Cattle Outlook: Unemployment Decline Good for Meat Demand

US - There has been some good news for the economy lately. Third quarter GDP growth rebounded to 2.9 per cent and the October unemployment rate declined to 4.9 per cent. That should be positive for meat demand, write Ron Plain and Scott Brown, Ag Economics, MU.
calendar icon 7 November 2016
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Ron Plain
Ron Plain

The Federal Reserve Bank did not raise interest rates at their November meeting. A rate hike is expected in December.

The Livestock Marketing Information Center estimated cattle feeding losses at $160.53 per steer for September closeouts. That was the biggest loss since February, but less than half the loss of September 2015. Better returns to feeding would help slow the decline in feeder cattle prices.

Fed cattle prices were a bit higher last week on heavy sales volume. Through Thursday, the 5-area average price for slaughter steers sold on a live weight basis was $104.47/cwt, up $1.34 from the previous week's average, but down $25.97 from a year ago. The 5-area dressed steer price averaged $162.59/cwt, up 82 cents from the week before, but down $42.15 from a year ago. This was the third consecutive week with higher fed cattle prices.

Beef cutout value was higher last week. On Friday morning, the choice boxed beef cutout value was $189.02/cwt, up $5.91 from the previous Friday. The select carcass cutout on Friday morning was $173.75/cwt, up $3.86 from the previous week. The choice-select spread remains large at $13.22/cwt.

Last week's cattle slaughter totalled 606,000 head, down 1.6 per cent from the previous week, but up 7.4 per cent from a year ago. Year-to-date cattle slaughter is up 5.0 per cent and beef production is up 5.1 per cent.

The average steer dressed weight for the week ending on October 22 was 915 pounds, unchanged from the week before, down 12 pounds from a year ago, and below the year-ago level for the 25th consecutive week.

Live cattle futures were mixed last week. The December live cattle futures contract settled at $102.72/cwt today, down $1.63 for the week. February fed cattle settled at $104.30/cwt, down 62 cents from the previous Friday. April fed cattle futures settled at $104.35/cwt, up 10 cents from the previous Friday. June live cattle gained 53 cents to settle at $96.70/cwt.

Thanks to lower corn prices, feeder cattle futures gained ground last week. November feeder cattle futures ended the week at $125.62/cwt, up $4.07 from a week earlier. January feeder cattle gained $1.85 last week to settle at $117.85/cwt. The March contract closed the week at $115.32/cwt, up $2.17 for the week.

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