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September 28th: Commodity Market Comments
  • “Shootin’ The Bull” -- Christopher B. Swift.
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    Live Cattle: Although the October fats were lower, none of the other months were.  October has a strong seasonal tendency to move higher from the first of October to expiration.  With that known by most, the packer may be getting aggressive in trying to buy cattle cheaper for potentially the last time this year.  Between the increase in open interest recently, high volatility, no cash trade to speak of, and massively varying takes on the packers needs, the price of fats are not anticipated to remain at this level for very much longer.  Whether that means another price tier lower or higher, but at this level there is significant attention begin paid to cattle at this time.

    Feeder Cattle: Feeders were the stellar performers today.  After having set new contract lows, all contract months traded higher at days end.  There are two ways to view the recent contract low.  The first will come from trend followers.  New contract lows or highs to them suggests to continue trading with the trend.  Then, there are those that look at new lows as potentially completing varying magnitudes of wave counts.  This is what I perceive to be transpiring.  Feeders have made approximately 4 new contract lows this year from rallies that materialized through the year.  Although collectively this has been a move of significance, when related to each low on it’s own, the new contract lows have been minimally lower compared to the previous one.  As in, collectively November feeders are $16.05 lower than the December ’15 low at today’s new contract low.  However, each one of the new lows separately are $5.05, $4.22, $4.88, and the most recent has been $2.40.  These are the differences between a previous contract low and the following new contract low.  This last one also had the smallest rally in price before moving to a new contract low again. Like the fats, interest has been garnered in the feeders as well.  Not to the same extent, but some nonetheless.  Therefore, feeders are not anticipated to hang around this price area for very long.   Today’s trade didn’t create a bar of significance on the candlestick charts, or do anything out of the ordinary.  So, tomorrow’s trade is anticipated to provide more evidence as to the next most probable move of further downward pressure or a reversal.

    Corn: Nothing new on corn today.

    Crude: Energies were hyper volatile today, but ended sharply higher as OPEC began setting the stage for production cuts at the November meeting.  This shot crude $3.00 higher in a flash and pushed equities higher and bonds lower.  Inflation????????  Maybe. However, it is inflated due to production cuts, not shortages or demand.

    Bonds: Bonds sold off sharply as crude rallied.  Bonds are anticipated to have completed their correction higher and are now anticipated to begin resuming their down trend.  Raising the price for oil and raising the price for money is anticipated to shake things lose.  Whether for the better or worse, the current situation reminds me of the old Jerry Clower joke of the hunter and the raccoon in the same tree fighting it out when he screams down to Marcel Ledbetter to just shoot up here amongst us, one of us has to have some relief.  Our economy is not moving and if this makes things worse, it will bring the bottom closer quicker. If this makes things better, then we may have something to begin building upon.

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    Christopher B. Swift is a commodity broker and consultant with Swift Trading Company in Nashville, TN. Mr. Swift authors the daily commentaries "mid day cattle comment" and "Shootin' the Bull" commentary found on his website @ www.shootinthebull.com

    An investment in futures contracts is speculative, involves a high degree of risk and is suitable only for persons who can assume the risk of loss in excess of their margin deposits.  You should carefully consider whether futures trading is appropriate for you in light of your investment experience, trading objectives, financial resources and other relevant circumstances. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.

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    September 28th: Closing Futures Summary

    October live cattle closed 35 cents lower, with the rest of the market 7 1/2 to 50 cents higher. Early weakness attracted short-covering, although October futures saw limited buying and ended the day pressured by the $2 to $3 lower start to cash cattle trade. Cash trade began yesterday in Nebraska and Texas at $103 to $104, leading to expectations for additional trade near those levels elsewhere. October cattle are trading in line with the cash market. 

    Corn favored a weaker tone in lackluster trade and ended with losses around 2 cents, which was low-range for the day. Funds sold an estimated, 4,500 contracts (22.5 million bu.) of corn today. Pressure in early trade was limited by USDA's announcement of a large corn purchase made by Mexico. The known value-buyer purchased 1,036,320 MT for 2016-17 and 541,020 MT for 2017-18 -- the fourth largest daily corn sale on record. 

    Soybean futures settled 5 3/4 to 7 cents lower through the July contract. That was on or near session lows. Soybeans tried to work higher on short-covering early today, but buyer interest was limited. Prices faded into the close on seasonal selling as harvest presses forward and yields remain impressive. With funds still holding a small net long position, active short covering ahead of Friday's USDA reports is unlikely and there could be more liquidation pressure. 

    Wheat futures were choppy today, but closed higher in all but SRW futures, which ended mixed. HRW ended the day mostly 2 cents higher and HRS finished 4 to 5 cents higher. Funds were neither net buyers nor net sellers in SRW wheat futures today. Futures saw periods of spillover weakness from the corn and soybean markets, but firmed in late trade on signs of improving demand for U.S. wheat. Adding to support were concerns about rains damaging wheat quality in Canada and Australia, as well as improvement in basis levels. 

    Lean hog futures ended narrowly mixed in a range of 10 cents lower to 25 cents higher through the April contract. Lean hog futures tried at times today to work higher on corrective buying, but ongoing supply concerns and pressure on the cash hog market capped buyer interest. Traders may cover some shorts ahead of Friday's Quarterly Hogs & Pigs Report, though the report is unlikely to contain any bullish surprises. 

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    September 28th: The Math of Why It’s Different Now
    Cassie Fish -- cassandrafish.com

    Between 2005 and 2014, the U.S. beef packing industry took just under 90,000 head of weekly kill capacity out of the market by closing plants. Forced to do so as the U.S. cattle herd dropped to modern historical lows, big financial losses resulted in shuttered plants and laid off workers. It’s hard to believe that it was just 28 months ago the last plant closed.

    Packing plants are designed to run 48 hours per week, if the economics support it. The last time plants ran that hard consistently was 2003, when the U.S. blew through fed cattle at a record speed, filling the void left when Canada’s beef industry was crippled by BSE.

    The current fed cattle slaughter capacity at 48 hours per week is about 565,000 head, way more than enough to handle current fed supplies. But the years of being forced to run reduced hours of 32 and 36-hour work weeks resulted in the loss of skilled labor at most if not all plants.

    Today’s labor limitations in U.S. packing plants has limited the fed kill to around 500,000 head per week so far this year. There were zero weeks in 2015 of a +500k per week fed kill, it occurred twice in 2014 and 15 weeks in 2013.

    Packer margins are running black between $100 and $200 per head and this year will go down as a record. This would be the first time in history when such economics did not incentivize running maximum hours. But the plants are not staffed to run 48 hours. The industry is currently averaging between 42 and 43 hours per week. Furthermore, labor isn’t always as skilled as they used to be nor line speeds as fast.

    Packing companies are making an effort to add staff and improve plant efficiency. But it is a complicated and challenging process, even more so nowadays, and it takes time to both hire and train people.

    Cattle feeders are routinely and understandably frustrated by having little if any leverage in negotiations with packers. But with long-term cattle supplies on the rise in this current market environment, feedyards being anything less than current has a greater negative impact on the market than any other time in history. There is no other way to restore a semblance of bargaining position to the feeder than by the feeding industry regaining full currentness in all cattle feeding regions.

    The process of adding packing plant staff just as the process of retailers lowering beef prices is happening, but the positive effect of these actions is not being felt today and the cattle feeder continues to absorb the full brunt of the imbalance. Only dramatically lower cattle replacement costs are left as a way to push the imbalance of money flow further down the line.

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    September 27th: Cow-Calf Operations -- The Charts Tell It All





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    September 27th: Rabobank Trims Forecast for US Beef Prices
    Rabobank

    Rabobank trimmed its forecast for US beef prices, and forecast weaker consumer demand in China, although keeping its forecast well above the futures curve.

    But Chinese imports will remain heavy, due to low domestic production, the bank said.

    And US producers could get in on this market, after a 13-year lull, after the news on Thursday that the Chinese government would allow imports from the US.

    US beef imports

    China's agriculture ministry announced that it will conditionally allow the import of US beef, ending a de-facto ban that has been in place since 2003.

    The lifting of the ban applies to imports of beef that are under 30 months old, and remains subject to quarantine requirements which are yet to be specified.

    The US Meat Export Federation welcomed the news, but warned that more clarity was needed.

    "While this is an important first step in the process of resuming beef exports to China, USMEF understands that China must still negotiate with USDA the conditions that will apply to US beef exports entering this market."

    The federation said it "looks forward to learning more details about the remaining steps necessary for the market to officially open and for US suppliers to begin shipping product."

    Lower US prospects

    Rabobank trimmed its forecast for US beef prices, in reaction to the weaker futures market in recent months.

    "Price erosion in the fed beef complex has been driven by escalating beef supplies as well as large supplies of competitive proteins," Rabobank said.

    "Additional market pressure has come from the exceptionally wide basis between cash cattle prices and the futures market.

    Carcass weights will be key to driving fed cattle prices for the rest of the year, Rabobank said.

    Carcasses are now averaging 863 pounds, down 11 pounds year on year, but nearly 19 pounds above the five-year-average.

    Rabobank's revised its forecast for prices over the last three months of the year to 125 cents a pound, down from 130 cents a pound.

    This is still bullish, with February 2017 live cattle futures trading at about 108 cents a pounds in Chicago.

    Lower Chinese demand

    Rabobank forecast Chinese beef demand to ease over the long term, due to weaker economic growth.

    Prices are getting some short term support from the seasonal uptick in meat consumption, but Rabobank said that "in the longer term, domestic beef prices are expected to decline as the economy slows down further in 2017".

    But Chinese imports will remain strong, due to slower domestic production.

    According to official data, Chinese beef imports increased by 51% year on year in the first seven months of 2016, reaching 348,000 tonnes.

    Higher imports from Brazil

    "The strong imports are driven by the substantial increase of Brazilian shipments," Rabobank.

    So far this year, Brazil has replaced Australia as the top exporter to China, with Australia pushed into third place behind Uruguay.

    "As China's beef market is still price sensitive, Brazil will continue to take advantage of its competitive price and sufficient supply, resulting in expected strong exports from Brazil to China," said Rabobank.

    Subdued EU prices

    And the EU beef market will "remain subdued," Rabobank said.

    Prices in the EU have been under pressure from the slaughter of dairy cows, in response to low milk prices.

    "Despite the current slow recovery of dairy prices, the normal seasonal increase of cow supply in the autumn will lead to increased dairy cow slaughter and a seasonal fall in prices," Rabobank said.

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    September 26th: Tale of Two Markets -- One Known & One Unknown
    Ag Center Cattle Report

    The reporting of the many transactions occurring every week in the cash cattle markets is in trouble and that is no new news to many operating in that marketplace. While recently we have seen an increase in reportable transactions, much of the current cash market remains opaque – hidden from view from most operators in the arena. We all see and hear reports on the few transactions covered by Mandatory Price Reporting but this is barely sufficient to see and understand the cash markets. Most days there is no trade or at least reported transactions. But behind the scene or screen, trades are occurring with rapid progression for current and future delivery. It takes a lot of pens of cattle to complete a weekly buy of close to half a million cattle.

    Packers are not members of the “in the dark” club. They are aware of the many transactions comprising the weekly kill. They are either a party to the transaction or their buyers are aware of which pens sold to which buyers under what type arrangement. They hear each time a competitor purchases a pen of cattle and they understand the terms under which the pen was bought including all the details of the type of purchase, purchase period and price. They know if a pen was purchased by giving a higher base for a negotiated grid or was a forward purchase for some cattle sold basis the futures. They know what it takes to put together an inventory for slaughter needs of the beef plants. They know the many and myriad ways cattle are bought and sold and they are aware of the various purchasing maneuvers designed create a transaction that will not disclose the information to the marketplace – all done without breaking the rules. They know the nature of category into each purchase fits and which will find their way into a mandatory report and how it will be disclosed to the public.

    The way most people see the market is still Mandatory price reporting however inadequate it is. They fail to see a dressed flat priced trade where the packer agrees to pay part or all the freight. They don’t see the cash trade that was not for next week but three weeks out. They don’t see the “over the tops” or the protected trades where cattle are purchased for $170 dressed but packers agree to raise the price if other cattle traded above $170. They don’t see the basis trades off the futures that must be priced by Friday for next week’s delivery.

    There are more avenues for transferring ownership through multiple pricing mechanisms than ever before.  Some detective work after the fact can give a profile of some of the information but in bulk the data is indecipherable to the marketplace because the marketing periods or price out dates are not clarified in the current reports.

    In Australia, Blockchain technologies are being used to parse the many and frequent price points in the Australian wheat market. This has provided important market information to Australian farmers as well as creating a tool for prompt payment. Wheat sales that once took 30 days to settle are now settling shortly following delivery of the wheat. In markets throughout the world, those interested in following cash trades are turning to Blockchains. The CME is joining financial institutions all over the world in investing in the technology and it holds the promise of auditable, stable, and accurate pricing information.

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    September 23rd: National Feeder & Stocker Cattle Summary
    USDA-MO Dept of Ag Market News

    RECEIPTS:    Auctions     Direct    Video/Internet     Total
    This Week     158,800     58,000        23,000          239,800 
    Last Week     153,300     36,000        88,500          277,800 
    Last Year       177,700     53,200        19,700          250,600 

    Compared to last week, feeder steers and heifers sold mostly 3.00 to 5.00 higher, with instances 7.00 to 10.00 higher.  Calves trended steady to 4.00 higher this period.  Last week's higher fed cattle trade gave a boost to cattle country psychology as CME cattle futures also turned green on Wednesday giving support to the feeder cattle market.  With a little less volatility on the futures board, buyers were more focused on condition and willing to step up on thin to average flesh, long-time weaned calves.  Some of the highest cattle in the country sold on Wednesday at the St Joseph Stockyards with a string of steers weighing 773 lbs selling at 154.75. 

    Seasonal fall runs have been slow to develop, causing some to question if the cattle are really out there in the country or if producers are just so depressed with current price levels they are trying to wait it out.  If the excellent condition of pastures and plenty of feed, has producers holding back from marketing, they risk more price decline, to a point that the additional pounds can’t catch up.  In the slaughter cattle complex, last week’s higher market was welcomed by feeders in all areas.   This upward move carried over to the cattle futures, with Wednesday’s close reaching a high for October at 108.50.  Mid-week on the Fed Cattle Exchange only 775 head of the nearly 2500 head offered settled at a price mostly steady to last week’s cash trade, supporting the thought that packer demand was light.  However, as of this writing trade had not developed, with traders bracing for the USDA’s Cattle on Feed and Cold Storage reports. 

    Packers have been diligent to slow down the upward move this week, by taking out 2 percent of this week’s fed harvest number compared to last week.  This is normal during this time of year as packers perform annual plant cleaning and repairs.  A combination of formula, forward contracts and negotiated purchases all seem to add up to limited packer needs going into October. 

    In the grain complex we seen corn 6 to 12 cents higher and soybeans 18 to 26 cents higher However, the highs were limited as early yields were better than expected.  Soybeans saw strength from on-going demand.  Wheat saw support from news of Egypt easing on zero percent ergot restriction.  The harvest is underway in parts of the Southern Plains and Midwest after being delayed last week due to heavy rain.  The crop condition ratings for corn and soybeans held steady at 74 percent and 73 percent good to excellent condition, respectively.  Spring Wheat harvest is all but done with 98 percent complete and 17 percent of winter wheat planted. 

    It was also announced that China has agreed to open its borders to US beef after a 13 year ban.  This was a welcome development giving the importance China now has in the global beef trade.  It is not sure when product will start moving, as quarantine requirement still need to be developed and installed.  On positive note, as we move into October and November we normally see a seasonal rally in boxed beef values.   This week prices have stayed somewhat steady with slight upward move late in the period, after dipping weaker mid- week.  In fact, the chuck and round primal cuts have already posted good increases this week, which is very seasonal.  Beef 50s trim continues to languish near multiple year lows, sub-$40 after trading above $90 earlier this year.  Auction volume this week included 50 percent weighing over 600 lbs and 39 percent heifers. 

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    September 23rd: Cattle on Feed Report
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    United States Cattle on Feed Up 1.63 Percent
    • Cattle and calves on feed for the slaughter market in the United States for feedlots with capacity of 1,000 or more head totaled 10.1 million head on September 1, 2016. The inventory was 1.63 percent above September 1, 2015.
    • Placements in feedlots during August totaled 1.88 million head, 15.13 percent above 2015. Net placements were 1.84 million head. During August, placements of cattle and calves weighing less than 600 pounds were 360,000 head, 600-699 pounds were 290,000 head, 700-799 pounds were 429,000 head, and 800 pounds and greater were 800,000 head.
    • Marketings of fed cattle during August totaled 1.87 million head, 17.63 percent above 2015.
    • Other disappearance totaled 41,000 head during August, 31.67 percent below 2015
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    Cattle on Feed Inventory in 1,000+ Capacity Feedlots as of September 1st
    Millions of Head
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    Number of Cattle Placed on Feed in 1,000+ Capacity Feedlots in August
    Millions of Head
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    Number of Cattle Marketed from 1,000+ Capacity Feedlots in August
    Millions of Head
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    Cattle on Feed by State as of September 1st
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    September 23rd: USDA Cold Storage Report
    • Total red meat supplies in freezers were up 1 percent from the previous month but down 3 percent from last year. 
      • Total pounds of beef in freezers were up 1 percent from the previous month and up 1 percent from last year. 
      • Frozen pork supplies were up 1 percent from the previous month but down 7 percent from last year. 
      • Stocks of pork bellies were down 37 percent from last month but up 132 percent from last year.
    • Total frozen poultry supplies on August 31, 2016 were down 4 percent from the previous month but up 4 percent from a year ago. 
      • Total stocks of chicken were down 6 percent from the previous month and down 1 percent from last year. 
      • Total pounds of turkey in freezers were up slightly from last month and up 11 percent from August 31, 2015.
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    September 16th: Shootin' the Bull Weekly Analysis
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    In my opinion, this has been one whale of a week in cattle.  October fats are perceived to have created a 5 wave move from the $99.37 low to the $108.10 high.  The price action from the $108.10 high to the $109.22 high is perceived to be an irregular B wave of an A,B,C correction.  The price action from the $109.22 high to Friday's low of $104.42 is the C wave of this correction.  What is unknown is whether the initial move up is an A wave or a wave 1.  Regardless,  Friday's low is anticipated to be a wave 2 or B with a wave C or 3 anticipated to push October fats higher.  The upside target for the wave C is $115.17 and a wave 3 to $121.20.   The abruptness of the sell off Thursday and Friday had my phone ringing off the hook. 

    Here is what I perceive has transpired.   Packers were perceived long the futures from when October was at or below $100.00.  At that time, that was $5.00 to $6.00 under the lowest established cash trade.  In the two weeks following, futures moved higher and helped to reverse cash.  With packers perceived owning inventory through futures contracts, the rally produced profits over and above still having to pay $110.00 cash last week.  This week, the futures continued higher, closing the basis and the spreads between months narrowed that produced no advantage to the packer.  On Thursday as their needs grew, it is anticipated that the packers had no advantage in buying cattle, so they potentially made one.  It is possible that packers have sold their futures, creating a panic to bearish weary producers.  The futures drop and with in less than 24 hours, packers are able to buy cattle at the desired $105.00 level in the futures.  Now, regardless of what happens, the packers own cattle at the lower end of the price range, and can be delivered as soon as next week as October expires.  Even if by days end they have to pay steady money or higher, the futures would then be anticipated to move higher, closing the basis with futures moving up. 

    Now, nothing I've stated is fact.  That is because no packer is going to tell anyone of their strategy.  However, there are only two players and they only trade once a week with one another, so it is not too awfully difficult to at least visualize what I perceive to have transpired.  Recall what was stated earlier this week, the packer needed an antic of some kind to turn the tide.  From "The Beef", Ms. Fish had made mention of the packers vocalizing a smaller kill week and potential cooler cleaning day.  Everyone knows the distress the producer is in and how easy it is at this time to push the hot buttons.  The phone traffic this morning alone was phenomenal, suggesting it didn't take much to bring concern right back to the forefront.  Lastly, the development of the chart pattern that resembles a "falling off the cliff" look, leads me to anticipate the next few days spent attempting to climb back up it.  This pattern is of my own recognition.  Take this analysis with two grains of salt as I fully understand the detriment that will ensue if incorrect on my analysis.  Supply is the bears drum beat.  Keeping current is anticipated to soften the noise.  Due to dealing in the future, it will be this time next week to see how accurate my analysis is.  Lastly, I continue to anticipate the trek to $116.00 October still intact. 

    Feeder cattle remain stuck in rut.  They didn't even come close to putting on as much price as did the fats.  Hence, when fats broke on Friday, the feeders tested the current contract lows on the front months and made new contract lows in the back.  Moving forward there remains not much to drive the feeder market.  However, there isn't much to drive it much lower either.  With the discounts of the back months, there appears even less reason to want to hedge feeders.  From here, a resumption of higher trading in fats would be friendly towards the feeders, but anticipated to only be keeping them buoyed at this time.

    Corn went from wallowing to meandering.  There is not much transpiring in the corn to make recommendation for.  This week, I had made the recommendation to buy July '17 bean meal. Meal didn't perform very stellar this week, but didn't break near as hard as did the beans themselves.  I don't see much to do at this time with any of the grains. 

    Christopher B. Swift is a commodity broker and consultant with Swift Trading Company in Nashville, TN. Mr. Swift authors the daily commentaries "mid day cattle comment" and "Shootin' the Bull" commentary found on his website @ www.shootinthebull.com

    An investment in futures contracts is speculative, involves a high degree of risk and is suitable only for persons who can assume the risk of loss in excess of their margin deposits.  You should carefully consider whether futures trading is appropriate for you in light of your investment experience, trading objectives, financial resources and other relevant circumstances. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.

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    September 23rd: Boxed Beef & Retail Beef Prices Lower
    Stephen R. Koontz, Colorado State University 

    There are a couple of things that have happened in cattle and beef markets across the last two weeks that need to have attention called to.  First, the boxed beef cutout value moved well below $2 per pound last week. It has been sometime since this price level has occurred.  Occasionally this fall the beef products that make up the composite have traded at levels where the combined level has dipped below $2 per pound. But last week the value was approximately $1.85 with October yet to come.  Second, during the week of September 6 the live cattle futures prices for October and December contracts traded for several days below $1 per pound and November feeder cattle contract traded below $1.25.  It is safe to say that it will likely be some time before the market prices for cattle and beef return to the levels seen from 2012-2014.  The shocks to the commodity system that occurred in 2007 and then again from 2009-2013 appear to have played out. This is good news for consumers, food service providers and restaurant establishments.  These levels also require cattle producers reevaluate long-term plans.

    In that last context, what next? Where’s the good news for producers? I believe we are in that phase of price adjustments where things look the worst and the potential for market change is most likely. Saturday beef slaughter numbers continue to be the highest in recent years. The Saturday volumes have been strong. Beef production is up but the lower prices are clearly encouraging product movement. Hamburger products and end meat cuts are showing the most price weakness. But the middle meats are not immune – loin cuts have moved progressively lower through the summer. Domestic demand has showed some weakness but the evidence is not substantial. Lower prices are resulting moving volumes and clearly the heavy showlists that has persisted since last year.  Further, the lower prices are translating into reasonably good beef export figures. July’s numbers were solid without much help from a cheaper dollar. Retail beef price showed is largest decrease in years with last month’s reported price and this is a price level that includes none of the discounts from retail featuring.  Retailers – and packers – are and will likely command very solid beef margins, possibly, well into next year.

    Finally, fed heifer slaughter is sharply higher through the summer. The majority of increased beef production is from fed heifers. The weekly figures for August and September 2016 are 20-30 thousand head per week higher than 2015. Expansion has likely not stopped but will prove to be lower than initial forecasts and appears unlikely to continue substantially into 2017. I don’t foresee fall of 2017 being more of 2016. And that is a long way off with the markets we’ve had to discuss the last two years.

    What do the technical say? Mainly, it’s, “My, that’s a big corn crop.” The discussion last week in this column of feedlot profitability was timely and useful.  DEC16 corn has rallied off support but the down trend in holding. I expect more down moves.  And it appears cash basis agrees – very weak basis is shaping up for corn before much is harvested.  The technicals for live and feeder cattle are exactly the same as corn. Support plains established in August where soundly broken in September.  The markets have rallied since these down moves and established new support. But down trends remain in place and more down moves are likely to continue.  I will be watching the Cattle on Feed report Friday be most interested in the calculated market ready inventories. Do the showlist inventories continue to tighten with strong slaughter volumes?  Or do the potential for heavier volumes hang over the market?

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    September 22nd: USDA Livestock Slaughter Report

    Record Commercial Red Meat and Pork Production for August

    Commercial red meat production for the United States totaled 4.43 billion pounds in August, up 14 percent from the
    3.90 billion pounds produced in August 2015.

    • Beef production, at 2.26 billion pounds, was 17 percent above the previous year. Cattle slaughter totaled 2.75 millionhead, up 18 percent from August 2015. The average live weight was down 11 pounds from the previous year, at1,352 pounds.
    • Veal production totaled 6.1 million pounds, 6 percent below August a year ago. Calf slaughter totaled 40,900 head, up 19 percent from August 2015. The average live weight was down 63 pounds from last year, at 255 pounds.
    • Pork production totaled 2.15 billion pounds, up 10 percent from the previous year. Hog slaughter totaled 10.39 million head, up 11 percent from August 2015. The average live weight was down 2 pounds from the previous year, at 276 pounds.
    • Lamb and mutton production, at 12.6 million pounds, was up 7 percent from August 2015. Sheep slaughter totaled 193,700 head, 11 percent above last year. The average live weight was 130 pounds, down 4 pounds from August a year ago.
    January to August 2016 commercial red meat production was 32.7 billion pounds, up 3 percent from 2015. Accumulated beef production was up 6 percent from last year, veal was down 8 percent, pork was up 1 percent from last year, and lamb and mutton production was down slightly. 
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    September 22nd: China to Resume U.S. Beef Imports

    China's premier promised to resume Chinese imports of U.S. beef soon, calling it a sign of Beijing's sincerity to improve commercial ties with the U.S. Speaking to U.S. business groups in New York on Tuesday night, Premier Li Keqiang said China would soon allow imports of U.S. beef. 

    "We also recognize that the United States has very good beef, so why should we deny Chinese customers this choice?" Li said.

    Though the premier didn't give a specific timetable, trade groups have previously said imports may resume before the end of the year. 

    China has had a ban in place on most U.S. beef imports since 2003 when mad-cow disease was found in some American beef cattle.

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    "Click Here to view a Slide Show of Drought Monitor maps for the last 12 weeks
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    September 21st: Canadian Feedlot to Cease Operations
    Reuters

    One of Canada’s biggest cattle feedlots, Alberta-based Western Feedlots, said on Wednesday it will suspend feeding operations after marketing the cattle it currently owns, due to poor economic conditions.

    The company, started in 1958, will continue its farming operations, it said in a release.

    Shareholders made the decision because of the high-risk, low-return environment in cattle ownership, and poor political and economic conditions in Alberta, Western said. It did not elaborate on the conditions in Alberta, which last year elected its first left-leaning government in decades.

    Canada is the world’s sixth-largest beef exporter, and Alberta raises more cattle than any other province.

    Loss of the feedlot “takes out a material portion of demand for cattle across the Prairies,” said livestock industry analyst Kevin Grier. “To me, this is pretty big news.”

    Grier said losing feedlot capacity is not surprising, given short Canadian supply and the high price of young cattle that feedlots buy and raise to slaughter weight, as well as the weak price of fed cattle.

    Recent Alberta fed cattle prices of $125 per hundredweight (100 pounds) are down 30 per cent from a year ago, he said.

    Cargill Ltd and JBS USA Holdings Inc run Alberta’s biggest beef processing plants.

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    September 21st: Brazil's Impact as a Beef Exporter to U.S.
    CME Group

    Media has reported that several beef producing facilities in Brazil have been approved to export fresh beef to the U.S. While we have heard this report from several sources, we have yet to be able to confirm it with USDA’s Food Safety Inspection Service.

    According to reports, three main international beef producing companies who have plants in Brazil; JBS, Marfrig, and Minerva, have all had individual Brazil units (plants) approved for export to the U.S. JBS has 4 units approved, andreported the first batch of fresh beef will be shipped to the U.S. this weekend. Marfrig has 6 units approved for export and said it has already shipped its first container of fresh beef to the U.S., and Minerva had 2 units approved for exporting.

    To recap, on August 1st, the USDA announced the reopening of fresh beef trade with Brazil. At the time of announcement no specific plant in Brazil had approval, but the announcement jumpstarted the plant specific approval process. While this market is now open and operating, we do not expect a major influx of Brazilian beef into the U.S. in the short run, mainly due to Tariff Rate Quotas (TRQ’s) and Brazil’s foothold in other major markets. To review, TRQ’s are assigned to countries exporting product to the U.S., who do not have a free trade agreement with us. The total TRQ for beef from countries without a free trade agreement or specific quota with the U.S. (defined as “Other Countries”) is 64,805 metric tons, and is used on a first come first served basis. Brazil falls into this “Other” category. Once the quota is reached, any beef exported to the U.S. from “Other” countries, over the maximum amount, is subject to a 26.4% ad valorem tax.

    Last year, 68% of the 64,805 mt (142 million pounds product weight) quota was filled, primarily by Nicaragua, Honduras, Costa Rica, and Ireland. This TRQ, along with the market share Brazil holds in Chinese and Russian beef imports, leads us to believe that relatively small levels of beef will be imported from Brazil at least for the first couple years. According to USDA’s Global Agricultural Information Network (GAIN), the recent report on Brazil’s 2016 Annual Livestock situation compiled by USDA staff in country, notes they expect Brazil to fill about 80% of the 64,805 mt quota in 2017. Note, the graph below shows that even if Brazil filled 80% of the quota, it would pale in comparison to the volume of beef we import from our main international sources.

    Brazil hosts an impressive cattle and beef industry. According to the GAIN report, Brazilian total beef cow inventory numbers were at 54 million head in 2015 and 55 million head in 2016. That is compared to the U.S. beef cow herd at 29 million head in 2015 and 30 million head in 2016. In Brazil, beef production, on a carcass weight equivalent (cwe), totaled 9,425,000 mt (20.8 billion pounds) in 2015 and is forecast at 9,620,000 mt cwe (21.2 billion pounds) in 2016, Almost 20% of their production goes to the export markets. This is compared to U.S. beef production which totaled 23.7 billion pounds cwe in 2015 and is estimated at 24.8 billion pounds in 2017. Brazilian cattle are generally smaller framed than in the U.S. Additionally, cattle in Brazil are largely finished on grass based pasture systems.

    The report describes the expected increase in Brazilian beef production into 2017 is underpinned by higher exports, mostly to Asian markets, along with a small increased in domestic demand due to a recovering economy. However, the report cautions that cattle producers and packers remain concerned with the price uncertainty of feed costs, along with the volatility of the exchange rate, as main factors that could affect margins. 

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    September 21st: Corn Crop Harvested

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    September Seasonal Drought Outlook
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    All Cattle & Calves Inventory: January 1, 2016 vs. 2015
    Compiled from USDA National Agricultural Statistical Service Data
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    Beef Cows Inventory: January 1, 2016 vs. 2015
    Compiled from USDA National Agricultural Statistical Service Data
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    Replacement Heifers Inventory: January 1, 2016 vs. 2015
    Compiled from USDA National Agricultural Statistical Service Data
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    January 29th: January 1 Cattle Inventory Up 3 Percent
    USDA - National Agricultural Statistics Service (NASS)

    All cattle and calves in the United States as of January 1, 2016 totaled 92.0 million head. This is 3 percent above the 89.1 million head on January 1, 2015.

    • All cows and heifers that have calved, at 39.6 million head, are 3 percent above the 38.6 million head on January 1, 2015.
    • Beef cows, at 30.3 million head, are up 4 percent from a year ago. Milk cows, at 9.32 million head, are up slightly from the previous year.
    • All heifers 500 pounds and over as of January 1, 2016 totaled 19.8 million head. This is 3 percent above the 19.3 million head on January 1, 2015. 
    • Beef replacement heifers, at 6.29 million head, are up 3 percent from a year ago. 
    • Milk replacement heifers, at 4.82 million head, are up 2 percent from the previous year. 
    • Other heifers, at 8.71 million head, are 3 percent above a year earlier.
    • All Calves under 500 pounds in the United States as of January 1, 2016 totaled 14.1 million head. This is 4 percent above the 13.5 million head on January 1, 2015. 
    • Steers weighing 500 pounds and over totaled 16.3 million head, up 4 percent from one year ago. 
    • Bulls weighing 500 pounds and over totaled 2.14 million head, up 2 percent from the previous year.
    Calf Crop Up 2 Percent
    • The 2015 calf crop in the United States was estimated at 34.3 million head, up 2 percent from last year's calf crop. 
      • Calves born during the first half of 2015 were estimated at 24.8 million head. This is up 2% from the first half of 2014. 
      • The calves born during the second half of 2015 were estimated at 9.50 million head, 28% of the total 2015 calf crop.
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    September 27th: Graphic Illustration of Where We Are

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