WLI

Equities climbed early Tuesday, helping to drag Cattle futures along, but late pressure took them lower.

Other than 5¢ lower in spot Apr, Live Cattle futures closed an average of $1.03 lower (60¢ to $1.47 lower). 

Except for 2¢ lower in spot Mar, Feeder Cattle futures closed an average of $1.96 lower ($1.17 to $2.50 lower).

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

Choice boxed beef cutout value was 9¢ higher Tuesday afternoon at $206.62/cwt. Select was $1.54 higher at $202.70.

Corn futures closed 3¢ to 7¢ higher.

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

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Equities started Tuesday’s Wall Street session extending the previous day’s gains, helped along by the Federal Reserve announcing a 0.50% rate cute, ahead of its regular meeting.

“The fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity. In light of these risks and in support of achieving its maximum employment and price stability goals, the Federal Open Market Committee decided today to lower the target range for the federal funds rate by 0.50% to 1.0% to 1.25%,” according to the Fed statement. “The Committee is closely monitoring developments and their implications for the economic outlook and will use its tools and act as appropriate to support the economy.”

Investor attitudes soured later in the session, though, pushing major U.S. financial indices lower. One theory is that investors took the early rate cut by the Fed to mean that worse economic data than expected is in the wings.

The Dow Jones Industrial Average closed 785 points lower. The S&P 500 closed 86 points lower. The NASDAQ was down 268 points.

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Demand for meat is accelerating with $50.5 billion in sales for 2019, according to The Power of Meat 2020—the 15th-annual in-depth study of meat and poultry through shoppers’ eyes—from the Food Industry Association (FMI), the Foundation for Meat and Poultry Research and Education and the foundation for the North American Meat Institute (Meat Institute).

Meat department sales are strong in dollars and volume, driven by beef and chicken, and spending per household increased. When it comes to meat consumption, moderation is far more popular than elimination, with flexitarians (12%) looking to reduce their animal protein through smaller portion sizes and/or a day without meat/poultry.

“One of the most compelling storylines in the analysis is that 83% of shoppers purchase specific cuts of meat and they are eating smaller portions, but with total volume sales up slightly, that means they are eating less more often,” says Rick Stein, FMI Vice President, Fresh Foods.

Among the top 10 findings of the Power of Meat 2020:

Plant-based meat alternatives are a small but growing market. Total store plant-based meat alternative sales were $760 million in 2019 and grew 11.8%. They are mostly an occasional choice driven by perceived health benefits, being a good source of protein, just something different and for environmental reasons. Blended vegetable/meat items, such as mushroom burgers, have a higher and greater cross-population appeal, and can be a bridge to the societal and health benefits people look for, while keeping meat on the plate.

Time-saving solutions drive meat and cooking appliance choices.  While the number of weekly home-cooked meals dropped to 4.5 over 2019, dinners containing animal protein increased to 3.9. Newer cooking appliances, including the Instant Pot and air fryer, continue to make inroads in both ownership and being used to prepare meat and poultry.

Production claims remain popular. Organic, grass-fed and no-antibiotics-ever offerings saw robust sales gains, but overall trust in such claims is only moderate. Building trust in and understanding of claims is key to continued growth.

Supermarkets remain meat powerhouses with some gains in online meat sales. More than half of shoppers primarily buy meat and poultry at supermarkets. Forty percent of shoppers ordered groceries and 19% ordered meat and poultry online, up from 14% last year.

Brands continued to benefit from being a preferred purchase among younger shoppers. 2019 was a strong year for private brands (+12.3%). Shoppers want to hear from brands about nutrition (58%), food safety practices (57%), animal care practices (46%) and the brand’s environmental impact (40%).

Sixty-eight percent of shoppers feel it is important for grocery stores to provide transparency into how and where livestock was raised.

Sustainability concerns impact meat and poultry choices, but 49% believe, if done properly, animal agriculture does not have negative impacts on the planet. Environmental sustainability is affecting protein choices. While 34% of consumers believe raising livestock has some or a lot of negative impact on the planet, this belief is much stronger among younger generations. The industry has an opportunity to improve the availability of unbiased environmental impact information to educate on steps taken to protect the planet.

Feeder Cattle futures led Live Cattle higher Monday. New-month positioning was likely a contributor. As well, the declining number of new coronavirus cases in China suggest the worst may be over in that nation, paving the way toward a resumption toward normal levels of commerce.

Other than 75¢ lower in recently minted away Aug, Live Cattle futures closed an average of $1.82 higher (62¢ higher toward the back to $2.77 higher toward the front). 

Feeder Cattle futures closed an average of $2.09 higher ($1.32 to $2.45 higher).

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

Choice boxed beef cutout value was $1.23 higher Monday afternoon at $206.53/cwt. Select was $2.25 higher at $201.16.

Corn futures closed 3¢ to 8¢ higher through Mar ’21 and then mostly fractionally higher to 1¢ higher.

Soybean futures closed 7¢ to 9¢ higher.

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Major U.S. financial indices charged higher Monday, despite key indicators of slowing manufacturing growth in the U.S. and China.

Although manufacturing in the U.S. continued to grow in February, based on the Institute for Supply Management® (ISM) Purchasing Managers Index® (PMI), growth was slower than expected, down 0.8 percentage points in February to 50.1.

“Comments from the panel were generally positive, with sentiment cautious compared to January,” says Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee. “Global supply chains are impacting most, if not all, of the manufacturing industry sectors.”

A respondent to the survey from the computer and electronic products sector noted: “There are always supply chain challenges with Lunar New Year shutdowns, and this year is no different. Coronavirus is wreaking havoc on the electronics industry. Companies are delayed in starting up production, which is resulting in longer lead times, constraints and increased pricing. It’s a mad dash to dual source stateside in case China isn’t back online soon.”

The closely watched Caixin China General Manufacturing PMI™—a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy—dropped 10.8 points month to month to 40.3 in February, the lowest reading since it began in 2004.

“Production, new work and staffing levels all fell at the quickest rates since the survey began nearly 16 years ago as companies extended their usual Lunar New Year shutdowns to help stem the spread of the virus,” according to the report from Caixin and IHS Markit. “Supply chains were also hit heavily, with average delivery times increasing at the quickest pace on record, leading firms to increase their use of current stocks. However, firms anticipate a recovery in production over the next year due to expectations that production will be ramped up once any coronavirus-related restrictions are lifted. Notably, the degree of positive sentiment was the strongest seen for five years.”

Chatter late in the session about the potential of coordinated rate cuts among the world’s major central banks, in response to the economic impact of coronavirus, added optimism.

The Dow Jones Industrial Average closed 1,293 points higher. The S&P 500 closed 136 points higher. The NASDAQ was up 384 points.

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Higher markets Monday were more than welcome, but likely speak more to the volatility ahead, due to unknowns associated with COVID-19, rather than a market bottom being established.

“Clearly, the uncertainty has not peaked yet and the best we can hope for, from a market perspective, is that there will come a time when it appears the worst is over and we can see a path to a lengthy recovery in markets,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “It seems unlikely that any definitive news is forthcoming, certainly not in the next few weeks, which would allow markets to bounce back with any confidence.”

Near term, at least the next 30-60 days, Peel believes producers should expect markets to remain weak, if not weaker.

“Obviously, the news about COVID-19 is changing constantly and may support brief short-lived market bounces,” Peel says. “Longer term, I don’t think we are ready yet to change the overall outlook for the year, but the prospect is growing that we might have to trim back our expectations for 2020.

“Producers probably should not make dramatic changes to production and marketing plans just yet, but it would be a good idea to think about how you will adjust things if we have to shift from offense to defense for the entire year.”

Through Friday afternoon, negotiated cash fed cattle prices for the week were $4-$5 less on a live basis at $115/cwt. in the Southern Plains and Nebraska. Dressed trade was $3-$5 less in Nebraska at $185-$187 and mostly $7 lower in the western Corn Belt at mainly $183.

Through Thursday, the average five-area direct steer price was $115.07/cwt. on a live basis, which was $4.70 less than a week earlier. The average dressed steer price of $185.45 was $4.65lower.

Cattle futures took another strong step lower Friday, with ongoing pressure in outside markets from novel coronavirus fears, as well as week-end and month-end position squaring. 

Other than 7¢ higher in expiring Feb, Live Cattle futures closed and average of $2.04 lower ($1.45 lower toward the back to $2.90 lower at the front).

Feeder Cattle futures closed an average of $1.62 lower.

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

Choice boxed beef cutout value was 24¢ lower Friday afternoon at $205.30/cwt. Select was 78¢ lower at $198.91.

Corn futures closed mostly fractionally mixed to 1¢ lower.

Soybean futures closed mostly 2¢ to 4¢ lower.

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Major U.S. financial indices mostly fell hard again Friday but closed off of session lows. Fears about novel coronavirus and its potential impact on the domestic and global economies continued to fuel the pressure. Federal Reserve Chair Jerome H. Powell, quelled some fears with this statement late Friday:

“The fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity. The Federal Reserve is closely monitoring developments and their implications for the economic outlook. We will use our tools and act as appropriate to support the economy.”

The Dow Jones Industrial Average closed 357 points lower. The S&P 500 closed 24 points lower. The NASDAQ was fractionally higher.

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Increasing market uncertainty last week, tied to the global spread of novel coronavirus, (COVID-19) took Cattle futures down as steeply as last summer’s plunge following the packinghouse fire in Kansas.

Week to week on Friday, Feeder Cattle futures closed an average of $7.74 lower, while Live Cattle futures closed an average of $6.34 lower. The week following the Tyson fire, Feeder Cattle were down an average of $5.48 and Live Cattle were down an average of $6.53.

Managed money—lots of it—and electronic, algo trading at lightening speeds is likely magnifying market volatility and momentum.

COVID-19 is nothing new, making headlines since the first case was identified in China last December. But fears ratcheted higher last week as economic impact appeared more pronounced in countries like China and South Korea as the likelihood of a pandemic grew.

For instance, the USDA Foreign Agricultural Service (FAS) issued an assessment last week about the current economic impact of COVID-19 in South Korea. “The local economy is slowing down due to weak retail sales and reduced economic activity. Many companies have temporarily closed their offices and processing facilities for the week of Feb. 23 to prevent spread of the virus,” according to the report. “The Korea Economic Research Institute (KERI) reported Feb. 24 that its Business Survey Index (BSI) for February 2020 fell to 78.9, down 7.6 points from January, the lowest level since February 2009.”

As of Feb. 26, 1,146 people in South Korea tested positive for the virus; 11 deaths. A week earlier, the number of cases in Korea was 51.

Meanwhile, according to the World Health Organization, there were 79,394 confirmed COVID-19 cases in China as of Feb. 29. Estimates of current and future economic impact vary widely. Already, companies like Apple are telling investors that previous revenue guidance for the next quarter is likely overstated as COVID-19 in China slows production, constrains supply chains and dampens demand in that nation.

Here at Home

As of Saturday, according to WHO, there were 62 COVID-19 cases in the U.S. The first death, due to the disease, was confirmed over the weekend.

“For the general American public, who are unlikely to be exposed to this virus at this time, the immediate health risk from COVID-19 is considered low. However, it’s important to note that current global circumstances suggest it is likely that this virus will cause a pandemic…,” according to last Tuesday’s situation summary from the Centers for Disease Control and Prevention (CDC).

Wednesday evening, CDC confirmed an infection with the virus that causes COVID-19 in California, in a person who reportedly did not have relevant travel history or exposure to another known patient with COVID-19.

“It’s possible this could be an instance of community spread of COVID-19, which would be the first time this has happened in the United States,” according to the CDC statement. “Community spread means spread of an illness for which the source of infection is unknown. It’s also possible, however, that the patient may have been exposed to a returned traveler who was infected.” So far there are 15 confirmed COVID-19 cases in the U.S.

Negotiated cash fed cattle trade continued lower Thursday with dressed trade in the western Corn Belt losing another $2-$4 at $180-$183/cwt., mostly $183. For the week, dressed prices there are $7-$10 lower than last week.

Although too few to trend, there were also some live trades in Nebraska at $112-$114, another $1-$3 lower than the market established earlier in the week, which was $4-$5 lower than last week.

Lower cash prices are, of course, tied to fears about the potential impact of novel coronavirus on the global economy. Those fears continued to drive equity markets and many futures markets sharply lower again Thursday.

Cattle futures closed off of session lows, but lost plenty of ground, especially in nearby contracts.

Live Cattle futures closed and average of $1.47 lower through the front three contracts and then an average of 34¢ lower to an average of 13¢ higher, with the heaviest volume of trade since last September.

Feeder Cattle futures closed an average of $1.57 lower through the front three contracts and then an average of 15¢ lower to an average of 40¢ higher.

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

Choice boxed beef cutout value was 80¢ lower Thursday afternoon at $205.54/cwt. Select was $1.09 higher at $199.69.

Carcass weights continue significantly higher year over year, according to the latest USDA Actual Slaughter Under Federal Inspection report. The average dressed steer weight for the week ending Feb. 15 was 905 lbs., which was 2 lbs. heavier than the prior week and 26 lbs. heavier than the same week a year earlier. The average dressed heifer weight of 833 lbs. was 1 lb. lighter than the previous week but 14 lbs. heavier than a year earlier.

Corn futures closed 4¢ to 6¢ lower through Mar ’21 and then mostly 2¢ lower.

Soybean futures closed fractionally higher to 5¢ higher through Nov ’20 and then mostly 1¢ lower.

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Major U.S. financial indices plunged Thursday as fears about novel coronavirus ratcheted higher.

The latest fuel to the panic came with a report from the Centers for Disease Control and Prevention (CDC) Wednesday night, confirming an infection with the virus that causes COVID-19 in California, in a person who reportedly did not have relevant travel history or exposure to another known patient with COVID-19.

“It’s possible this could be an instance of community spread of COVID-19, which would be the first time this has happened in the United States,” according to the CDC statement. “Community spread means spread of an illness for which the source of infection is unknown. It’s also possible, however, that the patient may have been exposed to a returned traveler who was infected.” So far there are 15 confirmed COVID-19 cases in the U.S.

The Dow Jones Industrial Average closed 1,190 points lower. The S&P 500 closed 137 points lower. The NASDAQ was down 414 points.

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Total pounds of beef in freezers Jan. 31 were 2% more than the previous month but 4% less than a year earlier, according to the latest USDA Cold Storage report.

Frozen pork supplies were up 8% from the previous month and up 11% from last year.

Total red meat supplies in freezers were 5% more than the previous month and 3% more than the previous year.

Total frozen poultry supplies were up 4% from the previous month and up 1% from a year ago. Total frozen chicken supplies were record high for the month.

Negotiated cash fed cattle trade continued with a lower undertone, Wednesday, although there were too few transactions to trend. A day earlier, live trade was $4-$5 lower week to week in the Southern Plains and Nebraska at $115/cwt. Dressed trade was $3-$5 lower at $185-$187.

There were 755 head offered in the weekly Fed Cattle Exchange auction—five lots from the Southern Plains. Four lots—627 head—sold for a weighted average price of $115.25/cwt.; 483 head for delivery at 1-9 days and 272 head for delivery at 1-17 days.

Choice steers and heifers sold $1.00-$1.50 lower at the fat auction in Tama, IA. There were 82 head of Choice 2-4 steers weighing an average of 1,457 lbs. and bringing an average price of $120.51. Country trade in the region last week was at $119-$120.

At Sioux Falls Regional in South Dakota, though, fat cattle sold $2-$4 lower with 176 Choice 2-3 steers weighing an average of 1,438 lbs., bringing an average of $116.84.

Cattle futures, especially Feeder Cattle, found some footing Wednesday, likely helped along by short covering.

Live Cattle futures closed mixed, from an average of 69¢ lower through the front four contracts to an average of 28¢ higher.

Except for 12¢ lower in Oct, Feeder Cattle futures closed an average of 80¢ higher (10¢ higher to $1.85 higher in Apr).

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

Choice boxed beef cutout value was $1.13 lower Wednesday afternoon at $206.34/cwt. Select was $1.30 lower at $198.60.

Corn futures closed mostly fractionally lower to 2¢ lower.

Soybean futures closed mostly fractionally higher to 3¢ higher.

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Despite an attempt at stability early on, major U.S. financial indices continued mainly lower again Wednesday, with persistent coronavirus fears.

The Dow Jones Industrial Average closed 123 points lower. The S&P 500 closed 11 points lower. The NASDAQ was up 15 points.

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Hide prices and subsequent beef byproduct values continue under long-term pressure. Part of it has to do with sheer volume, but another part has to do with consumers choosing synthetics in the place of leather, sometimes with the mistaken belief that fake leather is more environmentally friendly.

“There is no better, more environmentally-friendly alternative to using hides from animals processed for food than to make real leather,” says Stephen Sothmann, president of the Leather and Hide Council of America (LHCA). “Without the leather industry, nearly 2 billion lbs. of unused cattle hides would be diverted to landfills, placing tremendous pressure on the environment that would be further compounded by the shift to synthetic imitations produced from plastic and other non-renewable sources.”

As it is, based on USDA data, Sothmann explains the U.S. processed more than 33 million head of cattle for food last year, but U.S. export data and industry estimates suggest approximately 27.5 million U.S. cattle hides were used in domestic and global leather production. So, about 17% of U.S. cattle hides last year were destroyed or discarded in landfills.

Those discarded or destroyed hides could have been used to produce leather for approximately 99 million pairs of shoes, 110 million footballs or two million sofas, according to the LHCA.

Whereas cattle hides are naturally biodegradable, and may decompose in less than 50 years, Sothmann explains synthetics derived from petrochemicals could take as many as 500 years to break down.

Moreover LHCA suggests the annual percentage of discarded and destroyed cattle hides will likely increase if trends continue in the use of synthetics to produce finished goods in place of real leather.

“As consumers, retailers and brands weigh the versatility, beauty, durability and sustainability of leather compared to its imitations, it’s clear: there’s simply no substitute for real leather,” Sothmann says.