WLI

Negotiated cash fed cattle trade remained undeveloped through Wednesday afternoon. Many expect prices this week to be no worse than steady.

Slaughter steers and heifers sold $1-$2 higher at Sioux Falls Regional in South Dakota on Wednesday. “Packer buyers weren’t keen on pushing the market, especially on steers over 1500 lbs., but did have to pay more to get cattle bought,” explained the AMS reporter.

There were four lots (666 head) offered in the weekly Fed Cattle Exchange auction, and no takers.

Cattle futures rallied on Wednesday, led by Feeder Cattle, amid more active trade and growing Open Interest. It was hard to pin the optimism on a particular factor. Arguably, some support came from traders trying to get in front of a potential trade deal with China—leaders are scheduled to meet tomorrow and Friday.

Live Cattle futures closed an average of 51¢ higher.

Feeder Cattle futures closed an average of $2.40 higher.

Wholesale beef values were higher on Choice and lower on Select with light to moderate demand and heavy offerings, according to the Agricultural Marketing Service.

Choice boxed beef cutout value was $1.00 higher Wednesday afternoon at $214.60/cwt. Select was 94¢ lower at $186.12.

Corn futures closed mainly unchanged to fractionally lower.

Soybean futures closed 2¢ to 3¢ higher through Nov ’20 and then mostly unchanged to fractionally higher.

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Major U.S. financial indices closed higher on Wednesday, as the U.S.-China trade talk seesaw continued to rock, to the upside this time, with reports China might settle for a partial deal.

The Dow Jones Industrial Average closed 181 points higher. The S&P 500 closed 26 points higher. The NASDAQ was up 79 points.

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“Regardless of the decline in Chinese pork production, the gap between Chinese supply and Chinese demand will be filled by either imported pork, or substitution of an alternative protein product,” says Brenda Boetel, a livestock economist at the University of Wisconsin-River Falls.

Prior to the outbreak of African Swine Fever (ASF) in China, Boetel explains that nation’s annual per capita consumption of pork was approximately 73 lbs.; 13 lbs. for beef and 25 lbs. for poultry.

“Chinese pork consumption is expected to drop sharply in response to soaring prices, as well as lack of physical supply,” Boetel says, in the latest issue of In the Cattle Markets. “In an attempt to curb price increases (and resulting inflation) reserve pork supplies have been released and price ceilings have been created. Nevertheless, Chinese pork prices have increased 33% to 100% since January. Additionally, retail prices for sheep, beef and chicken are also at record levels.”

Chinese pork imports were 30% higher year over year for January through August, according to Boetel. U.S. pork exports to China were 38% higher for the same period. She adds that Chinese beef imports increased approximately 57% over the same period. US beef exports to China were up 24%.

“Given that Chinese beef imports are increasing at a faster rate than pork, and that Chinese beef and poultry prices are at record levels, one can assume there has been some substitution from pork consumption to alternative proteins,” Boetel says. “…Poultry production has increased in China due to the much shorter production cycle than either pork or beef and poultry’s similar price point to pork. If Chinese consumers switch to poultry in the short-run to accommodate the Chinese pork shortage, it will take some time for Chinese pork consumption to rebound.”

Cattle futures edged higher Tuesday, supported by the turnaround in Lean Hogs and despite a surge in Corn futures.

Except for 7¢ and 35¢ lower in the front two contracts, Live Cattle futures closed an average of 31¢ higher.

Feeder Cattle futures closed an average of 27¢ higher, except for 2¢ to 12¢ lower in the back three contracts.

Wholesale beef values were higher on moderate demand and light offerings, according to the Agricultural Marketing Service.

Choice boxed beef cutout value was $2.51 higher Tuesday afternoon at $213.60/cwt. Select was $1.15 higher at $187.06.

Corn futures closed 6¢ to 8¢ higher through Jul ’20 and then mostly 1¢ to 2¢ higher. Presumably, the surge had to do with the pending winter storm in the North, combined with ongoing delayed crop maturity.

Soybean futures closed mostly 5¢ to 6¢ higher.

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Major U.S. financial indices closed sharply lower on Tuesday, with reports of dimming hopes for a trade resolution between the U.S. and China.

The Dow Jones Industrial Average closed 313 points lower. The S&P 500 closed 45 points lower. The NASDAQ was down 132 points.

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“If the Kansas plant reopens as announced (by early January 2020), and Mother Nature does not dish out another very harsh fall and winter, as 2018-19 did for many U.S. cattle feeders, LMIC projects positive closeouts for the first five months of 2020,” say analysts with the Livestock Marketing Information Center (LMIC), in the latest Livestock Monitor. “Breakeven sales prices for February through May of 2020 are in the $113 to $116/cwt. range. At this time, feeding out 750-lb. steers that are scheduled to be marketed in mid-June through mid-September looks like a breakeven proposition at best. That is, would be a loss if all economic costs are considered. Of course, it is common for that  timeframe to be the least profitable.”

LMIC’s assessment is based on feeding in a commercial Southern Plains feedlot and assumes animals are sold on the cash market, i.e. no hedging and does not include premiums incorporated into quality carcass-based pricing programs.

In the meantime, LMIC estimated September feedlot returns at -$150 to -$155 per fed steer, driven by impacts from the Tyson plant fire. Those were the steepest losses since October 2016. Analysts project moderating losses in October and November and then positive returns in December.

When all was said and done last week, negotiated cash fed cattle trade ended up mainly $3-$4 higher on a live basis—$106-$107 in the South and $107-$109 in the North—and $5 higher in the beef at $170.

The 5-area direct average steer price was $2.37 higher on a live basis last week at $107.30/cwt., according to the latest USDA report. The average dressed steer price was $169.79, which was $4.50 higher.

Live Cattle futures closed narrowly mixed Monday, while Feeder Cattle closed lower, with pressure including firm grain prices and a sharp sell-off in Lean Hog futures.

Live Cattle futures closed mixed, from and average of 28¢ lower to an average of 40¢ higher (10¢ to 90¢ higher) with the gains coming on both ends of the board.

Feeder Cattle futures closed an average of 95¢ lower (27¢ lower in spot Oct to $1.37 lower).

Wholesale beef values were lower on light demand and moderate offerings, according to the Agricultural Marketing Service.

Choice boxed beef cutout value was 87¢ lower Monday afternoon at $211.09/cwt. Select was $1.01 lower at $185.91.

Corn futures closed mostly 1¢ to 2¢ higher.

Soybean futures closed mostly fractionally higher.

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Major U.S. financial indices closed lower on Monday, on likely profit taking and also defensiveness ahead of this week’s scheduled trade talks between the U.S. and China.

The Dow Jones Industrial Average closed 95 points lower. The S&P 500 closed 13 points lower. The NASDAQ was down 26 points.

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U.S. beef exports softened in August, according to data released by USDA and compiled by the U.S. Meat Export Federation (USMEF).

Beef exports for the month totaled 114,119 metric tons (mt), a 4% decline from the previous year’s record-large volume. Beef export value of $690.3 million was down 8%. January-August beef exports were slightly below last year’s record pace, declining 2% in volume (881,526 mt) and 1% in value ($5.44 billion).

Beef export value per head of fed slaughter averaged $298.94 in August, down 7% from a year ago, while the January-August average was down 3% to $309.85.

Part of the monthly decline came with 9% fewer beef exports to South Korea than a year earlier, in terms of volume, and 11% less for value at $157.4 million. For the year, however, U.S. beef exports to Korea are 8% ahead of the previous year’s record pace for volume, and 10% higher for value at $1.26 billion.

Exports for the month were less to Japan, too: 15% less for volume and 22% less for value at $164.3 million. Keep in mind that export value the previous August was $209.3 million, a post-BSE record high. For January through August, exports to Japan were 3% below last year’s pace in volume and 4% lower in value at $1.36 billion.

“The U.S. beef industry is extremely excited at the prospect of lower tariffs in Japan, as 38.5% is the highest rate assessed in any major market,” says Dan Halstrom, USEMF president and CEO. “As we’ve seen in Korea, where the tariff rate was once 40% but has been reduced by more than half, lower tariffs make U.S. beef even more affordable for a wider range of customers. While the agreement still needs parliamentary approval in Japan, importers are already enthused and preparing for long-awaited tariff relief.”

Pork exports up significantly

August U.S. pork exports increased 22% from a year ago to 221,586 mt, while export value climbed 19% to $588.8 million. These results pushed January-August export volume 4% ahead of last year’s pace at 1.7 million mt, while value increased 1% to $4.35 billion.

Although still restrained by China’s retaliatory duties, pork exports to China/Hong Kong were three times more than the previous year’s volume at 63,656 mt, while value was up 160% at $137.6 million. For January through August, exports to China/Hong Kong were up 38% in volume (356,322 mt) and 17% in value ($717.9 million).

“China’s demand for imported pork has increased steadily over the past few months and the U.S. industry is well-positioned to help fill that need,” Halstrom explains. “But, the really positive story behind these numbers is that even as U.S. exports to China/Hong Kong have surged and exports to Mexico rebounded after the removal of retaliatory duties, demand in other markets is proving resilient and continues to grow. This is exactly why the U.S. industry invested in emerging markets over the years, and it is definitely paying dividends.”

Negotiated cash fed cattle prices extended gains last week, with live sales in the Southern Plains $4/cwt. higher in Kansas at $107 and $3-$4 higher in the Texas Panhandle at $106-$107. Dressed trade in Nebraska, and early sales in the western Corn Belt were $5 higher at $170.

Cattle futures softened Friday, amid sluggish trade and week-end position squaring.

Other than 55¢ higher in spot Oct, Live Cattle futures closed an average of 26¢ lower.

Feeder Cattle futures closed an average of 42¢ lower. 

Wholesale beef values were steady to weak on light to moderate demand and offerings, according to the Agricultural Marketing Service.

Choice boxed beef cutout value was 10¢ lower Friday afternoon at $211.96/cwt. Select was 29¢ lower at $186.92.

Corn futures closed 2¢ to 4¢ lower through Jul ’20 and then fractionally lower to 1¢ lower.

Soybean futures closed 3¢ to 4¢ higher through Aug. ’20 and then mostly fractionally higher to 1¢ higher.

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Major U.S. financial indices closed higher again on Friday, buoyed by the bullish U.S. employment report.

Total nonfarm payroll employment increased by 136,000 in September, and the unemployment rate declined to 3.5%, according to the Employment Situation report from the U.S. Bureau of Labor Statistics.

Average hourly earning for all employees on private nonfarm payrolls was little changed at $28.09. Average hourly earnings increased 2.9% over the last 12 months.

The Dow Jones Industrial Average closed 372 points higher. The S&P 500 closed 41 points higher. The NASDAQ was up 110 points.

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Federally inspected beef production slowed in September, down 1.9% from the previous year, according to Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. He explains declining beef production was mainly due to lighter steer and heifer carcasses, along with more cows and heifers in the harvest mix.

“Cattle slaughter the first nine months of 2019 exceeded 24.6 million head which is 1.4% greater than 2018. Alternatively, September cattle slaughter compared to a year ago was down 0.6%,” Griffith says. “If beef production keeps pace in the fourth quarter then total 2019 federally inspected beef production will exceed 26.6 billion lbs. If slaughter maintains pace in the fourth quarter then federally inspected cattle slaughter will be close to 32.9 million head. The beef cutout will come under seasonal pressure the next couple of months and strong beef production will only aid that pressure.”

Negotiated cash fed cattle trade opened higher on Thursday, with live prices in the Texas Panhandle $3 higher than the previous week at $106/cwt.

Cash optimism helped Cattle futures fade some early pressure and edge higher, although trade was sluggish and open interest continued to decline.

Live Cattle futures closed an average of 33¢ higher.

Feeder Cattle futures closed an average of 32¢ higher. 

Wholesale beef values were lower on Choice and higher on Select, with light to moderate demand and offerings, according to the Agricultural Marketing Service.

Choice boxed beef cutout value was 91¢ lower Thursday afternoon at $212.06/cwt. Select was $1.31 higher at $187.21.

Corn futures closed fractionally higher to 1¢ higher.

Except for 1¢ higher in the back three contracts, Soybean futures closed mostly 1¢ to 2¢ lower.

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Major U.S. financial indices closed higher on Thursday, curbing steep losses from the previous two sessions. The popular notion for support was thinking that odds favored the Fed cutting interest rates at the end of the month.

The Dow Jones Industrial Average closed 122 points higher. The S&P 500 closed 23 points higher. The NASDAQ was up 87 points.

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More optimism by restaurant operators about the six-month outlook boosted the National Restaurant Association’s (NRA) Restaurant Performance Index (RPI) in August for the first time in three months.

Overall, the RPI— a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry—was 100.7 in August, which was 0.3% more than the previous month, according to NRA.

The Expectations Index was 101.2 in August, up 1.1% from the previous month, with restaurant operators slightly more optimistic about the direction of the economy. Operator outlook for capital spending was the highest in five months.

“Although the forward-looking indicators improved from last month, they remain tepid by historical standards,” say NRA analysts. “Only one in three operators expect their sales to be higher in six months, while just one in five think the economy will improve. Headlined by softer same-store sales readings and a net decline in customer traffic levels, current situation indicators trended lower in August.”

The Current Situation Index was down 0.5% from the previous month to 100.3. It lost ground mostly due to a net decline in customer levels, say NRA analysts.