WLI

Cattle futures surged higher Monday, recovering most of the losses from the previous session, even more for Live Cattle. Some attributed the reversal to the after-hours announcement on Friday that threatened U.S. tariffs on Mexican imports were suspended indefinitely.

Live Cattle futures closed an average of $2.15 higher ($1.57 to $3.00 higher).

Feeder Cattle futures closed an average of $2.31 higher.

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

Choice boxed beef cutout value was 65¢ lower Monday afternoon at $221.66/cwt. Select was $1.87 higher at $208.79.

Corn futures closed mostly 2¢ higher, except for unchanged to fractionally lower in the front three contracts. 

Soybean futures closed 2¢ to 4¢ higher, except for 7¢ higher in the back three contracts.

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Major U.S. financial indices closed higher Monday with apparent support from the aforementioned agreement between the U.S. and Mexico regarding illegal immigration that staved off U.S. tariffs.

The Dow Jones Industrial Average closed 95 points higher. The S&P 500 closed 13 points higher. The NASDAQ was up 82 points.

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“While good moisture conditions bodes well for forage growth in general, ongoing flooding and excessively wet conditions is limiting grazing and hay production in some regions,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “Sloppy feedlot conditions continue to hamper feedlot production in some areas. Additionally, the record late planting of corn and soybeans this year is adding uncertainty about corn acreage and yield and is beginning to push corn prices higher. There is little doubt that the corn crop will be smaller than anticipated just a few weeks ago but carryover levels are still expected to be adequate. While significantly higher feed prices are not anticipated at this time, the uncertainty remains.”

Peel outlined the variety of quandaries adding pressure to cattle markets, including ongoing trade issues. So far this year, he says weaker year-to-year exports of beef, pork and poultry suggest the meat complex is struggling internationally.

“Weaker beef demand may be the biggest threat to cattle and beef markets for the remainder of the year,” Peel says. “Strong beef demand supported cattle and beef markets in 2017 and 2018, but there are signs that some weakness may be developing in beef demand in both domestic and international markets. While unemployment remains very low, other indications of weakness in the macro-economy are concerning and have led to reduced forecasts for U.S. economic growth in 2019; largely due to ongoing impacts of tariffs and trade disruptions. Relatively slow domestic income growth and higher prices for major consumer items, such as gasoline, combined with record large supplies of beef, pork and poultry may be limiting domestic beef demand going forward in 2019. Relatively wet and cold weather thus far has likely stifled summer beef demand somewhat and probably contributed to an early seasonal peak in boxed beef prices and recent weakness in wholesale beef values.”

Negotiated cash fed cattle trade ended up generally $2-$3 lower on a live basis last week at $112-$113/cwt. in the Southern Plains and at $114-$115 in Nebraska and the western Corn Belt. Dressed trade was also $2-$3 lower at $183-$184.

Cattle futures, especially Feeder Cattle, closed sharply lower on Friday. Along with sharp pressure on Lean Hogs, there was likely plenty of trepidation related to the tariffs scheduled to begin on Mexican imports Monday unless negotiators reached a resolution on the illegal immigration issue. Friday night, those tariffs were suspended, according to various reports; no details given.

Live Cattle futures closed an average of $1.16 lower (67¢ to $1.50 lower).

Feeder Cattle futures closed an average of $2.35 lower.

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

Choice boxed beef cutout value was 6¢ higher Friday afternoon at $222.31/cwt. Select was 24¢ lower at $206.92. Week to week, Choice was 90¢ lower and Select was down 77¢.

Corn futures closed mostly 2¢ to 4¢ lower.

Soybean futures closed mostly 9¢ to 12 ¢lower. 

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Major U.S. financial indices closed sharply higher Friday. Apparently, much of the support came from significantly fewer new jobs than expected. Although counterintuitive, the notion is the anemic numbers will help encourage the Fed to cut interest rates.

Total non-farm employment increased by 75,000 in May, compared to the previous month, according to the Employment Situation Summary from the U.S. Bureau of Labor Statistics.

Average hourly earnings for all employees on private nonfarm

payrolls in May increased by 6¢ to $27.83. Over the year, average hourly

earnings are up 3.1%.

The Dow Jones Industrial Average closed 263 points higher. The S&P 500 closed 29 points higher. The NASDAQ was up 126 points.

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Although U.S. beef exports continued at a strong pace in April, they faltered from year-earlier levels beneath the weight of ongoing trade issues.

For instance, Dan Halstrom, president and CEO of the U.S. Meat Export Federation (USMEF) explained, “U.S. beef is holding its own in Japan, but the April numbers are telling. With the April 1 rate cut, Australian, Canadian, New Zealand and Mexican beef are now subject to a 26.6% duty while the rate for U.S. beef remains at 38.5%. It is absolutely essential that the U.S. secures an agreement that will level this playing field. U.S. beef’s exceptional growth in Korea is a great example of what’s possible when tariffs are less of an obstacle.”

April U.S. beef exports to Japan were 6% less than the previous year in both volume (24,149 mt) and value; 24,149 metric tons (mt) and $156.8 million, respectively.

Overall, U.S. beef exports totaled 105,241 mt in April, down 5% year over year and export value was down only slightly at $674.2 million, according to data released by USDA and compiled by the USMEF. For January through April, exports were 4% below last year’s record pace in volume (412,547 mt) and 1% lower in value ($2.58 billion).

Beef export value per head of fed slaughter in April averaged $305.61 (down 7% from April 2018). The January-April average was $308.34 per head, down 3% from a year ago.

U.S. pork exports totaled 216,757 mt in April, down 6% from a year earlier. Pork export value of $535.2 million was 8% less. For January-April, pork exports were 6% below last year’s pace in volume (817,025 mt) and were down 12% in value to just over $2 billion.

Cattle futures, especially Feeder Cattle, recovered from sharp losses early to close from narrowly mixed to a touch higher. Early pressure came from rising front-month Corn futures. Presumably part of the relief came with chatter that talks between the U.S. and Mexico continue on a positive note (see below).

Early negotiated cash fed cattle sales were $2 lower on a live basis at $114-$115/cwt. in Nebraska and the western Corn Belt. Dressed sales were $2-$3 lower at $183-$184.

Except for 25¢ lower in spot Jun, Live Cattle futures closed an average of 31¢ higher.

Feeder Cattle futures closed narrowly mixed, but mostly lower (an average of 12¢ lower to an average of 5¢ higher).

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

Choice boxed beef cutout value was 14¢ higher Thursday afternoon at $222.25/cwt. Select was 2¢ lower at $207.16.

Corn futures closed 5¢ higher through Jul ’20 and then mostly 1¢ to 2¢ higher.

Soybean futures closed fractionally lower to 1¢ lower. 

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Major U.S. financial indices closed higher Thursday. Key support was attributed to news that talks are progressing between the U.S. and Mexico, regarding illegal immigration from that country, and that threatened tariffs by the U.S. may be postponed.

The Dow Jones Industrial Average closed 181 points higher. The S&P 500 closed 17 points higher. The NASDAQ was up 40 points.

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Grading percentages and carcass weights continue to suggest market currentness.

Carcass quality in May was higher year over year with an average of 78.36% grading Choice and Prime, which was 1.13% more than the previous year. However, the average was 1.86% less month to month—compared to a decline of 0.84% the previous year.

As for carcass weights, after catching up and surpassing year over year levels for several weeks, average dressed steer weights sunk to 842 lbs. the week ending May 25, the lightest of the year. Though a seasonal decrease is unsurprising, dropping 7 lbs. from the previous week and 6 lbs. from the previous year speaks to heavy, timely marketing.

Also positive, as reported previously, beef in freezers as of  Apr. 30 totaled 430.35 million lbs. That was 5% less (-40.8 million lbs.) than the previous month and 9% less than the previous year, according to the monthly USDA Cold Storage report.

“This is the lowest cold storage number since June of 2017,” according to analysts with the Livestock Marketing Information Center (LMIC), in the latest Livestock Monitor. “Seasonally, beef in cold storage typically declines in the first five months of the year and remains there through the summer quarter before inventories build again in September through the end of the year. Another decline in May might take inventories back to the lowest levels since 2014. These smaller levels in cold storage point to several positive signs for the beef industry.”

For one thing, LMIC analysts point to the fact that the inventory of beef in cold storage is declining more aggressively than last year, despite increased beef production and reduced beef exports.

Cattle futures crawled higher Wednesday, building on the previous session as lower grain futures provided some support, despite lower cash fed cattle prices and languishing wholesale beef values.

Established country trade so far this week is $2-$3 lower on a live basis at $113/cwt. in the Texas Panhandle and $112-$113 in Kansas.

Similarly, there were 412 head (three lots from Kansas) offered in the weekly Fed Cattle Exchange Auction. One lot (heifers) sold for a weighted average price of $113, with delivery at 1-9 days.

Live Cattle futures closed an average of 87¢ higher (30¢ to $1.22 higher).

Feeder Cattle futures closed an average of $1.87 higher.

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

Choice boxed beef cutout value was 89¢ lower Wednesday afternoon at $222.11/cwt. Select was 3¢ lower at $207.18.

Grain futures dove lower amid heightened volatility as traders weigh domestic planting prospects against what looks to be bumper crops in South America. That’s besides the potential impact of threatened U.S. tariffs on Mexican imports.

Corn futures closed mostly 10¢ lower through Jul ’20 and then 2¢ to 8¢ lower.

Soybean futures closed mostly 9¢ to 12¢ lower. 

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Major U.S. financial indices closed strongly higher again Wednesday. Follow-though support seemed tied to the previous day’s notion that the Fed is willing to cut interest rates in an effort to sustain economic growth.

Perhaps that’s why markets faded the ADP National Employment Report that indicated a month-to-month increase in private-sector non-farm employment of just 27,000, which was significantly less than the trade expected.

Optimism also came in the face of further erosion in oil prices, with pressure including more inventory than anticipated and wonderments about economic growth and demand. Crude Oil futures (WTI-CME) closed at their lowest levels since January, about $7 lower week to week through the front six contracts.

The Dow Jones Industrial Average closed 207 points higher. The S&P 500 closed 22 points higher. The NASDAQ was up 48 points.

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Assuming other costs remain constant, last month’s increase in corn prices equates to an additional $5/cwt. for feedlot cost of gain, according to Brenda Boetel, Extension agricultural economist at the University of Wisconsin-River Falls.

“Using regression results obtained by Michael Langemeier from Purdue University that found each $0.10/bu. increase in corn prices increases feeding cost of gain by $0.87/cwt. and each $5/ton increase in alfalfa prices increases feeding cost of gain by $0.55/cwt., one can estimate that even if hay price and all other costs remain constant, cost of gain will increase by $5/cwt., given the May increase in price of corn,” Boetel, explains. “This calculation assumes price remains at this level and feeders haven’t conducted any hedging activities, but it highlights the increased costs of feeding producers should expect.”

In the latest issue of In the Cattle Markets, as of the first part of June, Boetel points out CME Corn futures for the front three months were up 59¢, which was 48¢ more than the 5-year average for the same period of time.

“If one assumes corn planting will be down 6 million acres to 86.8 million acres and we see a decrease of 2 bu./acre to 174.6 bu./acre yield we would see a decrease in corn production of 554 million bu.,” Boetel says. “Although the market may focus on the news concerning Mexico and trade, the long-term impact (and in my opinion the more likely scenario) of lower acres and yield will eventually have the greater impact on prices.”

Cattle futures burst higher on Tuesday, supported by higher outside markets, what some would call obscenely oversold conditions and likely short covering. There was also chatter about support coming from news that Brazil halted beef exports to China after confirming a case of atypical BSE. The ball will likely be in China’s hands because it seem doubtful the discovery will change Brazil’s OIE BSE risk status.

The rally came despite negotiated cash fed cattle sales opening in the Southern Plains a day earlier at $113/cwt., which was $2 less than the previous week.

Live Cattle futures closed an average of $1.35 higher (77¢ to $1.70 higher).

Feeder Cattle futures closed an average of $3.42 higher.

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

Choice boxed beef cutout value was 20¢ lower Tuesday afternoon at $223.00/cwt. Select was 34¢ higher at $207.21.

Corn futures closed mostly 1¢ to 2¢ higher.

Soybean futures closed mostly 3¢ to 4¢ higher. 

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Major U.S. financial indices closed sharply higher Tuesday with hints that the Fed is willing to cut interest rates in an effort to sustain economic growth. At least that’s what the trade seemed to interpret from opening remarks made by Federal Reserve Chair, Jerome Powell at the Conference on Monetary Policy Strategy, Tools, and Communications Practices:

“I’d like first to say a word about recent developments involving trade negotiations and other matters,” Powell said. “We do not know how or when these issues will be resolved. We are closely monitoring the implications of these developments for the U.S. economic outlook and, as always, we will act as appropriate to sustain the expansion, with a strong labor market and inflation near our symmetric 2% objective.”

The Dow Jones Industrial Average closed 512 points higher. The S&P 500 closed 58 points higher. The NASDAQ was up 194 points.

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The Purdue University/CME Group Ag Economy Barometer—a measure of producer sentiment—dropped 14 points in May to 101, the lowest level since October 2016.

“Ag producers are telling us the agricultural economy weakened considerably this spring as the barometer has fallen 42 points (29%) since the start of this year,” says James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture. “Farmers are facing tough decisions in the midst of a wet planting season and a lot of uncertainty surrounding trade discussions.”

Month to month, producer perspectives weakened considerably, relative to both current and future economic conditions. The Index of Current Conditions declined 15 points to 84. The Index of Future Expectations also declined 15 points to 108.

Unsurprisingly, producers continue to be concerned about agricultural trade issues. For instance, only 65% of respondents expect U.S. agriculture to see a favorable outcome to the U.S.-China trade dispute. That’s down from 77% in March and 71% in April.

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The political football that was the supplementary disaster aid bill finally made it through the uprights Monday night. If signed by President Trump, as expected, it will start the ball rolling on $19.1 billion in aid for natural disasters going back a few years.

According to a statement from Iowa Secretary of Agriculture, Mike Naig, these are some of the highlights:

Approximately $3 billion is provided to the USDA Office of the Secretary to cover producers’ agricultural losses due to natural disasters.

$435 million will be provided to the Emergency Watershed Protection Program (EWPP) for rural watershed recovery.  

$558 million will be provided to the Emergency Conservation Program (ECP) for repairs to damaged farm land.   

$150 million will be allocated to repair Rural Development Community Facilities in towns affected by natural disasters.