WLI

Based on USDA reports through late Friday afternoon, the only trendable negotiated cash fed cattle trade for the week was steady money in the Southern Plains at $124/cwt.

Week-end positioning, reduced tonnage from another storm and the promise of grilling-season demand helped lift Cattle futures on Friday.

Live Cattle futures closed an average of 66¢ higher. 

Except for unchanged in spot Apr and an average of 29¢ lower in the back two contracts, Feeder Cattle futures closed an average of 62¢ higher. 

Corn futures closed fractionally higher through Sep ’20 and then mostly fractionally lower.

Soybean futures closed mostly fractionally lower. 

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

Choice boxed beef cutout value was 1¢ higher Friday afternoon at $228.84/cwt. Select was $1.07 higher at $221.02. 

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Major U.S. financial indices closed higher Friday. Support included quarterly earnings from J.P. Morgan Chase and surging Disney shares, tied to its new streaming service. 

The Dow Jones Industrial Average closed 269 points higher. The S&P 500 closed 19 points higher. The NASDAQ was up 36 points.

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Measured against history, analysts with the Livestock Marketing Information Center (LMIC) say the expansion phase of the current cattle cycle is typical. It may be the liquidation phase that runs against the grain.

In the latest Livestock Monitor, LMIC analysts explain cyclical herd growth since the 1970’s lasts 5-7 years, with peak numbers usually fewer than the apex of the previous cycle. The liquidation phases usually takes 5-8 years. Currently, they estimate beef cow numbers at the beginning of next year to be about the same as this year; then a negligible reduction.

“Even though cow-calf returns are dramatically below a few years ago, most producers are not faced with financial stress to force substantial breeding herd reductions,” LMIC analysts say. “That is a contrast to most recent cattle cycles. In several areas of the U.S. drought, floods, and/or brutal winter weather has impacted and could continue to ratchet down cowherd numbers. But the economics suggest the most modest cyclical herd downturn since the 1958-67 inventory cycle.”

Cattle futures worked their way higher Thursday, helped along by Lean Hog futures once again (see below). Lean Hogs were buoyed by data from USDA’s Foreign Agricultural Service indicating 77,700 metric tons of U.S. pork sold to China last week. 

Live Cattle futures closed an average of 30¢ higher. 

Feeder Cattle futures closed an average of 63¢ higher (25¢ higher to $1.17 higher in the back contract).

Corn futures closed fractionally lower to 2¢ lower. 

Soybean futures closed mostly 5¢ to 7¢ lower. 

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

Choice boxed beef cutout value was 22¢ lower Thursday afternoon at $228.83/cwt. Select was 33¢ higher at $219.95. 

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Major U.S. financial indices closed little changed on Thursday. 

The Dow Jones Industrial Average closed 14 points lower. The S&P 500 closed unchanged. The NASDAQ was down 16 points.

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“African Swine Fever has spread to every province in mainland China and is now affecting an estimated 150-200 million pigs,” says Christine McCracken, RaboResearch animal protein analyst. “The expected 30% loss in pork production is unprecedented. These losses cannot easily be replaced by other proteins like chicken, duck and seafood, nor will larger pork imports be able to fully offset the loss.” McCracken authored the recent Rabobank article, Rising African Swine Fever Losses to Lift All Protein Boats.

According to a media advisory from Rabobank Thursday:

In 2019, Rabobank expects Chinese pork production losses of 25% to 35%. This loss is at least 30% larger than annual U.S. pork production and nearly as large as Europe’s annual pork supply.

Rabobank expects production losses to exceed 10% in Vietnam, the world’s fifth largest pork-producing country and a significant supplier to China.Rabobank believes there will be a net supply gap of almost 10 million metric tons in the total 2019 animal protein supply, which will increase farmgate and consumer prices.

Negotiated cash fed cattle trade got underway in the Southern Plains Wednesday at $124/cwt. on a live basis, which was steady with last week.

Likewise, there were 510 head—four five lots of Oklahoma heifers—offered in the weekly Fed Cattle Exchange auction. Four lots (416 head) sold for 1-17 day delivery at a weighted average price of $124/cwt. 

Continued sluggish trade and lack of direction pressured Cattle futures Wednesday, despite strong renewed buying in Lean Hog futures.

Live Cattle futures closed an average of 51¢ lower (2¢ lower in spot Apr to 72¢ lower). 

Feeder Cattle futures closed an average of 53¢ lower (2¢ lower to 97¢ lower in spot Apr).

Corn futures closed mostly fractionally higher to 1¢ higher.

Soybean futures closed 2¢ to 3¢ higher. 

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

Choice boxed beef cutout value was 73¢ higher Wednesday afternoon at $229.05/cwt. Select was 82¢ higher at $219.62. 

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Major U.S. financial indices edged higher Wednesday. Support included release of minutes from the most recent FOMC meeting, underscoring the likelihood of static interest rates for the remainder of the year.

“…a majority of participants expected that the evolution of the economic outlook and risks to the outlook would likely warrant leaving the target range unchanged for the remainder of the year,” according to the FOMC minutes. “Several of these participants noted that the current target range for the federal funds rate was close to their estimates of its longer-run neutral level and foresaw economic growth continuing near its longer-run trend rate over the fore-cast period.”

The Dow Jones Industrial Average closed 6 points higher. The S&P 500 closed 10 points higher. The NASDAQ was up 54 points.

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Cattle prices will meander lower next year and then increase steadily through 2028, according to the 2019 Baseline Outlookreport from the University of Missouri’s Food and Agricultural Policy Institute (FAPRI) and Agricultural Markets and Policy team. The outlook through 2028 is based on market information available in February.

FAPRI pegs the 5-area fed steer price in 2020 at $112.38/cwt., compared to a projection of $114.17 this year. The price is projected at $114.78 in 2021, rising from there to $130.29 in 2028.

Prices for steers weighing 600-650 lbs. (basis Oklahoma City) are projected to ebb at $143.92/cwt. in 2020, compared to a projection of $153.30 for this year. The estimated price in 2021 is $149.47 and then increases to $181.35 in 2028.

Overall, however, FAPRI suggests pressure on farm finances likely will continue. Although the analysis shows a projected increase for net farm income this year, it remains below the average of 2014-17. Longer-term projections suggest little change in real net farm income over the next decade, resulting in continued increases in the farm sector’s debt-to-asset ratio.“Although it remains well below the levels of the 1980s, the ratio of U.S. farm debts to assets has increased from 11.3% in 2012 to 13.5% in 2018,” according to the report. “The outlook is for continued stress on farm finances, with the debt-to-asset ratio averaging 14.8% between 2020 and 2028.”

Sluggish trade, pressure in Lean Hog futures and softer outside markets weighed on Cattle futures Tuesday.

Other than 10¢ and 90¢ higher at either end of the board, Live Cattle futures closed an average of 20¢ lower. 

Feeder Cattle futures closed mixed, from and average of 23¢ lower to an average of 42¢ higher.

Corn futures closed unchanged to 1¢ higher. 

Soybean futures closed unchanged to fractionally mixed. 

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

Choice boxed beef cutout value was 35¢ lower Tuesday afternoon at $228.32/cwt. Select was $2.08 lower at $218.80. 

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Major U.S. financial indices closed lower Tuesday, with investors apparently fretting over protracted trade negotiations with China and an expected rough patch for quarterly earnings. 

The Dow Jones Industrial Average closed 190 points lower. The S&P 500 closed 17 points lower. The NASDAQ was down 44 points.

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“The beef production forecast is reduced from the previous month, primarily on lower carcass weights, but higher total cattle slaughter for 2019 is expected to partially offset declines in carcass weights,” say analysts with USDA’s Economic Research Service (ERS), in the latest 

World Agricultural Supply and Demand Estimates (WASDE).

Estimated beef production for this year of 27.280 billion lbs. is 20 million lbs. less than the previous month’s projection.

Projected fed steer prices (5-area Direct) were lowered slightly based on a lower price in the first quarter. The 5-area Direct fed steer price is projected at $122-$126/cwt. in the second quarter; $111-$119 in the third and $109-$119 in the fourth.

 Incidentally, total red meat and poultry production for this year was reduced by 212 million lbs. to 104.245 billion lbs.

“Pork production is lowered on a slower pace of slaughter throughout the

year, but is partially offset by slightly higher hog weights,” say ERS analysts. “Broiler production was reduced based on recent hatchery data and slowing weight growth, while turkey production was raised slightly.”