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Market Summary for the week ending February 5th:
February 5, 2016
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  • "Click Here" to receive the new Market Summary via e-mail on Saturday mornings
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The Cattle Range 10 Day Market Trend:
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    Slightly Bullish: The overall trend was higher but boxed beef and cattle futures both traded sharply lower on Friday.

    With increased cattle numbers and beef production projected for 2016, it should be remembered that when the supply of any product, service, or commodity increases without a corresponding increase in demand, prices tend to go lower.  The weaker U.S. Dollar is friendly for increased beef exports but the dollar is weaker because the indicators for the U.S. economy are less than positive and sliding into a recession is a real possibility.

The Trendline is an indicator of overall cattle/beef market strength and is based on daily market factors for the last 10 days.
    • Each daily factor is the aggregate weighted total of the Gain/(Loss) for 10 major market indicators compared to the previous trading day.
    • The angle indicates direction & velocity of the trend.
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On-Line Store
 
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National Feeder & Stocker Cattle Weekly Summary:
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RECEIPTS:  Auctions   Direct    Video/Internet     Total
This Week     210,000     27,800        23,600              261,400
Last Week     237,100     56,700          6,900              300,700
Last Year       159,100     61,400        36,700              257,200

Compared to last week, major winter storm moved across the Central Plains on Monday evening and Tuesday with plenty of high winds closed parts of I-70 and I-80 across Kansas and Nebraska with 10-12 inches in many areas.  The storm also affected parts of Colorado, eastern Wyoming and extended back into the upper Midwest across Iowa.  This halted production of several packing plants and a number of auctions cancelled.  Lower undertones were prevalent on most classes of feeders sold throughout the Southern Plains and the Midwest with prices ranging steady to 5.00 lower on calves and yearlings through mid-week; as many feedlots were digging out and trying to get cattle fed.

A number of auctions from mid to late week reported sales steady to 5.00 higher as many feedlots resumed normal operations after the storm.  Some of the better tested markets this week were in the Southeast trading mostly steady to 5.00 higher with instances 10.00 higher on calves.  Last Friday’s Cattle Inventory Report pretty much confirmed that the nation’s cattle herd is expanding, but rebuilding a little faster than anticipated.  Feeder cattle futures struggled the most with this to start the week but Live cattle futures seem to like a winter storm and moved in a higher direction early in the week.  Cattle futures retreated Friday with triple-digit losses cooling on upside potential.  There remains some skepticism regarding the cash strength in the feeder cattle market as theinventory report showed plenty of feeder cattle outside of feed yards and deferred live cattle futures showing discounts.

Late last Friday feedlot saleswere very positive with live sales mostly 3.00-4.00 higher ranging from 135.00-138.00 as fed cattle supplies appear to be tightening.  With the severe winterweather in a great deal of cattle feeding country this should shed some poundsoff fat cattle and will no doubt cut into slaughter schedules this week.  The New Year has started out with the month of January being a profitable month for packers as boxed-beef values increased sharply from December.  January also saw good size slaughter levels along with increased exports to start the year with feedlots staying mostly current. 

Boxed-beef values have responded this week as anticipation of cut back in slaughter numbers has helped to boost prices this week.  Choice boxed-beef closed Friday 2.43 lower at 220.60 compared to last Friday’s close at 218.76.  A historic piece of Kentucky Agriculture was destroyed last Saturday as a massive fire burned down the Blue Grass Stockyards in Lexington, KY.  The stockyards was a 70 year old historic member of the Lexington community and a significant loss to the livestock industry in Kentucky will be sadly missed.  Cattle sales will be relocated to the company’s Mount Sterling and Richmond sites.  Auction volume included 56 percent weighing over 600 lbs and 41 percent heifers.

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Stocker Steers:
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Feeder Steers:
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Five Year Moving Average - Stocker Steers, Feeder Steers, & Slaughter Steers:
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Cattle Futures: Live cattle futures closed 30 cents to $1.25 lower, with the April contract leading the decline. Feeder cattle futures closed $2.35 to $2.77 1/2 lower. February live cattle futures finished the week about 75 cent higher; other months also edged out slight gains. Cattle futures may start next week under selling pressure as futures showed signs of starting a correction on Friday. The extent of the correction will depend upon the degree marketings have been disrupted due this week's winter storm.
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Selected Auction Reports:
"Click" on individual auction links for complete report

Farmers & Ranchers Livestock Commission Co. - Salina KS
Receipts:  2976    Last Week:  5235    Year Ago:  2540
Compared with last week: Feeder Steer 600-750 lbs steady to firm; 750-900 lbs 2.00-4.00 higher; few 900 lbs and over firm to 1.00 higher. heifers 600-750 lbs 5.00-7.00 higher.

Tulia Livestock Auction - Tulia TX
Receipts:  1947    Last Week:  2069    Year Ago:  1023
Compared to last week:  Yearling steers and heifers sold 2.00 to 5.00 higher.  Calves sold as much as 10.00 higher in spots.  Trade activity was active on very good demand.

Mitchell Livestock Wtd Avg Report - Mitchell SD
Receipts:  3210    Last Week:  6130    Year Ago:  4085
Compared to last week:  Feeder steers under 700 lbs lightly tested, over 700 lbs steady to 1.00 higher except 800-850 lbs 2.00 to 4.00 higher.  Feeder heifers 600-700 lbs 2.00 to 5.00 higher, 700-800 lbs steady to 2.00 higher, 850-900 lbs 2.00 to 3.00 higher.

Oklahoma National Stockyards - Oklahoma City OK
Receipts: 9,128    Last Week: 9,871    Year Ago: 4,300
Compared to last week:  Feeder steers and heifers over 750 lbs traded mostly 1.00-3.00 lower.  Steer and heifer calves sold steady to 3.00 lower, instances of 5.00 lower on 500 lb cattle.  Demand moderate.

El Reno Cattle Narrative - El Reno OK
Receipts:  5544    Last Week:  6585    Year Ago:  3542
Compared to last week:  Feeder steers and heifers sold 1.00 to 2.00 higher. Steer and heifer calves sold steady to 5.00 lower, instances of up to 10.00 lower on 500 lbs.  A shorter supply of light weight calves on offer.

Joplin Regional Stockyards Feeder Cattle Wtd Avg - Carthage MO
Receipts:  6693    Week Ago:  6529    Year Ago:  2980
Compared to last week, steer calves and yearlings steady to 3.00 lower, heifer calves 3.00 to 5.00 lower.  Demand moderate to good, supply moderate to heavy.

Winter Livestock - La Junta CO...
Receipts:  743    Last Week:  2964    Year Ago:  1456
Compared with last Tuesday: Receipts lighter this week due to the snow storm and poor road conditions.  Steers 500 to 550 lbs 3.00 to 5.00 higher, all weights over 550 lbs mostly steady in a light test.

Toppenish, WA Livestock Auction - Toppenish WA
Receipts:  2350    Last Week:  1300    Year Ago:  1575
Compared to the last Thursday at the same market: stocker and feeder cattle 15.00-19.00 higher. Trade active with good demand and good buyer attendance.

Cattleman's Livestock Auction - Dalhart, TX
Cattle and Calves: 1526       Week ago: 2200       Year Ago: 934
Compared to last week:  Feeder steers and heifers mostly steady in all weight categories.  Receipts were mostly thin gaunt kinds with a few fleshy. Slaughter cows and bulls 2.00-3.00 higher.  Trade fairly active.  Demand good.

Pratt Livestock Feeder Cattle Auction - Pratt, KS
Receipts:  2026    Last Week:  4334    Year Ago:  2597
Compared to last week: Feeder steers 650-800 lbs 3.00-6.00 higher; 850-950 lbs firm to 4.00 higher; Feeder heifers 700-900 lbs firm to 2.00 higher on a very light test

Tri-State Livestock Auction Market - McCook NE
Receipts:  2500    Last Week:  2400    Year Ago:  1800
Compared to last week, steers and heifers were steady – 6.00 lower. Demand was good for a snowy cold day. Steers Accounted for 56 percent and heifers 44 percent of the Offering today.

Clovis Livestock Auction - Clovis NM
Receipts: 2614           Week Ago:  1909           Year Ago:  1460
Compared to last month:  No comparison with last month's Holstein Steer Special due to very limited receipts last month, but a higher undertone noted.
Compared to last week, feeder steers unevenly steady to 2.00 higher; heifers mostly steady except a few 650-700 lbs 2.00 higher.

Sioux Falls Regional Livestock wtd Avg Report - Worthing SD
Receipts:  3914    Last Week:  5514    Year Ago:  1379
Compared to last week:  Steers 500-600 lbs steady to 5.00 higher, 600-700 lbs steady to 5.00 lower with instances to 10.00 lower, 700-800 lbs steady to 5.00 lower, 850-900 lbs steady to 4.00 lower.

Russell Wtd Avg Feeder Cattle Auction - Russell IA
Receipts:  2553    Last Week:  4179    Year Ago:  968
Compared to the sale last week: Feeder strs mostly 2.00-6.00 lower and feeder hfrs mostly 6.00-10.00 lower. Trade Active and Demand Good today.

Valentine Livestock Auction Market - Valentine NE
Receipts:  2570 Last week: 4020 Last year:  0
Compared with last week 550 to 700 lbs steers traded 6.00 to 8.00 higher, with the exception of 600 offerings trading steady.  A limited number of comparable offerings for heifers that trading unevenly steady.

Huss Platte Valley Auction - Kearney NE
Receipts:  5424    Last Week:  5585    Year Ago:  4680
Compared to last week steers sold 7.00 higher and heifers sold steady to 4.00 higher. Demand was good from the crowd of buyers. The feeder supply included 57 percent steers and 38 percent heifers with the balance on Holstein steers,

Denison Wtd Avg Feeder Cattle Auction - Denison IA
Receipts:  3103    Last Week:  1987
Compared to last week, Steers 500 to 650 lbs were steady to 2 higher and 650 to 900 lbs were 3 to 5 higher. Heifers 500 to 800 lbs were steady to 2 lower. The receipts included 53 percent steers and 47 percent heifers.

Direct Sales of Feeder & Stocker Cattle:

AZ-CA-NV Weekly Feeder Cattle Review (Fri)
Confirmed: 4205 
Compared to last week,  Trade and demand moderate.  Several loads of 325 lb Holstein steers for June Delivery traded this week.  Heifers 0 percent of total supply. Cattle weighing over 600 lbs totaled 0 percent.

Colorado Direct Feeder Cattle Report (Fri)
Receipts: 4,160        Last Week 1,598        Last Year 350 
Compared to last week:  Feeder steers traded steady 2.00 higher.  Feeder heifers too lightly tested last week for comparison, however, a firmer undertone noted. Supply consisted of 100 percent over 600 lbs; 35 percent heifers.

Eastern Cornbelt Direct Feeder Cattle Summary (Fri)
Reported sales this week: 0    Last Week: 0     Last Year: 0
Compared to last week:  Feeder steers and heifers not established. Prices based on net weights FOB after a 3 percent shrink or equivalent and 5-10 cent slide on calves and 4-6 cent slide on yearlings from base weights

Georgia Direct Cattle Summary (Fri)
Confirmed sales on 1,253 head; All sales 2-3 percent shrink f.o.b. feedlots or equivalent, 10 day pickup: 
Steers Medium and Large 1-2 119 head 600-650 lbs 155.00-167.00; 188 head 650-700 lbs 158.00-165.00; 67 head 700-750 lbs 149.50; 208 head 800-850 lbs 146.00-147.25; 56 head 850-900 lbs 143.00.

IA-South MN Direct Feeder Cattle Weekly (Mon)
Receipts:  0       Last Week:  0       Last Year:  126
Compared to last week:  Feeder steers and heifers not established.Prices based on net weights FOB after a 3 percent shrink or equivalent and 5-10 cent slide on calves and 4-6 cent slide on yearlings from base weights.

Kansas Direct Feeder Cattle Summary (Fri)
Receipts:  1740    Last Week:  5312    Year Ago:  569
Compared with last week: Steers and heifers steady in a very limited test, this past weeks snowstorm slowed the country trade. Sales confirmed on 1166 steers, 574 heifers and no calves for a total of 1740 head compared with 5312 last week and 569 last year.

Montana Direct Feeder Cattle Wtd Avg (Fri)
Receipts:  1041    Last Week  410    Last Year  140
Compared to last week:  Feeder steers sold mostly steady.  Feeder heifers had no recent comparison.  Demand moderate to good. Supply includes 90 percent over 600 lbs; 83 percent heifers.

New Mexico Feeder Cattle Report (Mon)
Receipts:  2800    Last Week:  2700    Year Ago:  15800
Compared to last week:  Feeder steers and heifers sold mostly steady. Trade activity and demand were moderate to good.  Supply consisted of 90 percent steers and 10 percent heifers.  Approximately 96 percent of the offering weighed over 600 lbs.

Northwest Wtd Avg Direct Feeder Cattle Report (Fri)
Receipts:  2700    Last Week:  1900    Year Ago:  2950
Compared to last Friday, feeder cattle steady. Trade remains slow with moderate to good demand. The feeder supply included 66 percent steers and 34 percent heifers. Near 100 percent of the supply weighed over 600 lbs.

Oklahoma Direct Feeder Cattle (Fri)
Receipts: 1,402        Last Week 5,532        Last Year 2,720 
Compared to last week:  No trend available for feeder steers and heifers due to limited comparable current FOB sales. Demand moderate as the volatility in the market has created much uncertainty among both buyers and sellers

South Dakota Direct Feeder Cattle Summary (Fri)
Receipts:  620    Last Week:  470    Last Year: 0 
Compared to last week: Feeder steers and heifers were not well tested, however a firmer undertone prevailed. Supply included 100 percent over 600 lbs; 69 percent heifers.

WY, Western NE & Western Dakotas Direct Feeder Cattle Wtd Avg (Fri)
Receipts: 1037     Week Ago:  679    Year Ago:  1820 
Compared to last week steers and heifers sold unevenly steady.  Heavy snow across most of the trade areas this week with most areas receiving from 8-15 inches of snow early in the week along with winds up to 45 MPH.

Texas Direct Feeder Cattle (Fri)
Confirmed: 8,300     Last Week:  36,600    Last Year: 29,800
Compared to last week current FOB feeder steers and heifers, were mixed and uneven but mostly steady to 2.00 higher on limited sales. There were lower bids at times during the week but sellers passed the lower bids which curtailed the total sales volume.

Weekly Auction Summaries:
 

  • Reported on Friday for current week.
  • Reported on Monday for previous week.
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    Representative Sales of Cow & Pairs:
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    No sale data available
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    Tire-Changing Ramp for Trailers
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    Canadian Cattle:
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    Alberta Beef Producers:  Alberta direct cattle sales so far this week have seen light trade develop with dressed sales positioned at the bottom end of last week's trading range. This week dressed sales have been exclusively at 298.00 delivered. All reported cash sales have traded to local buyers, local bids remain at a premium to the US and few if any cattle have traded state side. Cash to futures basis levels strengthened this week and remain right in line with the five year historical average.
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    Canadian Cattle Prices:
    Prices have been converted to U.S. $/CWT.  Grades changed to approximate U.S. equivalents
    Exchange Rate: Canadian dollar equivalent to $0.7102 U.S. dollars
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    Robust Beef Expansion Will Slow:
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    Nothing like record cattle prices and profitability to get an industry excited about expansion. The latest USDA Cattle report shows a rapid expansion is underway with cattle and calf numbers up three percent and beef cow numbers up four percent in the past year.

    Record high cattle prices in the last-half of 2014 and first-half of 2015 raised excitement among beef cow producers and they heard the market's expansion call. During that 12-month period Nebraska finished steer prices averaged $162 per hundredweight. Since May 2015, cattle prices have fallen sharply and averaged just $126 in the final quarter of 2015.

    Further evidence of the rapid expansion is shown in the three percent increase in the number of beef heifers being retained to be added to the cow herd. In addition, the number that is expected to calve in 2016 is up six percent.

    The beef expansion is widespread across the country as all regions increased their beef cow numbers. However, leading the expansion has been the Central and Southern Plains states with 60 percent of the nation's total expansion over the past two years. Drought in those regions through 2013 had been an additional reason for massive reductions of beef cow numbers. Some of the current expansion in those regions, then, represents restocking as the grass returned.

    The Southern Plains is the nation's largest beef cow region and they have expanded by nine percent over the past two years. Other important beef cow regions and their magnitude of beef cow expansion over the past two years include: the Central Plains up five percent; the Western Corn Belt up five percent; the Eastern Corn Belt up five percent; the Southeast up one percent; and the Northern Plains up one percent.

    Feeder cattle supplies will be rising as well. The number of steers and heifers weighing over 500 pounds that are not being retained for breeding purposes is up four percent. This is a sizable increase in the feeder cattle supply that can go into feedlots and therefore add to slaughter supplies in the last-half of 2016 and 2017.

    The industry is two years into beef cow expansion so an interesting question is, "How long will this expansion phase last?" Historically, beef cattle expansions lasted five to six years. However, history is not likely to be a very good guide on this cycle. The reasons are that the current expansion has already been quick and of large magnitude. Secondly, the profit outlook for brood cow operations is already providing much less incentive than a year ago.

    Third, beef production in the rest of the world is also expanding and other countries are able to ship increasing supplies of beef to the U.S. and to our foreign buyers. Finally, U.S. pork and poultry supplies are also expanding rapidly providing heightened competition. My best guess is that U.S. cow numbers will continue to rise for only one or two more years, making this a relatively short expansion phase of three or four years.

    Available beef supplies in 2015 were higher than had been anticipated at the start of the year. USDA inventory data one year ago indicated that the number of cattle available for slaughter would be down about five percent. In reality, the amount of beef available in the U.S. in 2015 was actually up one percent. How did we go from five percent lower slaughter numbers to one percent more beef? The answer is in higher weights and in higher beef imports. Each added about three percentage points and thus the amount of beef available was up one percent.

    For 2016, beef production is expected to rise by four percent. However, USDA analysts believe that trade, particularly beef imports, will be down this year. That is possible since beef prices will be lower and will provide less incentive for large imports. A counter argument is that the exchange rate of the U.S. dollar is currently stronger than for most of 2015. The dollar is particularly strong versus Brazil who is the second largest world beef exporter. These relationships at least suggest some uncertainty for U.S. beef trade in 2016.

    The live cattle futures market is not optimistic for finished cattle prices. An estimate of 2016 finished cattle prices derived from current futures suggest yearly averages of around $125. This compares with actual prices of $126 for calendar 2013, $155 in 2014, and $148 in 2015.

    The annual 2016 pattern of prices from these estimates for the four quarters of 2016 are $132, $128, $117, and $120 in the final quarter. Live cattle futures have had extreme volatility in the past two years, so their accuracy at predicting forward prices should be suspect. However, live cattle futures are the hedging mechanism for cattle feeders and must therefore be taken as the current opportunity to forward contract finished cattle prices.

    Steer calves weighing 500 to 550 pounds at Oklahoma City reached record high prices in May 2015 at $290 per hundredweight. By December, those prices had fallen to $194, a level that provides only modest profits above total costs of production, and therefore small incentives for continued brood cow expansion.

    The current futures market estimate of 2016 finished cattle prices might provide prices for those Oklahoma City calves of $185 to $205. This would probably signal small potential profits above all costs. Under this price situation the industry would continue further beef cow expansion plans this year, with the expansion phase more likely to begin leveling off in 2017.

    Chris Hurt - Agricultural Economics Purdue University

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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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    Implications of the Annual Cattle Inventory Report:
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    In reviewing the annual Cattle inventory report released on January 29th by USDA’s National Agricultural Statistics Service, the total U.S. inventory of all cattle and calves (beef-type and dairy), both on farms/ranchers and in feedlots as of January 1, 2016 totaled 92.0 million head. That was up 3% year-over-year. Importantly, USDA lowered their prior estimates including dropping the size of the 2014 calf crop. The U.S. cattle herd, beef cow count, and the number of heifers being retained for breeding purposes all grew significantly. 

    One of the aspects of the report is that it provides the best survey-based assessment of the total number of cattle on-feed in the U.S. Remember, the monthly Cattle on Feed report includes only feedlots that have 1000 head or more capacity. The monthly report showed as of January 1, 2016 that there were 10.6 million head in those surveyed feedlots, slightly fewer animals than a year ago (down 0.5%). In contrast, the annual Cattle report gave a total feedlot inventory of 13.2 million head, 1.2% above 2015’s. The implication is that the smaller feedlots (those under 1000 head capacity and often referred to as “farmer feeders”) after tending to become less-and-less interested in feeding cattle during most recent years jumped back into the game during 2015. The proportion of animals in the larger feedlots actually was below 2015’s as of January 1st of this year, cattle on-feed in 1000 head and larger capacity lots as of January 1, 2016 was 80.2% of all animals on-feed, down about 1% from a year ago. Factors that likely contributed to renewed interest by farmer feeders included lower corn prices and growing trend in urban areas os sourcing locally raised food.

    Based on recent cattle industry reports from USDA-NASS, what does the balance of 2016 and 2017 seem to hold in terms of U.S. beef production? A larger calf crop was produced in 2015 (up 780,000 head or 2.3% above 2014’s and the largest since 2011). An even larger calf crop will be produced in 2016. Those numbers suggest that steer and heifer slaughter numbers will clearly be posting year-over-year increases, with the largest percentage increases during 2016 occurring in the second half of the calendar year.

    Besides steers and heifers processed into beef, an important source U.S. beef tonnage comes from cull cows slaughtered. The Livestock Marketing Information Center (LMIC) forecasts year-over-year increases in U.S. Federally Inspected cow slaughter in both 2016 and 2017. However, levels of cow slaughter are forecast to remain below the drought-induced huge levels posted annually from 2007 into 2014. So, without another severe U.S. drought, the increase in beef produced from steers and heifer slaughter is expected to be much larger than beef from cows. For example, in 2016, steer and heifer slaughter could increase 3% to 4% compared to 2015’s, while the number of cows processed rises by 2% to 3%.

    Given the biological time lags between calf crops and increases in beef production, forecast cow slaughter levels, and forecast dressed weights; U.S. beef production in 2016 is estimated to be 2% to 4% above 2015’s. In 2017, output could grow in the range of another 4% to 5% year-over-year. Still, LMIC expects U.S. beef production in 2017 to be at to slightly below 2013’s. That is important context.

    CME Group

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    Beef Cows Inventory: January 1, 2016 vs. 2015
    Compiled from USDA National Agricultural Statistical Service Data
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    Prices from a Wal-Mart Super Center -- Wal-Mart is the world's largest grocery retailer.
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    Photo of the Week:
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  • Red Angus Rep. Heifers... Southeast OK*
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    Margin between the Choice Boxed Beef Cutout & Feeder Steers:
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    5 Year Average: $42.15 -- This Week: $68.39
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    El Niño to Subside:
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    Art Douglas, professor emeritus at Creighton University and the CattleFax weather analyst for the last 40 years spoke during the CattleFax outlook session at the 2016 Cattle Industry Convention in San Diego.  Douglas said the current El Niño will mature and begin to wind down over the next three to five months. In the interim, however, drought will continue to lessen its grip on much of the U.S., especially California and the Southwest.

    His forecast for February calls for warmer temperatures across the northern tier of states while the southern swath will be slightly cooler. He predicts above-normal precipitation for California and the Southwest, perhaps in the later part of the month. “It’s going to be wet in the Southwest and Southern Plains,” he says, but drier for the Northern Rockies toward the Ohio Valley.

    March, he says, could bring storms from the West Coast to the Central Plains. “This indicates we’re probably going to have a lot of blizzards. It will be cold, but it won’t be minus 10, minus 20.” That dies down in April, but as we transition into May it’s going to remain relatively moist in the West, he predicts.

    “As we get into April, we have very strong westerly winds across the Plains. We have very cool conditions in the Southern Plains spreading into the Corn Belt, It’s likely we’re going to see delayed planting because of this very cool April.”

    “The summer forecast indicates we’re going to have a pretty strong jet stream coming out of the Pacific into the western U.S. It’s going to keep things cool and slightly on the wet side. On the other hand, in the Southeast, we’re going to be building a ridge of high pressure. That’s where we get super hot and dry throughout the Southeast and spread north.”

    June will bring more rain along the West Coast, but the monsoons will be a disappointment in the Southwest, leaving it dry. “Pretty heavy rains in the Ohio Valley but dry in the Northern Plains.”

    As June transitions to July, the Northwest is very wet, but it dries out from Southern California all the way to the Southeast. Then finally, as we get into August, dry conditions return to the central U.S. “So this is the switch from El Niño to La Niña.”

    That poses, as we move through the summer into August, possible problems for the corn crop, he says. “We’re going to have a very hot August. We’re going to have to worry about what this is going to do to the corn crop.”

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    Out of Kilter:
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    A good way to determine if something is, “going on” in a market is by noticing when market relationships are out of kilter. Cattle and grains typically have a positive correlation. They tend to move in tandem. Moderately increase the price of corn and the cattle will follow suit. The opposite is also true as the cost of feed declines, so does the cost of production. However, when this relationship breaks down, its because one market can't keep pace or pass on the costs of the other. 

    Normally, the value of 25 bushels of corn is approximately equal to the price per cwt. for feeder steers.

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    5 Year Moving Average:
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    Crude/Cattle Correlation:
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    The chart below shows a fairly consistent correlation between the price for a barrel of crude oil and the per cwt. price for slaughter cattle.  Since it is unlikely the price of cattle affects the price of oil on the world market, it might be assumed the price of crude oil affects the price of cattle, but that is unlikely as well.  It is more likely that economic factors affecting demand for crude oil have a similar effect on demand for beef.

    Accordingly, in the absence of geo/political events disrupting or distorting oil supply, since price trends occur slightly sooner in the crude oil market, crude oil has been a good indicator of the direction of near term cattle prices. However, with increased supplies of crude oil and decreased supplies of slaughter cattle, an "Out of Kilter" situation between the two commodities has developed.

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    5 Year Moving Average:
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    Slaughter Cows & Bulls:
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    Slaughter cows and bulls sold steady to 2.00 higher. 

    USDA's Cutter Cow cut-out value Friday afternoon was 165.03 -- Steady with last Friday.

                     %Lean    Weight         Colorado        Oklahoma       Alabama 
    Breakers 75-80%  1100-1600  76.00-80.00   71.00-80.00    73.00-78.00
    Boners     80-85%  1000-1450  75.00-79.00   71.00-81.00    79.00-84.00
    Lean        85-90%  1000-1300  71.00-77.50   70.00-78.50     71.00-76.00
    Bulls         88-92%  1300-2500  96.00-99.00   93.00-103.00   93.00-97.00

                  Confirmed  01-29   Year Ago   WTD   Week Ago   Year Ago
    National     6,799     7,575     6,294      37,638    37,556        34,567
    S Central   2,436     2,200     1,669      11,692    11,411          8,776
    N Central      938       558         361         2,414     3,213            2,451
    East           1,687     1,297     1,577         8,713     6,797           8,319
    West             751     1,957     1,451         8,515     9,286            8,985
    Midwest        987     1,563    1,236         6,304      6,849           6,036

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    Est. Weekly Meat Production Under Federal Inspection:
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    Total red meat production under Federal inspection for the week ending Saturday, February 06, 2016 was estimated at 915.6 million lbs. according to the U.S.Department of Agriculture's Marketing Service. This was 6.1 percent lower than a week ago and 2.1 percent lower than a year ago.  Cumulative meat production for the year to date was 1 percent lower compared to the previous year.
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    Weekly Hay Reports: "Click" on links for detailed report
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    Weekly Feedstuffs Market Review:
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    The USDA Market News Service reports feed ingredient prices for the week ending February 3 were mixed. 
    • Soybean Meal was mixed, 1.50 lower to 6.70 higher, mostly 2.70 to 6.70 higher. Cottonseed Meal was mixed, 15.00 lower to 10.00 higher. Canola Meal was mixed, 10.00 lower to 4.70 higher. Linseed Meal was steady to 5.00 higher. Sunflower Meal was 20.00 lower. 
    • Whole Cottonseed was steady to 40.00 lower. 
    • Crude Soybean Oil was steady to 5 points higher. Crude Corn Oil was steady. 
    • Ruminant Meat and Bone Meal was mixed, 60.00 lower to 35.00 higher. Ruminant Blood Meal was 25.00 to 35.00 higher. Feather Meal was mixed, 5.00 lower to 5.00 higher.   Menhaden Fishmeal was steady. 
    • Corn Hominy was mixed, 1.00 lower to 1.00 higher. Gluten Feed was steady. Corn Gluten Meal was mixed, 10.00 lower to 10.00 higher. 
    • Distillers Dried Grain were mixed, 5.00 lower to 10.00 higher. 
    • Wheat middlings were mixed, 5.00 lower to 5.00 higher, mostly steady to 5.00 higher. Wheat millrun was steady to 30.00 lower, mostly steady.

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    CME Says Cattle Market May Be ‘Broken’ as Volatility Soars:
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    CME Group Inc., the world’s largest futures market, moved to curb a recent jump in price volatility in U.S. cattle futures while warning that the derivatives may be “broken” because of changes in the livestock industry.

    Starting Monday, cattle futures will be added to a CME system that caps how many electronic order updates traders can send in relation to the number of trades they actually execute. CME Chairman Terry Duffy said he’d also push for shorter hours and trading delays to help curb volatility.

    Speaking Jan. 29 at a conference held by the National Cattlemen’s Beef Association in San Diego, Duffy denied that high-frequency traders were to blame for the volatility. While the NCBA wrote a letter to the CME last month linking high-frequency trading to volatility, some of its members see another cause: the slumping volume in the underlying cash market where cattle change hands directly between owners and meatpackers.

    “Futures, a derivative thereof, need to have a viable cash market, so if it doesn’t, it might be broken,” Duffy said in an interview.

    The volatility has meant cattle futures traded in Chicago have increasingly hit daily trade limits for upward and downward prices moves. That’s spooked cattle owners and deterred them from using the derivatives to protect against price swings, the 28,000-member NCBA said in its Jan. 13 letter.

    Price Indicators

    “You’re scared to buy, you don’t want to sell, it paralyzes you," said Ed Greiman, the chair of the NCBA’s marketing and international trade committee.

    Volumes in the cash market have been falling for decades as cattle owners increasingly agree to sales contracts based on price formulas. These are often more efficient, resulting in a $25-per-head value for sellers, according to Stephen Koontz, an economist at Colorado State University. In some instances trade has effectively dropped to zero in some southern states, he wrote in research published last year.

    When there’s a lack of price indicators from negotiated cattle trades, futures prices can’t be based on supply and demand fundamentals, Greiman said in an interview last week. He said that may have added to the spike in recent volatility.
    Online Auctions?

    Duffy downplayed the influence of high-frequency traders, telling the conference that they account for just 10 percent of cattle-futures trading, compared with about half of all the derivatives volume on the CME. The bourse hasn’t gotten complaints about volatility or high-frequency trading from other agricultural commodity groups such as pork and grain producers, Duffy said in the interview.

    Still, the bourse is adding cattle, feed-cattle and lean-hog futures to its trader messaging system.

    “I will be very aggressive to drive home change for cattle futures,” Duffy said.

    In an attempt to expand cash-market trading, Greiman’s committee is working on developing an online auction for feed yards and meatpacking companies. A mock-up auction was conducted recently, Greiman said.

    The NCBA is also forming a working group that will include representatives from the CME to drive more action and continue to address the volatility in futures, Colin Woodall, vice president of government affairs for the NCBA, said in an interview Friday.

    “Our biggest concern is that intraday volatility, when you see cattle contracts trade limit up or down without any change in fundamentals to drive that,” he said. “When the market goes limit either way, the market stops for that day, and waiting to the next day can cost a lot of money.”

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    Bullish/Bearish Consensus:
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    The theory behind the "Bullish/Bearish Consensus" indicator is when the public reaches a consensus, they are usually wrong:
    • They get too bullish after prices have risen, and too bearish after they have already fallen.
    Because of this tendency, there are often extremes in opinion right before major changes in trend:
    • When the public reaches a bullish extreme, i.e., a great majority thinks prices will keep rising, then prices often decline instead. 
    • And when they become too bearish, then prices tend to rise.
    So when Public Opinion moves above the red dotted line in the chart, it means that compared to other readings over the past year, you're seeing excessive optimism. You also want to look at the absolute level of Opinion, too - if it's at 90%, then there's no question we're seeing an historic level of bullish opinion.  Watch for readings above 80% (or especially 90%) to spot those dangerous times when the public is overly enthusiastic about a commodity.

    Conversely, when Public Opinion moves below the green dotted line, then the public is excessively pessimistic about the commodity's prospects for further gains compared to their opinion over the past year.  Looking for absolute readings under 20% (or especially 10%) often indicates an upturn in the market.

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    Bullish/Bearish Consensus: Cattle
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    Bullish/Bearish Consensus: Corn
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    Stock Markets & Economic News:
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    STOCKS FALL ON OIL, FED UNCERTAINTY: Stocks fell as investors reacted early in the week to a renewed decline in oil prices and late in the week to a mixed jobs report. Weakness in some fast-growing and highly valued technology and biotechnology shares weighed particularly heavily on the tech-heavy Nasdaq Composite Index. The Russell 2000 Index, which is focused on typically more volatile small-cap shares, was also notably weak. Both the Nasdaq and the Russell 2000 ended the week down roughly 13% for the year to date.

    Although the broader market was able to shake off another decline in oil prices at the start of trading on Monday, energy stocks paced a broader slump on Tuesday. Along with a renewed retreat in oil prices below $30 per barrel, investors were discouraged by oil giant Exxon Mobil’s decision to scale back its stock buybacks. Oil prices and the overall market bounced back at midday Wednesday, however, in response to rumors of a possible production cutback agreement among Russia and other non-Gulf producers.

    JOBS GROWTH SLOWS, BUT WAGES AND WORKWEEK SHOW STRONG INCREASES: Friday’s monthly payrolls report caused another reversal in sentiment. Employers did not create as many jobs as widely predicted in January, which may have raised alarms for some about an economic slowdown. The underlying data were stronger, however, which appeared to cause other investors to worry that the Federal Reserve would announce another rate increase sooner rather than later.

    Companies in the U.S. service sector such as retail, banking and health care grew in January at the slowest pace in almost two years, adding to a drumbeat of data suggesting the economy has slowed. The Institute for Supply Management said its nonmanufacturing index fell to 53.5% from 55.8% in December. Economists had forecast a 55.2% reading.

    Any number over 50% indicates more businesses are expanding instead of contracting, but the ISM service index has dropped three straight months and is at the lowest level since February 2014.

    The slowdown suggests that weakness among energy producers, manufacturers and major exporters may have spread to the much larger service side of the economy that employs the vast majority of Americans.

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    U.S. Stocks:
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    "Click Here" to view a Slide Show of Drought Monitor maps for the last 12 weeks
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    Looking Ahead:
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    • During February 4-8, 1-3 inches of precipitation is expected to fall across New England, New York, and the mid-Atlantic region, while 2-5 inches is forecast across parts of the Southeast. This should reduce, if not eliminate, some of the D0 coverage in this part of the country. For the northwestern quarter of the contiguous U.S., the mountainous areas can expect precipitation amounts (liquid equivalent) to range from about 0.5-1.5 inches, with perhaps as much as 4-6 inch amounts confined to the Olympic Peninsula and northern Cascades in Washington state.
    • During the ensuing 5 days (February 9-13), there are elevated odds of above-median precipitation from the Dakotas eastward across the Great Lakes to the northern Atlantic Coast, as well as for most of Alaska. Below-median precipitation is favored for most of the remainder of the contiguous U.S.
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    Feedyard Closeouts: Profit/(Loss)
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    Typical closeout for un-hedged steers sold this week:
    • Placed On Feed 150 days ago = September 8th
    • Projected Profit/(Loss) based on the futures when placed on feed: ($139.99)
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    Cost of 750 lb. steer delivered to the feedyard @ $205.15 per cwt. 
    $1,538.63
    Cost of gain* for 600 lbs. @ $82.95 per cwt.
    $497.70
    Interest** @ Prime + 2% on cattle cost for 150 days
    $33.20
    Interest** @ Prime + 2% of the feed cost for 150 days
    $5.37
    Total Cost & Expense
    $2,074.89
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    Sale proceeds: 1,350 lb. steer @ $137.00 per cwt.
    $1,849.50
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    This week's Profit/(Loss) per head
    ($225.39)
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    Profit/(Loss) per head for previous week
    ($297.10)
    Change from previous week
    +$41.71
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    Sale price necessary to breakeven
    $153.70
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    Projected closeout for steers placed on feed this week:
  • Projected Sale Date @ 150 days on feed = July 4th
  • Cost of 750 lb. steer delivered to the feedyard @ $159.75 per cwt.
    $1,198.13
    Cost of gain* for 600 lbs. @ $80.65 per cwt.
    $483.90
    Interest** @ Prime + 2% on cattle cost for 150 days
    $27.08
    Interest** @ Prime + 2% of the feed cost for 150 days
    $5.47
    Total Cost & Expense
    $1,714.57
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    Sale proceeds: August Live Cattle Futures @ $120.62 per cwt.
    $1,628.37
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    Projected Profit/(Loss) per head
    ($86.20)
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    Projected Profit/(Loss) per head for previous week
    ($47.36)
    Change from previous week
    -$38.84
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    Sale price necessary to breakeven
    $127.01
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    *In addition to feed costs, "Cost of Gain" includes death loss, medicine, insurance, etc.
     **Interest Rate @ Prime + 2.00% - Prime Rate as defined and published by The Wall Street Journal
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  • Typical closeout for steers sold this week and hedged when placed on feed: ($139.99)
  • Typical closeout for un-hedged steers sold this week: ($225.39)
  • Projected Profit/(Loss) based on the futures & estimated Cost of Gain when Placed on Feed: ($86.20)
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    Feedyard Close-Outs for the weeks ending:
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    Slaughter Cattle:
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    Friday negotiated cash trading in the Southern Plains and Colorado has been at a standstill. In Nebraska and the Western Cornbelt trading has been mostly inactive on very light demand. Not enough sales for a market trend. Last week live sales in the Southern Plains sold at 138.00. In Nebraska live sales sold from 135.00-138.00 and dressed sales sold mostly at 210.00. In Colorado a very light test of live sales sold at 135.00 for the previous week. In the Western Cornbelt last week live sales with a light test sold from 131.00-134.00 and dressed sales sold mostly at 210.00.

    Livestock Slaughter under Federal Inspection:
                                     CATTLE    CALVES  HOGS     SHEEP
    Friday       (est)        107,000      2,000      435,000      8,000
    Week ago (est)       105,000      2,000      425,000      7,000
    Year ago (act)         109,000      2,000      424,000       5,000
    Week to date (est) 499,000      9,000   1,982,000     40,000
    Last Week (est)      549,000      9,000   2,172,000     40,000
    Last Year (act)        539,000      8,000   2,115,000     36,000

    Saturday 02/06 (est  35,000         0           200,000          0
    Week ago (est)         18,000         0            156,000         0
    Year ago (act)             8,000         0             144,000         0
    Week to date (est) 534,000      9,000     2,182,000      40,000
    Last Week (est)      567,000      9,000     2,328,000      40,000
    Last Year* (act)       546,000      9,000     2,259,000      36,000
    2016 YTD             2,849,000    49,000   11,860,000    190,000
    2015 *YTD            2,922,000    48,000   11,958,000    188,000
    Percent change    -2.5%            1.8%         -0.8%           0.9%

    Negotiated prices paid for Slaughter Steers and Heifers:
    Live basis               Steers                                      Heifers

    Not enough sales to establish market values.

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    National Grain Summary:
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    Compared to last week, grain bids were higher his week despite some bearish undertones as buying returned this week as the dollar has traded lower much of the week.  Weather in South America remains good for growing conditions. Ethanol production has been going down as reserves increase and with large supplies of corn on hand buying is not very aggressive at this time.  Soybeans this week found fund some buying support as did wheat.

    Corn Futures Summary: Corn futures faced pressure for much of the day session and futures ended low-range with losses of 2 to 2 3/4 cents. The March contract lost about 6 cents on the week. To kick off next week, traders will gauge the coverage and rainfall amounts from a system that is expected to bring rain to dry areas of Argentina this weekend. These rains are needed to prevent crop damage. The other major focal point is USDA's Supply & Demand Report Tuesday. USDA is expected to raise corn carryover slightly and make just minor tweaks to its South American crop pegs.

    Soybean Futures Summary: Soybean futures ended the day 5 to 7 cents lower in the 2016 contracts, which was low-range for the day and week. March soybeans posted weekly losses of 14 3/4 cents to return to the bottom of the month-long consolidation range. Next week's soy complex focus will be on USDA's Supply & Demand Report. Traders expect only minor fine tuning to U.S. and global balance sheets, which if realized, would provide a muted price reaction and keep traders' focus on outside market influences and South American crops. Rains in the forecast for the weekend and into next week across Argentina are expected to be widespread and provide timely moisture.

    Wheat Futures Summary: Wheat futures were the anchor in the grain markets this week, finishing the week on a sour note. March SRW wheat ended the week around 12 cents below last week's close, with March HRW posting steeper losses of around 18 cents. March HRS futures posted weekly losses of around 9 cents. Winter wheat futures led losses this week after beneficial precip covered much of the region. A very small percentage of the HRW wheat ground is now covered by abnormally dry conditions and should be drought-free by the time the crop comes out of dormancy. Traders will also be focused on USDA's February Supply & Demand Report next week

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    Five Year Moving Average - Corn & Wheat
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    Your Suggestions:
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