORE THAN 1,000 CAPACITY
                                                  AVERAGE            RANGE
                                   ACTUAL       OF ESTIMATES     OF ESTIMATES
CATTLE ON FEED           July                          102.8      102.1-103.0
PLACED DURING            June                          105.9      103.1-107.0
MARKETED DURING          June                          104.6      104.1-105.2


Feeder Cattle Cash Index. The index is now under the August futures.    


Forward cattle contracting. Some feedlots are looking at fall prices and making some basis purchases. Prices were mostly par for October on 800# steers delivered to the Texas Panhandle.  There is more interest in forward sales from sellers who might take the recent rally as an exit point for recently purchased cattle.


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


Corn futures. Corn prices turned higher. Weather is always critical during the pollination phase of the growing corn crop. Most of the crop is in the pollination phase. The basis traded steady in recent trading to 50 cents in Guymon, Oklahoma. Corn is now pricing into rations at $7.60 cwt. in the Oklahoma Panhandle.





Politics is the tool. It is deployed frequently to disarm and frustrate reform – the behind the scene maneuvering orchestrating opposition. Change is the enemy and those opposing change never say so. They warn the disrupters of moving too fast. They acknowledge the need for change and they give voice to embracing technology but deep down, they desire to remain in their comfort zone and don’t want to move out. Identifying those opposed to change can be hard because they don’t want to be identified as a name associated with a face.


Mandatory ID of the nation’s cattle herd is a no brainer. This past week was Exhibit A of why this has not happened when every other beef producing country has deployed this program resulting in improved competitiveness in the world markets. The roadblocks to this initiative are found within the industry. Their rationale is weak and flawed, but their political influence is strong. 


Leading the charge are the breeders. Foremost among those groups is the Texas and Southwestern Cattle Raisers Association. Their stated objection is allowing the government to have inside access to what they own [cattle] and third parties to bring lawsuits against their membership for liability for instances of eColi, or worse, Mad Cow. Legal opinions contradict this fear by assuring a firewall once live cattle are processed into beef. Unmasking the organization reveals the real reason for opposition. They fear mandatory ID might harm their primary revenue stream – brand inspection.


The national beef association, NCBA, joins in failing to advocate mandatory ID. The NCBA meeting this past week confirmed a lack of leadership on this issue. Pressures from the membership have forced them into the ludicrous position of sanctioning another attempt in 2018 to study the application of a mandatory system. This replicates the studies done over and over through the years and accomplishes nothing except wasting time and money. Meanwhile hundreds of millions of dollars of lost sales and improved markets continue to damage U.S. beef producers at every level.


U.S. Roundtable for Sustainable Beef [USRSB} is an industry group of food companies, retailers, packers, and producers setting forth a program designed to measure scientifically the progress of sustainability matrixes in beef production. The group has developed draft metrics that can be used by each segment of the supply chain to measure the progress of animals moving through the supply chain. But guess what? No mention of animal ID in the entire 70 page document. This entire effort is quickly transitioning into a charade without mandatory identification of the nation’s herd and there can be no disease traceback. The reason it was left out, it was too controversial.


Those individuals hiding behind organizations opposing mandatory ID need to come forward and identify themselves. Each name should be posted on the Web under a banner of HALL OF SHAME.  Living in the past is for old timers. The economic world is full of failed businesses whose only flaw was a refusal to change.        




Click on the links below to find out all about how Australia plans to use Blockchains and Smart Contracts:


Australia and Distributed Ledgers


Blockchains and Smart Contracts




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 Steer1,162.13154.95
Cost of Gain 600 pounds442.060.74
Estimated Interest(Prime + 1%)32.23 
Current Breakeven1,630.97120.81
Current Futures  
Net Profit / Loss  


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 ago952.50127.00
Cost of Gain 600 pounds453.080.76
Estimated Interest(Prime + 1%)23.02 
Resulting Breakeven1,428.60105.82
Current Texas Panhandle Cash1,618.65119.90
Net Profit / Loss190.0514.08



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