Content ID

269145

Cattle Processing Numbers Drop

Next few months may be tough for cattle feeders.

Cattle slaughter this week will total 597,000 head according to USDA’s packer survey. This would be under our 611,000 noted in the morning comments.

They see a mild 112,000 head for today and only 18,000 for Saturday. This week’s run would be under last week’s 608,000. It would be only 0.4% over last year. The previous four weeks averaged 2.5% over. For the big picture, we would suggest the smallest non-holiday kill week is behind us. It was posted two weeks ago.

We expect rising supplies seasonally in the weeks ahead and a large offering in April and May due to heavy fall placements. At this time we see no reason to suggest the recent $128 to $130 peaks won’t be the high for the year.

This week’s $126 and $127 cash cattle trade was within reason. We had a 9,800-head increase in showlists. Also, the industry is well aware of the coming supply issues.

USDA lowered the 2018 beef production estimate by 40 million pounds today on the monthly supply/demand report. They are still a bit high on their number at 5.8% over last year. Along with a minor increase for imports the amount of beef left for the U.S. consumer, per capita, fell from 59.2 to now 59.1 pounds. That is the largest since 2010. We won’t get too excited about this decline in supply as we are still 3.9% over last year. Allendale still expects prices this year to scale down below last year as a whole.

Monthly meat trade numbers were also released. In January we exported 244 million pounds of beef. That is a new record for any previous January. It was also 15% over last year. Exports in November and December ran 3% over last year. Imports in January reached 248 million pounds. This was not a new record. Imports ran 9% over last year. November and December imports were unchanged and +4% year/year respectively. During January our net trade, based on volume, was a 4-million-pound net importer. The previous two months were 49 and 51 million, respectively.

The next few months may be tough for cattle feeders. April and May finished cattle are looking at $127 and $130 breakevens respectively. Along with those high-priced feeder purchases this past fall, some may not have hedged against rising feed prices. The second half won’t be too much better. From summer to fall we are looking at $120 - $124 breakevens. This may not be pretty. Don’ be surprised to see feeder prices get hit hard in a couple months as a result.

Yesterday’s drought monitor intensified the drought in the Texas panhandle. New for all of winter, we now have stage four of their classification on the map. That is called Exceptional Drought.

We have moved our April, June, and August hedging recommendation from when April hits $128 to now $126. RN
-------------------------

Rich Nelson Allendale Inc. 815-578-6161
This material has been prepared by a sales or trading employee or agent of Allendale Inc. and is, or is in the nature of, a solicitation. This material is not a research report prepared by Allendale’s Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.
 
DISTRIBUTION IN SOME JURISDICTIONS MAY BE PROHIBITED OR RESTRICTED BY LAW. PERSONS IN POSSESSION OF THIS COMMUNICATION INDIRECTLY SHOULD INFORM THEMSELVES ABOUT AND OBSERVE ANY SUCH PROHIBITION OR RESTRICTIONS. TO THE EXTENT THAT YOU HAVE RECEIVED THIS COMMUNICATION INDIRECTLY AND SOLICITATIONS ARE PROHIBITED IN YOUR JURISDICTION WITHOUT REGISTRATION, THE MARKET COMMENTARY IN THIS COMMUNICATION SHOULD NOT BE CONSIDERED A SOLICITATION.
 
The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that Allendale Inc. believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades.

Read more about
Loading...

Talk in Marketing