WLI

The weekly weighted average five-area direct price for fed steers was $1.68 lower on a live basis last week at $113.17/cwt. Steer prices in the beef were $3.98 lower at $180.80.

There were too few transactions to trend negotiated cash fed cattle in any region on Monday, but early sales were decidedly pessimistic with some live trade in Nebraska and the western Corn Belt at $110/cwt.; early dressed sales at $175.

Cattle futures started the week limit down and near limit-down as equity markets plunged amid continued uncertainty about COVID-19, coupled with the outbreak of an oil price war over the weekend that sent crude oil prices into free-fall.

Live Cattle futures closed an average of $2.89 lower.

Feeder Cattle futures closed limit-down $4.50 across the board.

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

Choice boxed beef cutout value was 11¢ lower Monday afternoon at $207.36/cwt. Select was 25¢ lower at $202.32.

Corn futures closed 2¢ to 5¢ lower.

Soybean futures closed mostly 15¢ to 21¢ lower.

*******************************

Major U.S. financial indices plunged Monday, to their lowest levels since early 2019, fueled by the continued spread of COVID-19 and the panic it spawns, as well as an oil price war.

The simple version goes something like this: Saudi Arabia and most of its OPEC allies wanted to cut oil production in an effort to stabilize oil prices, which were losing significant ground due to the COVID-19-slowed global economy. Russia said no, so Saudi Arabia set about offering oil at lower prices. As oil prices plummet, so does the economic health of companies tied to the energy sector.

Crude Oil futures—West Texas Intermediate on the CME—closed $8.98 to $10.15 lower through the front six contracts. Spot Apr closed $10.15 lower (-24.59%) than the previous session and $15.62 lower (-33.4%) week to week.

The Dow Jones Industrial Average closed 2,013 points lower. The S&P 500 closed 225 points lower. The NASDAQ was down 624 points.

*******************************

Although it’s too soon to tell if COVID-19 is impacting beef demand, or to what degree, Derrell Peel, Extension livestock marketing specialist at Oklahoma State University says it’s certainly possible there are negative impacts, especially where exports are concerned.

“There are a multitude of market factors to sort out including: new trade agreements, macroeconomic changes (stock market, interest rates, etc.), exchange rates, African Swine Fever, and others that will make it more difficult to determine the more direct impacts of COVID-19 on international and domestic beef markets,” Peel says. 

In the meantime, there has been little seasonal improvement to wholesale beef prices.

Compared to the prior year, for Choice, Peel says rib primal prices last week were 10.4% less, loin values were 10.8% less, brisket values were 13.8% less, chuck values were down 7% and rounds were 1.3% less. He adds Select primal values are also lower year over year.

“Weakness in boxed beef prices does not necessarily mean that beef demand is lower,” Peel says. “Beef production is up 5.1% year over year for the first eight weeks of 2020. Beef prices would normally be pressured with higher beef production even with stable demand.” 

Negotiated cash fed cattle trade ended up $2 lower on a live basis last week in Nebraska and the Southern Plains at $113/cwt. It was $1 higher to $2 lower in the western Corn Belt at $113-$115. Dressed trade was $5 lower in Nebraska at $180-$182; steady to $5 lower at the same money in the western Corn Belt.

Cattle futures dropped like a rock again Friday.

Live Cattle futures closed an average of $2.42 lower ($1.82 lower at the back to $2.90 lower in spot Apr).

Spot Apr Live Cattle closed at $105.75 on Friday. That’s $22.20 less (-17.35%) than the recent high of $127.95 Jan. 10 and lower than the $110.17 shortly after the Tyson plant fire.

Feeder Cattle futures closed an average of $3.36 lower.

Spot Mar Feeder Cattle closed at $130.70 on Friday, which was $16.75 less (-11.36%) than the recent high Jan. 10, but still slightly higher than the first week of September.

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

Choice boxed beef cutout value was 22¢ higher Friday afternoon at $207.47/cwt. Select was $1.51 higher at $202.57.

Corn futures closed 1¢ to 7¢ lower through May ’21 and then fractionally higher to 1¢ higher.

Soybean futures closed 2¢ to 5¢ lower through Jan ’21 and then mostly 2¢ to 3¢ higher.

*******************************

Major U.S. financial indices continued to extend losses Friday as the number of COVID-19 cases and deaths escalated in the U.S. and around the world.

That was despite a U.S. employment report that was significantly more positive than the trade expected.

Total nonfarm payroll employment rose by 273,000 in February, according to the U.S. Bureau of Labor Statistics. The unemployment rate was little changed at 3.5%. Average hourly earnings for all employees on private nonfarm payrolls in February increased by 9¢ to $28.52. Over the past 12 months, average hourly earnings increased by 3.0%.

The Dow Jones Industrial Average closed 256 points lower. The S&P 500 closed 51 points lower. The NASDAQ was down 162 points.

Crude Oil futures—West Texas Intermediate on the CME—closed $3.90 to $4.62 lower through the front six contracts. Those contracts were an average of $11.48 lower over the past two weeks.

*******************************

Although there’s no way to estimate the eventual long-term economic implications of COVID-19, Aaron Smith, crop marketing specialist at the University of Tennessee suggests a couple of areas that bear watching.

“First, the disruption to global markets and consequently exports of agricultural products may be substantial and could get worse,” says Smith, in his weekly market comments. “For agricultural commodities and products, both logistical issues and economic activity are at the forefront of trade issues. Getting vessels loaded or unloaded at ports can be problematic (both domestically and internationally). For example, there can be challenges with refrigeration units as a limited number of places to “plug in” large containers are available at importing ports. This could create issues with unloading ships and may result in perishable cargos being rendered unusable. From an economic activity standpoint, the restrictions to travel and the quarantining of some cities/regions reduces consumer spending (affecting economic growth/GDP) as dollars are not circulated in economies and thus impact demand for agricultural products. This is an oversimplification of very complex economic systems, but it is worthwhile to consider the short and long-term implications on US agricultural exports.”

Further, Smith says securing agricultural inputs produced in China could become a challenge for the upcoming planting season.

“The longer logistical disruptions continue, the greater the strain could be on domestic supplies of certain agricultural (and non-agricultural) inputs. This also may have longer term consequences as large multinational companies evaluate supply chains and risks,” Smith says.

Negotiated cash fed cattle trade continued $2 less than last week on Thursday at $113/cwt. in the Southern Plains and Nebraska. Although too few to trend there were some early dressed sales in Nebraska at $182, which was $3-$5 less than the previous week.

Cattle futures followed outside markets lower.

Live Cattle futures closed an average of 93¢ lower (40¢ lower to $2.62 lower in spot Apr).

Feeder Cattle futures closed an average of $1.87 lower ($1.70 to $2.77 lower).

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

Choice boxed beef cutout value was 43¢ higher Thursday afternoon at $207.25/cwt. Select was 45¢ lower at $201.06.

Carcass weights continue heavier year over year, according to USDA’s latest Actual Slaughter Under Federal Inspection report for the week ending Feb. 22.

The average dressed steer weight was 900 lbs., which was 26 lbs. more the same week a year earlier. The average dressed heifer weight was 13 lbs. more than a year earlier at 831 lbs. Week to week, dressed steer and heifer weights were 5 lbs. and 2 lbs. lighter, respectively.

Corn futures closed mostly 2¢ lower.

Soybean futures closed mostly 8¢ to 10¢ lower.

*******************************

Major U.S. financial indices dove South Thursday, driven once again by fears about coronavirus.

The Dow Jones Industrial Average closed 969 points lower. The S&P 500 closed 106 points lower. The NASDAQ was down 279 points.

*******************************

The U.S. inventory of all cattle and calves started the year 391,400 head fewer (-0.41%) than a year earlier at 94.41 million head. There were 374,000 fewer beef cows (-1.18%) at 31.32 million, according to the Jan. 1 Cattle report.

Herd contraction north of the border was more significant, according to USDA’s United States and Canadian Cattle and Sheep report published Thursday.

All cattle and calves in Canada Jan. 1 were 11.22 million head, which was 220,000 head fewer (-1.92%) than a year earlier. Beef cows of 3.56 million head were 94,600 head fewer (-2.59%).

Combined, the number of cattle and calves in the U.S. and Canada Jan. 1 were 105.63 million head, which was 611,400 head fewer (-0.58%) than the previous year. There were 34.88 million beef cows, which were 468,600 fewer (-1.33%).

Negotiated cash fed cattle trade developed in the Southern Plains Wednesday at $113/cwt., which was $2 lower than last week. Trade was light to moderate on moderate demand.

There were 566 head (three lots) offered in the weekly Fed Cattle Exchange auction at an offer price of $114; with no takers.

Cattle futures continued joined at the hip to equity markets on Wednesday, surging higher on the day.

Live Cattle futures closed an average of 92¢ higher (50¢ to $1.17 higher).

Feeder Cattle futures closed an average of $1.92 higher ($1.32 to $2.72 higher).

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

Choice boxed beef cutout value was 20¢ higher Wednesday afternoon at $206.82/cwt. Select was $1.19 lower at $201.51.

Corn futures closed 1¢ to 5¢ higher through Mar ’21 and then mostly unchanged to fractionally mixed.

Soybean futures closed 1¢ to 5¢ higher through the front three contracts and then mostly 6¢ lower.

*******************************

Major U.S. financial indices soared, Monday, amid positive economic news that included a steeper increase in private payrolls than expected.

Private sector employment rose by 183,000 last month, according to the ADP National Employment Report®.

“COVID-19 will need to break through the job market firewall if it is to do significant damage to the economy,” says Mark Zandi, chief economist of Moody’s Analytics. “The firewall has some cracks, but judging by the February employment gain it should be strong enough to weather most scenarios.”

Presumably, investors also were responding to the Super Tuesday Democratic Primary won by former vice-president, Joe Biden, who is seen as the more business friendly option on that side of the ticket.

The Dow Jones Industrial Average closed 1,175 points higher. The S&P 500 closed 126 points higher. The NASDAQ was up 334 points.

*******************************

Agricultural producer sentiment was record high in February, according to the Purdue/CME Group Ag Economy Barometer, which was up 1 point from the previous month to 168. Optimism stemmed from producer sentiment regarding current conditions.

“Almost across the board, producers indicated they were more optimistic about current conditions on their farms and in U.S. agriculture, and retained most of the improvement in future expectations exhibited in January,” says James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture. “Optimism about the agricultural trade outlook was underpinned by recent trade agreements and appeared to be the primary driver behind the improvement in sentiment.”

The Index of Current Conditions increased 12 points from January to a reading of 154. Meanwhile, the Index of Future Expectations fell 4 points below the record high set in January to a reading of 175.

The Ag Economy Barometer is based on a mid-month survey of 400 U.S. agricultural producers.

Over three-fourths (76%) of respondents said the USMCA and the China Phase One agreements either relieved their concerns about the effect of tariffs on their farms’ income “somewhat” (69%) or “completely” (7%); 17% said, “not at all”.

Although some voiced concerns about the possible impact of the COVID-19 virus on agricultural trade in mid-February, when the survey was conducted, producers remained relatively optimistic about the resumption of trade with China.

“As the COVID-19 virus footprint continues to expand, it remains to be seen whether it will impact farmer sentiment at home,” Mintert says.

Expectations for an improvement in farmland values also rose to an all-time high in February. When asked to look ahead five years, 59% of producers said they expect farmland values to rise, up from 50% in January. This was the most positive response to the question since data collection began in 2015.