The Cattle Range Home Page Weekly Market Summary 
For the week ending December 29, 2017

The Cattle Range Market Trendlines:

Cattle futures closed the week with triple digit losses while dressed beef strengthened this week.


10 Day Market Trendline

Change from Previous Day: +0.34% 
  Change from 10 Days Ago: +0.52% 
  Change from 60 Days Ago: -3.53%

60 Day Market Trendline

The Trendlines are indicators of overall cattle/beef market strength and are based on daily market factors.  Each daily factor is the aggregate weighted total of the Gain/(Loss) for 12 market indicators compared to the previous trading day. 

Weekly Market Overview:

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The Challenge of 2018

In 2018, higher cattle prices will be contingent upon increased demand.  Expressed as a percentage of production, beef exports in 2017 were at record levels and global meat/protein demand in 2018 are expected to remain strong.  Globally, demand for U.S. meat/protein will likely increase with the caveat that trade agreements allow the U.S. access to global markets.  Domestically, economic growth is expected to continue with more and higher paying jobs available and the new tax legislation will result in higher take-home pay for many consumers.


Even though increased demand is likely, supply is the other variable in the price equation and supplies of beef and other meats will increase in 2018 and beyond.  Although slower than the past few years, the U.S. cow herd will continue to grow in 2018 and 2019.  To put the impact of the larger cowherd in perspective, the most recent estimate for the 2017 calf crop is 36.3 million head, 1.2 million head more than in 2016 with the 2018 calf crop projected to be larger than 2017.


Projections for U.S. beef production increases range from 3 percent to 6 percent in 2018 and will not top-out until 2020 & 2021.  With large numbers of cattle on feed, feeders will have to aggressively market cattle to avoid increased carcass weights.


Additionally, cow slaughter is projected to be 4% to 5% higher than in 2017.  The supply concerns will be further compounded by record production of pork and poultry with 6 percent and 2 percent increases projected respectively.  Adding to the uncertainty for 2018 are weather forecasts showing large areas of the U.S. either currently experiencing drought conditions or drought likely to develop.


Producers should anticipate the real possibility that supplies of beef, pork, and poultry will increase more than demand, resulting in lower prices for cattle in 2018.  Along with uncertainty comes price volatility.  Risk management and marketing will be critical and if a profit is available, contemplate long and hard before not taking it.


Analysis of December Cattle on Feed Report 

Derrell S. Peel, Oklahoma State University Livestock Marketing Specialist
The latest Cattle on Feed report pegged the December 1 feedlot inventory at 11.512 million head, 108 percent of last year.  This is an additional 864,000 head in feedlots compared to December 2016. This is also the largest monthly on-feed total since March, 2012 and the highest December feedlot inventory since 2011.  Among the three largest cattle feeding states, the December 1 feedlot inventory in Texas and Nebraska were both up 9 percent year over year, while Kansas was 104 percent of last year.  Number four Colorado was also 109 percent of one year ago while fifth largest Iowa was 117 percent of last year.  November feedlot placements were up 13.8 percent year over year, once again sharply higher than expected.  Marketings in November were about as expected at 103.1 percent of one year ago.  
The jump in November placements will clearly be viewed as bearish but a couple of points must be remembered.  First, feedlots do not create cattle supply with placements; they can only change the timing a bit.  Larger feeder supplies (and feedlot placements) in 2017 were expected given herd growth in 2016.  The 2017 calf crop was likely up close to three percent in 2017; roughly a million head more calves.  This leads to the second point: recent large placements means that feedlots are pulling cattle forward by placing feeders at a faster rate than the growth in feeder supply.  The November placements included a 6.9 percent increase in feeders over 700 pounds; close to expectations.  The surprise came from a 20.3 percent increase in placements under 700 pounds. Indeed, placements under 600 pounds were up 29.8 percent year over year.  Lightweight feeders placed now will not be available for placement later.  
Feedlots are enjoying favorable cost of gain and generally have an incentive to load feedlots up to capacity.  A regional look at November placements is even more insightful. Texas placements were 23.1 percent higher than one year ago with placements under 600 pounds up 71.4 percent year over year.  This reflects late development of wheat pasture in the Southern Plains this fall. Feedlots took advantage of poor stocker conditions and moved calves into feedlots earlier than is typical.   In fact, Texas placements under 600 pounds, represented 56.3 percent of all placements under 600 pounds and 29.3 percent of the total increase in placements.  In total, Texas accounted for 35.2 percent of increased November placements while Kansas accounted for 19.5 percent; Nebraska, 13.7 percent and Colorado, 3.9 percent.  
The implications of this report may not be as bearish as it seems.  These lightweight placements will be marketed later and are not bunched up with earlier placements. Lightweight placements tend to get spread out more over time and winter weather is likely to further spread cattle out over the next few months.  Lightweight placements may help moderate beef production as well.  Feedlot data shows that lighter placement weights result in lighter finished weight, and thus lighter carcass weights.  It’s not a one for one relationship but, on average, feeders placed 200 pounds lighter would be expected to finish about 100 pounds lighter.  Winter weather could further impact finished weights on feedlot cattle and especially these lightweight feeders.


Analysis of Meat in Cold Storage

Steiner Consulting Group Daily Livestock Report
The supply of red meat and poultry in cold storage is higher than a year ago but the drawdown in stocks during November suggests demand remains in good shape. The total supply of beef, pork, chicken and turkey in cold storage at the end of November was 2.179 billion pounds, 4.9% higher than a year ago and 10.2% higher than the five year 
average. However, the drawdown in stocks during November was 10.7% compared to 9.3% average of the last five years.

The inventory of boneless beef at the end of November was 445.8 million pounds, 9.6% less than a year ago. Boneless beef stocks declined by 3.5% from the previous month while in the last five years inventories actually increased into year end. Beef inventories declined in November even as beef production increased by 2.2% during the month. The sharp decline in fat beef trimmings in the last few weeks will likely encourage end users to start building inventory positions for spring needs.

According to USDA, there were 505.0 million pounds of pork in cold storage at the end of last month, 2.7% less than a year ago and 5.7% less than the five year average. What is even more impressive is that inventories declined 15.6% from the previous month. In the last five years the average drawdown in freezer stocks has been 7.8%. Part of the 
reason for the decline in inventories is the increase in hog slaughter and ample product availability. With slaughter expected to remain historically large in 2018, packers and end users continue to be very aggressive in liquidating inventories during key holiday periods. Ham inventories at the end of November were 98.2 million pounds, a 50% decline from the previous month and the biggest drawdown in stocks in almost a decade. Current ham inventories are down 7.5% from a year ago and 6.6% lower than the five year average. Ham inventories have declined sharply in the 
last two weeks, which is normal for this time of year. The lower inventories should help support produce accumulation for Easter needs and we see the latest cold storage report as supportive of the pork/hog market for late January and February. Pork belly inventories have almost double compared to the minimal volume in storage a years go. Lower 
belly prices in December will likely cause more bellies to go into the freezer and this should help prevent the sort of price appreciation we observed in Q1 of 2017.
Chicken supplies in cold storage remain heavy. The total supply of whole broilers and broiler parts was 897.4 million pounds, 13.5% higher than a year ago and 20.4% higher than the five year average. Wing and leg quarter inventories are lower than last year but breast meat inventories remain burdensome and there are notably more “other” chicken parts currently stored away. Turkey inventories at the end of November were 289.3 million pounds, 22% higher than a year ago. Breast meat inventories declined once again in November but still remain 16% above year ago levels. Whole bird stocks are currently 58% higher than last year.

USDA National Retail Beef Report: 

Advertised Prices for Beef at Major Retail Supermarket Outlets


 This week in Beef Retail, the Feature Rate charted a 8.4 percent decrease, the Special Rate saw a 7.3 percent decrease, and hte Activity Index dropped 22.4 percent. Beef saw a drastic decrease in features this week as most holiday celebrations have ended and consumers and retailers alike are returning to their normal shopping habits to begin the new year. Cuts from the Loin, Brisket, and Ground Beef saw more ad space, while cuts from the Rib, Chuck, and Round saw considerably less. Cattle slaughter under federal inspection saw a 18.0 percent decrease in response to the holiday.

Photo of the Week:

"Shootin' the Bull" Weekly Analysis:

In my opinion, the supply factors would be worrisome without current demand.  While many attempt to find the end to the demand, I perceive it will increase.  The consumer continues to see elevated employment and to some degree wage increases.  A change in pallet has become noticeable as well.  I noted this week where poultry stocks were elevated in the cold storage report with no increases in production.  As we saw beef storage decline slightly, I think the consumer is back to eating beef as the price between competing proteins has narrowed.  This narrowing of price is perceived to expose the taste preference between beef and other proteins.  Then there is pork.  Pork production has not only continued to increase, but it is slated again to take another step with new kill facilities in the works. I perceive a large portion of this increase will be to supply China.  This is a good example of demand outstripping increasing supplies.  Most of my analysis has been formed around the aspect that the current economic environment decreases the likelihood of cattle going into a bear market.  Until I begin to see changes in these economic factors, I will continue with my analysis of a firmer cattle market in 2018.  Hedging every year is different due to ever changing factors.  I felt early in 2017 that cattle would trade higher and I set out to do as little futures hedging as possible and move towards options where risk could be mitigated, but not eliminated.  Due to my mindset starting off 2018, my goal is to reduce the costs of hedging with options. I'm trying to hedge in a way that produces the least amount of friction to the cash market.  I think that buying at the money put options when perceived necessary with a second tier strategy to reduce that initial premium cost through the sale of a put or call, depending upon price direction, is the most applicable approach at this time. 


Any reduction in placements will begin to reflect the hard pull on inventory.  What I have to wonder, from the huge discrepancies between private forecasters and the USDA, is who is correct? Did private forecasters miss a large calving time frame and these placement numbers are here to stay? The flip side being, is USDA going to state one report that the pull has been so heavy in comparison to private forecasters thoughts,  that there just won't be any heavy cattle for some time to come. I don't think either really know for certain.  What I do believe though is that factors in 2017 curtailed expansion greater than thought at the first of '17.  March feeders have made a small rally from its $138.30 low made on 12/22.  Intraday charts suggests it could be a 5 wave pattern.  At Friday's low of $140.95, this was just shy of a 50% retracement of the initial incline.  Were March feeders to exceed the $143.22 high, it would lead me to believe a minor wave 1 and 2 were complete and a minor wave 3 in progress.  So, I recommended on Friday to place a buy stop at $143.30 March for entry with a sell stop to exit only at $140.90 were the buy stop to be elected.  ***This is a sales solicitation.***  Basis has now been narrowed greatly from its over $13.00 positive width just last week.  This was achieved by about a 50/50 move of futures higher and cash lower.  I anticipate basis to go negative for a little while.  This will help when producers feel they need to hedge.  Going through the year of '17, the strategy that worked was buying the at the money option when desired and attempting to mitigate the cost of the premium at some time in the future by selling either a call or put depending upon price direction.  I think the same strategy will work in 2018 due to anticipation of significant price fluctuation. 


Crude oil broke $60.00 on Friday.  Diesel fuel futures (Heating Oil) has put on approximately $.27 since the recommendation went out to top off farm tanks.  With both of these markets moving higher with supplies not having diminished, it is viewed as a very demand driven market.  A testament to how demand can over ride what may appear as burdensome supplies.  The US dollar index resumed its down trend this week.  The Eurocurrency, which is the largest denominator of the index, has begun to move higher in earnest as well.  A healing Europe in 2018 is anticipated to mirror the healing the US did in 2017.  Were it not for the weak grain markets, commodities in general performed well this year.  Lastly, interest rates are anticipated to rise again.  From their initial low, they have made several small steps higher on the Fed Funds rate and one giant step in retail rates.  At the top of the retail rate rise in March '17, rates have consolidated in a wide range to date.  That wide trading range is anticipated to give way to a resumption of the initial move down.  I look for this believing employment inflation will continue and commodity inflation rise. So, were you in need of refinancing working capital or restructuring lines of credit, I recommend you visit with your lender as soon as possible.  Lastly, the wheat market appears to be a smoldering fire.  Any air provided to it in the way of decreasing supplies or further drought damage would be anticipated to send wheat higher.  The burdensome supplies are keeping a lid on the drought damages, but for how much longer I am unsure. 


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 @


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.

Electronic Animal Identification... The Writing is on the Wall

Most cattlemen in the U.S. are resisting implementing electronic animal identification. Producers view it as an added expense and a hassle but it will only become more important, and at some point, likely to become mandatory.
Here are two current examples of lost opportunity costs...
  • The USDA’s Animal and Plant Health Inspection Service (APHIS) issued a notice in October that Canada has updated its ID requirements for breeding cattle entering the country from the United States.  Effective February 1, 2018, U.S. breeding cattle exported to Canada will need an 840 radio-frequency identification (RFID) tag and a USA tattoo in the right ear. The USDA metal tag will no longer be accepted as an option for identification of cattle for export to Canada.
  • The US and China reached an agreement in 2017 that allows US beef to be exported to China. China, the world’s second-largest importer of beef, will now permit imports of US beef for livestock under 30 months that can be traceable to a US birth farm or first place of residence or port of entry. The problem is that only 15 percent of US producers participate in the voluntary beef traceability system, which, the report concludes, “limits gains for US exporters hoping to reach the Chinese market.”
An analogy from the past... Many Texas cattlemen can recall the restrictions placed on Texas cattle by other states before Texas implemented an approved Brucellosis control program.  Having a restricted market cost Texas cattlemen millions of dollars per year.

U.S. Dollar - 6 Month Chart:

Over the last 5 years, an average of around 10% of U.S. beef production has been exported, making exports an extremely important factor affecting beef and cattle prices.  A strong dollar depresses export demand. 

Est. Weekly Meat Production Under Federal Inspection:

Total red meat production under Federal inspection for the week ending Saturday, December 30, 2017 was estimated at 873.4 million lbs. according to the U.S.Department of Agriculture's Marketing Service. 
This was 16.2 percent lower than a week ago and 0.3 percent higher than a year ago.  Cumulative meat production for the year to date was 3.2 percent higher compared to the previous year.

Weekly Hay Reports: "Click" on links for detailed report

5 Year Bullish/Bearish Consensus Charts:

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 linein 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.

Bullish/Bearish Consensus: Cattle

Bullish/Bearish Consensus: Corn

Stock Markets & Economic News

U.S. stock benchmarks produced modest losses amid very light trading in the holiday-shortened week. Mid-cap stocks outperformed, and the tech-heavy Nasdaq Composite lost ground. The dollar weakened for the week, while the price of oil, as reflected by the Brent index, reached a new high of about $67 per barrel for the year. There was little stock-specific news to drive the markets, but it was noted that the possibility of Apple cutting its first-quarter sales targets for the new iPhone X model was a negative. Apple, which is a component of the Dow Jones Industrial Average and the Nasdaq, was down about 2.9% for the week. Utilities stocks were supported by declining Treasury yields that increased the relative attractiveness of their dividends.


Led by the Nasdaq, all the major U.S. indexes recorded solid gains in 2017, with large-cap stocks generally performing better than smaller-caps. It was the ninth straight year of positive total returns for the S&P 500, but the index lagged many overseas markets as non-U.S. stocks bounced back after several years of underperformance, with returns to U.S. investors enhanced by stronger currencies versus the dollar.

U.S. Stocks:

"Click Hereto view a Slide Show of Drought Monitor maps for the last 12 weeks


Looking Ahead: The next 5 days (December 28-January 1) appear to be a mostly dry period, with the greatest precipitation (2-6 inches) expected in the Pacific Northwest and northern Rockies, offshore and along the Gulf and southern Atlantic Coasts (0.5-3 inches), and in the typical snow belt locations of the Great Lakes (1-2 inches). Little or no precipitation is favored elsewhere. Arctic air should be entrenched east of the Rockies while unseasonably mild weather envelops the West.


During the 6-10 day period (January 2-6), the odds favor near to below-median precipitation across much of the lower 48 States, with elevated chances for above-median precipitation limited to along the Gulf and southern Atlantic Coasts, and in Alaska. Subnormal temperatures are expected to persist in the eastern half of the contiguous U.S., with above normal readings probable in the Southwest, California, and Alaska.



Feedyard Closeouts: Profit/(Loss)


Closeout projections are for cattle placed on feed by a cattle owner at a commercial feedyard and not for cattle owned by a feedyard and fed at cost or a farmer/feeder utilizing his own feed.
Typical closeout for un-hedged steers sold this week:
  • Placed On Feed 165 days ago = July 17th
  • P/(L) based on the futures when placed on feed: $55.19
Cost of 750 lb. steer delivered @ $148.75 per cwt:      $1,129.95
Feed Cost for 600 lbs. @ $76.64 per cwt:                      $458.40
Interest @ Prime + 2% on cattle cost for 165 days:      $29.37
Interest @ Prime + 2% of the feed cost for 165 days:    $5.96
Total Cost & Expense:                                                       $1,623.68


Sale proceeds: 1,350 lb. steer @ $121.00 per cwt:           $1,633.50


This week's Profit/(Loss) per head:                                   $9.82


Profit/(Loss) per head for previous week:                      ($3.36)
Change from previous week:                                           + $13.18


Sale price necessary to breakeven:                               $120.27

Projected closeout for steers placed on feed this week:

  • Projected Sale Date @ 165 days on feed = June 12th
Cost of 750 lb. steer delivered @ $154.25 per cwt:        $1,123.65
Feed Cost for 600 lbs. @ $74.55 per cwt:                          $448.62
Interest @ Prime + 2% on cattle cost for 165 days:        $31.75
Interest @ Prime + 2% of the feed cost for 165 days:      $6.34
Total Cost & Expense:                                                        $1,610.35


Sale proceeds: June Futures @ $112.32 per cwt:           $1,534.28


This week's Profit/(Loss) per head:                               ($76.08)


Profit/(Loss) per head for previous week:                    ($113.60)
Change from previous week:                                           +$37.52


Sale price necessary to breakeven:                                 $119.29


Typical closeout for hedged steers sold this week: $55.19 
Typical closeout for un-hedged steers sold this week: $9.82 
Projected closeout for steers placed on feed this week: ($76.08)



 Slaughter Cattle:

Slaughter Cattle: Friday trading has been at a standstill in the Southern Plains and Colorado. In Nebraska and the Western Cornbelt trading has been very inactive on very light demand. Not enough trades for a market trend. Last week in the Southern and Northern Plains live cash trades were at 120.00. In Nebraska for the prior week dressed trades were mostly at 190.00 with a few up to 191.00. For the previous week in the Western Cornbelt live cash trades were mostly at 120.00 with a few up to 121.00 and dressed trades were from 190.00-191.00.
Negotiated Sales: Confirmed: 1,035 Week    Ago: 1,500 Year    Ago: 25,092
Formula Purchases: Net - Dressed 
Head count priced today: 28,600 
Weighted avg weight:       907.00 
Weighted avg net price:   191.37


Livestock Slaughter under Federal Inspection:
                               CATTLE      CALVES      HOGS         SHEEP 
Friday  (est)           118,000       2,000       463,000       8,000 
Week ago (est)      117,000       2,000       455,000       6,000 
Year ago (act)       114,000       3,000       437,000       7,000 
Week to date (est) 446,000       8,000    1,741,000     29,000 
Last Week (est)     588,000     10,000    2,323,000     39,000 
Last Year (act)       468,000     11,000    1,763,000     36,000
Saturday (est)          56,000         0             366,000         0 
Week ago (est)        24,000         0             137,000         0 
Year ago (act)          47,000         0             305,000         0 
Week to date (est)  502,000      8,000      2,107,000      29,000 
Last Week (est)      612,000     10,000     2,460,000      39,000 
Last Year* (act)      515,000     11,000     2,068,000      36,000 
2017 YTD          31,705,000   500,000 120,494,000 1,924,000 
2016 *YTD         30,110,000   480,000 117,363,000 2,008,000 
Percent change        5.3%          4.2%          2.7%         -4.2%

National Grain Summary:

Compared to last week, cash bids for wheat, corn, and sorghum were higher, soybeans traded mixed. Much of the trading in the last couple days may have traders focusing on getting final positions set before moving into the new year.  The soy complex remained bearish this week, fueled by slow export pace and favorable weather conditions in South America. Ethanol production for last week totaled 1.09 million 
barrels per day, 13,000 more than the previous week.  Friday's holiday delayed export sales and shipments report will reveal if export figures have seen any improvement from last week.  Wheat was steady to 14 3/4 cents higher.  Corn was 3/4 to 3 cents higher.  Sorghum was 2 to 46 cents higher.  Soybeans were steady to 5 cents lower.

Your Suggestions:

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Although all information is from sources believed to be accurate & timely, The Cattle Range expressly disclaims all warranties, expressed or implied, as to the accuracy of any of the contents provided and shall not be liable for decisions or actions taken based on the data/information/opinions contained within.