WLI

Cattle futures took a strong step higher Tuesday, buoyed by the outlook for steady to higher cash prices, as well as strong exports indicated in the weekly boxed beef report.

Live Cattle futures closed an average of 89¢ higher, from 12¢ higher at the back to $1.47 higher toward the front.

Feeder Cattle futures closed an average of $1.70 higher, from 80¢ higher at the back to $2.67 higher toward the front.

Choice boxed beef cutout value was 56¢ lower Tuesday afternoon at $217.16/cwt. Select was 57¢ higher at $206.99.

Corn futures closed 1¢ to 2¢ lower.

Soybean futures closed 2¢ to 3¢ lower through May ’21 and then mostly fractionally higher to 1¢ higher.

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Major U.S. financial indices closed lower with most of the pressure appearing to stem from worries about resurgent coronavirus and prolonged impact on the economy. Potentially, there was also some positioning ahead of Tuesday night’s presidential debate.

The Dow Jones Industrial Average closed 131 points lower. The S&P 500 closed 16 points lower. The NASDAQ closed 32 points lower.

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Last week, Sen. Deb Fischer (R-Neb.), a member of the Senate Agriculture Committee, introduced the Cattle Market Transparency Act of 2020.

Among other things, according to Sen. Fischer’s office, the legislation would:

“Establish regional mandatory minimum thresholds of negotiated cash trades to enable price discovery in cattle marketing regions.

“Require USDA to create and maintain a library of marketing contracts between packers and producers, and require packers to supply this information to USDA.

“Make clear that all information should be reported in a manner that ensures confidentiality…

“Mandate that a packer report the number of cattle scheduled to be delivered for slaughter each day for the next 14 days. This requirement already exists for the swine industry.”

Many of those mirror suggestions made in USDA’s Boxed Beef and Fed Cattle Price Spread Investigation Report, published July 22. That report was the result of USDA’s investigation into cattle market volatility in the wake of the pandemic and last summer’s Tyson plant fire in Kansas.

“Sen. Fischer’s bill explores many avenues to improve transparency in the cattle markets,” according to a statement from the National Cattlemens Beef Association (NCBA). “The creation of a cattle contracts library and clarification of confidentiality rules will provide crucial data to cattle producers as they seek to make informed marketing decisions. However, our policy dictates that the voluntary framework we are developing be allowed the opportunity to succeed or fail before we can lend our support to regional mandatory minimums for negotiated trade.”

NCBA’s 46 state affiliate organizations unanimously adopted a fed cattle price discovery policy at their 2020 Summer Business Meeting, directing NCBA to pursue a voluntary approach to price discovery that includes triggers established by a working group of producer members which, if tripped due to a lack of regionally sufficient negotiated trade, would prompt NCBA to seek legislative or regulatory solutions—such as those outlined in Sen. Fischer’s bill.

Similarly, striving for voluntary solutions to increased cash cattle trade is supported by the recent report from the American Farm Bureau Federation’s (AFBF) Cattle Market Working Group, which also examines cattle market volatility in the wake of the pandemic and last summer’s Tyson plant fire in Kansas.

“A key point to remember when discussing the optimal level of negotiated transactions is that PRICE DISCOVERY is not the same as PRICE DETERMINATION,” according to the AFBF report. “While enhanced price discovery is a good thing, it does not necessarily mean it will result in higher prices (as many proponents of minimum thresholds contend). Mandatory minimum negotiated trade could potentially inhibit a producer’s ability to enter into AMAs (alternative marketing arrangements), which are typically a premium paid above market value. Current AFBF policy does not endorse a mandatory minimum negotiated trade.”

The five-area direct weighted average steer price last week was $105.05/cwt. on a live basis, which was $1.51 higher week to week. The average price in the beef was $1.64 higher at $164.89.

After apparent positioning ahead of Friday’s monthly Cattle on Feed report, traders seemed to take increased placements in stride (see below), as Cattle futures closed narrowly mixed to higher Monday, likely buoyed by cash cattle and wholesale beef prices.

Other than an average of 21¢ lower in the back three contracts, Live Cattle futures closed an average of 36¢ higher.

Other than an average of 19¢ lower in three contracts, Feeder Cattle futures closed an average of 43¢ higher, from 15¢ higher at the back to 95¢ higher toward the front.

Choice boxed beef cutout value was $1.62 lower Monday afternoon at $217.72/cwt. Select was 56¢ lower at $206.42.

Corn futures closed 1¢ to 2¢ higher through Sep ’21 and then mostly fractionally higher.

Soybean futures closed mostly 3¢ to 6¢ lower.

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Major U.S. financial indices extended gains from the previous session Monday, with support from tech stocks, as well as renewed optimism about Congress striking a deal for another round of economic stimulus.

The Dow Jones Industrial Average closed 410 points higher. The S&P 500 closed 53 points higher. The NASDAQ closed 203 points higher.

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Although the latest Cattle on Feed report appears to be bearish, with August placements higher than expected and the most cattle on feed September 1 since the data series began, Derrell Peel says perspective is required to understand the current feedlot situation.

“Despite large placements the past two months, total feedlots placements are down 4.2% for the year to date (down 4.3% in the last six months),” says Peel, Extension livestock marketing specialist at Oklahoma State University. “Two months of large placements does not mean that we suddenly have more cattle. Over the course of the year, the total number of feeder cattle in the pipeline has not changed from what was indicated early in the year. Cattle inventories peaked in 2019 and Jan. 1 estimated feeder supplies were down 0.4% year over year. As we work through 2020 and into 2021, feeder cattle supplies should continue to tighten modestly. The indications are that September placements will not follow the pattern of July and August.” As mentioned, placements in August were 9% higher year over year; they were 11% higher in July.

In his weekly market comments, Peel explains the 12-month moving average (12MA) of feedlot inventory, placements and marketings offers valid month-to-month comparison and a longer-term view of feedlot production, due to seasonality.

“The 12MA of feedlot inventories peaked in March and, despite increasing the past two months, is currently 0.6% below the peak,” Peel says. “The 12MA of marketings peaked cyclically in March 2020 as well. The 12MA of placements peaked recently in December 2019 and is currently 2.7% below the peak. The cyclical peak in 12MA placements was in Feb 2018. All of these highlight the fact that the industry has moved past the cyclical peak in cattle numbers and will see modestly tighter supplies going forward.”

Even so, he points out atypical fluctuations in recent placements imply altered short-term dynamics.

“The July-August bulge in placements suggests higher feedlot marketings in the first quarter of 2021. July placements were skewed to the lighter weight cattle,  while August placements included more heavyweight placements, which further implies that cattle could be somewhat bunched up,” Peel says. “However, winter weather typically spreads cattle out a bit, so the exact timing is uncertain. The ripples from the first half of 2020 will extend into early 2021.”

Negotiated cash fed cattle prices ended the week generally $2 higher on a live basis at mostly $105/cwt. in the five-area feeding region, according to the Agricultural Marketing Service. Dressed trade was $1-$2 higher at mostly $165.

Through Thursday, the five-area direct weighted average steer price was $105.03/cwt. on a live basis, which was $1.49 higher than the previous week. The average steer price in the beef was $164.87, which was $1.94 higher.

Even so, Feeder Cattle futures closed lower on Friday, likely based mostly on expectations of a bearish Cattle on Feed report, which came to fruition (see below). Live Cattle followed along, to a lesser degree.

Live Cattle futures closed an average of 72¢ lower, from 7¢ lower at the back to $1.05 lower.

Feeder Cattle futures closed an average of $1.70 lower, from 97¢ lower at the back to $2.20 lower.

Choice boxed beef cutout value was $1.86 higher Friday afternoon at $219.34/cwt. Select was 76¢ lower at $206.98.

Corn futures closed fractionally higher to 1¢ higher.

Soybean futures closed 2¢ to 5¢ higher through Nov ’21 and then mostly higher to 1¢ to 4¢ lower.

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Major U.S. financial indices closed higher Friday, buoyed by tech stocks, and despite ongoing wonderments about domestic and international economic recovery.

The Dow Jones Industrial Average closed 358 points higher. The S&P 500 closed 51 points higher. The NASDAQ closed 241 points higher.

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If anything, the monthly USDA Cattle on Feed report issued Friday (feedlots with 1,000 head or more capacity) will likely be viewed as bearish, with 2.06 million head placed in August, which was 173,000 head more (+9.2%) than a year earlier. That’s about 3% more than expectations heading into the report. In terms of weights, 36% went on feed weighing 699 lbs. or less, 48% weighing 700-899 lbs. and 16% weighing 900 lbs. or more.

Marketings in August of 1.89 million head were 61,000 head fewer (-3.1%) than last year, in line with expectations.

Cattle on feed Sept. 1 of 11.39 million head were 412,000 head more (+3.8%) than a year earlier, which was the most for the date since the data series began in 1996.

Although there were too few transactions to trend in any region, early negotiated cash fed cattle sales were at mostly higher prices week to week on Thursday.

There were a few live trades in Kansas at $105/cwt. and a few in the western Corn Belt at $104-$105. Early dressed trades were at $165 in Nebraska and the western Corn Belt.

Cash optimism and another day of higher wholesale beef prices helped Cattle futures extend gains on Thursday.

Live Cattle futures closed an average of 83¢ higher.

Feeder Cattle futures closed an average of 93¢ higher, from 45¢ higher in expiring Sep to $1.20 higher at the back.

Wholesale beef values gained for another day. Choice boxed beef cutout value was $1.61 higher Thursday afternoon at $217.48/cwt. Select was 14¢ higher at $207.74.

The average dressed steer weight of 920 lbs. for the week ending Sept. 12, was 2 lbs. heavier than the previous week and 29 lbs. heavier than the same week last year, according to USDA’s Actual Slaughter Under Federal Inspection report. The average dressed heifer weight of 836 lbs. was 4 lbs. heavier than the prior week and 14 lbs. heavier than a year earlier.

Net U.S. beef export sales for 2020 of 18,000 metric tons were up 26% from the previous week and 36% from the prior four-week average, according to the Weekly U.S. Export Sales report from USDA’s Foreign Agricultural Service, for the week ending Sept. 17. Increases were primarily for Japan, South Korea, China, Taiwan, and Hong Kong.

Corn futures closed mostly 3¢ to 5¢ lower.

Soybean futures closed 12¢ to 16¢ lower through Sep ’21 and then fractionally higher to 9¢ lower.

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Major U.S. financial indices edged higher Thursday, following the previous session’s selloff.

On the one hand, initial weekly job insurance claims increased by 4,000 week to week to 870,000, according to the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.

On the other, new and existing home sales continue at a blistering pace.

Existing-home sales increased in August for the third consecutive month, according to the National Association of Realtors^®. For the month, total existing-home completed transactions rose 2.4% from July. Through July, existing home sales were 10.5% higher year over year.

“Home sales continue to amaze, and there are plenty of buyers in the pipeline ready to enter the market,” says Lawrence Yun, NAR’s chief economist. “Further gains in sales are likely for the remainder of the year, with mortgage rates hovering around 3% and with continued job recovery.”

As for new home sales, they were 4.8% higher from July to August and 43.2% higher year over year.

The Dow Jones Industrial Average closed 52 points higher. The S&P 500 closed 9 points higher. The NASDAQ closed 39 points higher.

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Income growth, reduced trade barriers and technological advancements are driving the increase in global value chains, transforming markets and trade processes, linking farmers to traders and consumers across regions and countries. That’s according to a new report from the Food and Agriculture Organization of the United Nations (FAO).

The State of Agricultural Commodity Markets, 2020 (SOCO 2020) argues that global trade and well-functioning markets lie at the heart of the development process as they can spur inclusive economic growth and sustainable development, and strengthen resilience to shocks.

Global agri-food trade more than doubled since 1995, amounting to $1.5 trillion in 2018, with emerging and developing countries’ exports on the rise and accounting for over one-third of the world’s total, according to the report.

Technological progress, urbanization, population and income growth, lower transport costs, trade policies and a decline in average import tariffs are driving the growth.

“We need to rely on markets as an integral part of the global food system. This is all the more important in the face of major disruptions, whether they come from COVID-19, locust outbreaks or climate change,” according to FAO Director-General QU Dongyu in his introduction to the report.

The report estimates that about one-third of global agricultural and food exports are traded within a global value chain and cross borders at least twice.

Among the report highlights:

Upper and lower middle income countries, together, increased their share in global agri-food exports from about 25% in 2001 to 36% in 2018.

Although global agri-food trade doubled since 1995 in real value, its growth rate slowed since the 2008 financial crisis. This is expected to be further impacted by the COVID-19 pandemic.

Digital technologies are transforming all stages of the food value chain from farm to table. They improve efficiency, create jobs and save resources. But it is difficult to foresee all the impacts technological innovation can have on how food is grown, processed, traded and consumed.  

While countries in Europe and Central Asia, and East Asia and the Pacific tend to trade within the same regions, countries in South Asia, Latin America and the Caribbean, sub-Saharan Africa, North America, and the Middle East and North Africa trade more globally.

Cattle feeders offered 683 head in the weekly Fed Cattle Exchange Auction, all from the Southern Plains. They sold 219 head (two lots) for an average of $104.16/cwt., for delivery at 1-17 days. That was higher than last week’s country trade of $103.00-$103.50.

Similarly, Choice steers and heifers sold 75¢ to $1 higher at the fat auction in Tama, IA. Choice 2-4 steers (217 head) weighing an average of 1,450 lbs. sold for an average price of $105.55/cwt., at the top of last week’s price range for country trade.

On the other hand, slaughter steers sold $2-$3 lower at Sioux Falls Regional in South Dakota, where 332 Choice 2-3 steers weighing an average of 1,490 lbs. brought an average price of $102.92.

The notion of firm to higher cash prices helped support Cattle futures Wednesday, although trade was sluggish.

Live Cattle futures closed an average of 51¢ higher (10¢ to $1.02 higher).

Feeder Cattle futures closed an average of 55¢ higher.

Choice boxed beef cutout value was 43¢ higher Wednesday afternoon at $215.87/cwt. Select was $1.30 higher at $207.60.

Corn futures closed fractionally lower to 1¢ lower.

Soybean futures closed 3¢ to 5¢ lower through Nov ’21 and then mostly fractionally higher.

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Major U.S. financial indices closed lower Wednesday, hamstrung by big tech stocks and wariness over the pace of economic recovery.

The Dow Jones Industrial Average closed 525 points lower. The S&P 500 closed 78 points lower. The NASDAQ closed 330 points lower.

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As the COVID-19 pandemic continues to unfold, some researchers are getting their arms wrapped around the resulting economic damage so far, and into the future.

For instance, a recent Texas A&M AgriLife coordinated study suggests the pandemic will reduce U.S. gross domestic product (GDP), by $2.5 trillion and employment by 19 million full-time equivalent jobs over the next year.

The study includes researchers from Texas A&M’s Department of Homeland Security (DHS) Center of Excellence Cross-Border Threat Screening and Supply Chain Defense (CBTS), Arizona State University’s DHS Center of Excellence, the Center for Accelerating Operational Efficiency, and researchers at the Victoria University in Australia.

Researchers utilized a model of the U.S. economy with a special emphasis on major food and agriculture sectors.

Compared to most other sectors–tourism, air transport, education, restaurants and lodging–the report concludes U.S. food and agricultural sectors will experience smaller economic impacts because they were not subject to shutdowns and reductions in aggregate consumer spending brought on by job losses.

Researchers also suggests livestock operations will suffer economically more than crop operations. They explain USDA’s latest figures show that animal product receipts in 2020 are down just over 8.1%, while cash receipts for crops are expected to increase 6.9%.

“This analysis gives us a critical and realistic evaluation of how the pandemic has and will continue to impact our nation’s and the world’s food supply,” says Patrick J. Stover, vice chancellor of Texas A&M AgriLife, dean of the College of Agriculture and Life Sciences and director of Texas A&M AgriLife Research. “It will be critical that we work together to elevate food system concerns and develop solutions that address the economic consequences to serve as a foundation for lasting recovery.”

Here you can read the full article by Kay Ledbetter, associate editor/communication specialist for Texas A&M AgriLife Research.