WLI

Negotiated cash fed cattle trade remained largely undeveloped through Wednesday afternoon, based on USDA reports, but had a firm to higher feel.

For one thing, there were some early live trades in the Texas Panhandle at $120/cwt., which was $1 higher than last week.

Earlier in the day, there were three Southern Plains lots (422 head) offered in the weekly Fed Cattle Exchange auction, and no takers. One lot was passed out at $119.75/cwt.

Up North, Choice steers and heifers sold $1.75-$2.25 higher at the fat auction in Tama, IA Wednesday. There were 91 Choice 2-4 steers weighing an average of 1,434 lbs. and bringing an average of $123.15/cwt. Country trade in the western Corn Belt was $119 last week.

Similarly, slaughter steers also sold $2-$3 higher at Sioux Falls Regional in South Dakota, where 184 Choice 2-3 steers weighing an average of 1,447 lbs. brought an average of $120.74.

Feeder Cattle futures gained more ground Wednesday on strong fundamentals, and perhaps positioning ahead of the monthly Cattle on Feed report due out Friday. That helped underpin Live Cattle. 

Live Cattle futures closed narrowly mixed and mostly higher, from unchanged to an average of 11¢ lower in three contracts to an average of 20¢ higher.

Feeder Cattle futures closed an average of 75¢ higher (47¢ to $1.47 higher in spot Mar). That makes for an average of $5.87 higher over the last five sessions.

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

Choice boxed beef cutout value was 56¢ lower Wednesday afternoon at $205.57/cwt. Select was $1.97 lower at $201.76.

Corn futures closed mostly 1¢ to 2¢ lower.

Except for 5¢ and 3¢ higher in the front two contracts, Soybean futures closed 1¢ to 2¢ higher.

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Major U.S. financial indices closed higher Wednesday, buoyed in part by various reports suggesting China is containing novel coronavirus.

The Dow Jones Industrial Average closed 115 points higher. The S&P 500 closed 15 points higher. The NASDAQ was up 84 points.

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America’s ranchers and farmers took another step toward collectively telling agriculture’s positive sustainability story to consumers and policy makers Wednesday with announcement of Farmers for a Sustainable Future (FSF), a coalition of agricultural organizations committed to environmental and economic sustainability.

“Today’s launch of the Farmers for a Sustainable Future is a defining moment,” said Ethan Lane, Vice President of Government Affairs for the National Cattlemen’s Beef Association (NCBA), who spoke at the FSF rollout event in Washington. “Twenty-one agricultural groups—which represent the vast majority of the agricultural industry in our country—are standing side by side in unity to correct a false narrative that has haunted us for as long as I can remember. We’re here because we support incentivizing innovation, science-based research, resilient infrastructure, and focusing on outcomes.”

Along with NCBA, other founding FSF members include the American Farm Bureau Federation, USA Rice, American Sugar Alliance, the National Corn Growers Association, and the National Pork Producers Council.

“We know that consumers care how beef is produced, and they want to know that it’s done in a way that’s environmentally and socially sustainable,” Lane explains. “In fact, the U.S. is the leader in sustainable beef production, with a carbon footprint 10 to 50 times lower than the rest of the world. And while we’ve already made a lot of progress, American cattle farmers and ranchers are committed to continuous improvement by producing high-quality beef even more sustainably for generations to come.”

NCBA is also a founding member of the U.S. Roundtable for Sustainable Beef, a multi-stakeholder organization composed of more than 220 ranchers, feed yard operators, packers, food service companies, research institutions, and NGOs that share a mission to advance, support, and communicate about beef’s sustainability.

The coalition will share with elected officials, media and the public U.S. agriculture’s commitment to sustainability and the incredible strides already made to reduce agriculture’s environmental footprint. As policy proposals are developed and considered, the goal is for the coalition and its guiding principles to serve as a foundation to ensure the adoption of meaningful and constructive policies and programs affecting agriculture.

FSF’s guiding principles call for policies that support science-based research, voluntary incentive-based conservation programs, investment in infrastructure, and solutions that ensure vibrant rural communities and a healthy planet.

Cattle futures on Tuesday picked up where they left off last week, gaining more ground, albeit with light and two-sided trade.

Live Cattle futures closed an average of 31¢ higher.

Feeder Cattle futures closed an average of 74¢ higher (30¢ to $1.10 higher).

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

Choice boxed beef cutout value was $1.13 lower Tuesday afternoon at $206.13/cwt. Select was $2.45 lower at $203.73.

Corn futures closed 4¢ to 5¢ higher through Jly ’21 and then 1¢ to 2¢ higher.

Soybean futures closed 1¢ to 2¢ lower.

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Major U.S. financial indices mainly softened Tuesday, with most of the pressure attributed to continued worries about the impact of novel coronavirus on global economic growth.

The Dow Jones Industrial Average closed 165 points lower. The S&P 500 closed 9 points lower. The NASDAQ was up 1 point.

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“The lower year-over-year 2019 calf crop will reduce the number of steers and heifers available for slaughter in the second half of the year and place upward pressure on feeder steer prices,” say analysts, with USDA’s Economic Research Service (ERS), in the latest monthly USDA Livestock, Dairy and Poultry Outlook.

Based on current prices, ERS increased the annual expected feeder cattle price (basis Oklahoma City) by $1 to $146/cwt. By quarter, feeder steers prices are projected at $145 in the first and second quarters, at $148 in the third quarter and at $146 in the fourth quarter.

ERS increased anticipated U.S. beef production for the first half of 2020, reflecting a faster pace of slaughter, but lowered second-half expectations on the anticipation of fewer steers and heifers available for slaughter, due to a slower pace of placements during 2020.

ERS lowered its expected first-quarter fed steer price to $123/cwt. on recent price weakness.

Through Friday, the five-area direct price for steers was $118.90/cwt. on a live basis and $190.27 in the beef. Week to week, that was $2.15 lower and $2.91 lower, respectively.

Futures and equity markets were closed Monday, in observance of Presidents Day, so it will be another day before finding out if the late-week momentum in Cattle futures carries ahead.

Wholesale beef values were lower 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 83¢ lower Monday afternoon at $207.26/cwt. Select was 47¢ higher at $206.18.

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“Heavier carcass weights in 2020 are expected to keep total beef production at or near record levels even as cattle slaughter decreases slightly,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his latest weekly market comments. “Moreover, steer and heifer carcass weights in 2020 may indicate whether the industry is resuming the long-term trend of ever-larger carcasses.”

Steer carcass weights averaged 879.0 lbs. last year, according to Peel. That was 1.5 lbs. less than the previous year. Heifer carcass weights last year averaged 813.1 lbs., down 3.4 lbs. from the prior year. 

“Monthly steer carcass weights were lower year over year for the first nine months of 2019 before moving sharply higher at the end of the year. In fact, monthly steer carcass weights were lower year over year for 31 of 41 months from May 2016 through September 2019,” Peel says. “Heifer carcass weights were lower 26 of 38 months from August 2016 through September 2019. However, steer and heifer carcass weights jumped sharply higher in November and December compared to the previous year and appear to have resumed the long-term trend of higher carcass weights.”

For longer term perspective, Peel explains annual steer carcass weights peaked in 2015 at 892.0 lbs. but averaged lower since then. Heifer carcass weights peaked in 2016 at 821.5 lbs. and have averaged lower through 2019.

“The moderation of carcass weights since 2016 has raised the question of whether the long trend of higher carcass weight was over,” Peel says. “Since 1960, steer carcass weights have averaged 3.8 lbs. larger each year, increasing from 656.3 lbs. in 1960 to 879 lbs. in 2019. Heifer carcass weights have increased an annual average of 4.5 lbs. per year from 545.6 lbs. in 1960 to 813.1 lbs. in 2019.”

As an aside, although economic incentive suggests a continuation of increasing carcass weights, you can find some cattle feeders who believe cattle physiology will cap future carcass growth. Said differently, there are some who think cattle weights are growing beyond the ability of cattle skeletal structure and internal organs to support them.

Moreover, Peel points out, “Multiple research studies have shown that bigger carcasses and the larger beef cuts (bigger steaks) that result have some negative demand implications. If the larger carcass trend resumes, these issues will continue to grow resulting in increased product fabrication needs and alternative product marketing.”

Negotiated cash fed cattle trade ended the week $2-$3 lower at $119/cwt. on a live basis and $3 lower in the beef at $190.

Recent oversold conditions continued to help lift Cattle futures higher Friday as traders positioned for the three-day weekend.

Live Cattle futures closed an average of $1.17 higher, from 77¢ higher to $1.80 higher toward the front of the board.

Feeder Cattle futures closed an average of $2.36 higher. That’s an average of $3.62 higher in the last two sessions.

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

Choice boxed beef cutout value was $1.64 higher Friday afternoon at $208.09/cwt. Select was $1.92 higher at $205.71.

Corn futures closed mostly 2¢ to 3¢ lower.

Soybean futures closed 2¢ lower to 2¢ higher.

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Major U.S. financial indices closed little changed Friday, amid mixed economic news and as investors positioned for the holiday weekend.

The Dow Jones Industrial Average closed 25 points lower. The S&P 500 closed 6 points higher. The NASDAQ was up 19 points.

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“The cattle herd is expected to decline cyclically in the early part of the projection as producers respond to lower returns,” say USDA analysts, in the Agricultural Projections to 2029, released Friday. “A decline in cattle numbers early in the period will likely contribute to higher cattle prices, although a modest herd expansion the rest of the period pressures cattle prices lower. Rising slaughter weights, due to efficiencies from nutrition and genetics, will further support gains in beef production. Overall, beef production levels are expected to rise to 29.5 billion lbs. by 2029.”

The five-area direct fed steer price is projected to be $116/cwt. this year, then range from $116.37 (2024) to $121.39 (2023) over the next five years. From there, through 2029, the estimated range is $110.58 (2028) to $114.70 (2026).

USDA projects this year’s feeder steer price (basis Oklahoma City) to be $141/cwt. It ranges from $138.13 (2028) to $151.27 (2023) for the remainder of the projection period.

This year’s projected farm calf price of $160/cwt. is the lowest of the projection period, which ranges from $165.17 (2028) to $180.88 (2023).

Keep in mind short-term projections in the report began with the October 2019 USDA World Agricultural Supply and Demand Estimates report. Projections don’t include recent trade deals, such as the Japan-U.S. free trade agreement, phase-one China trade deal or the U.S.-Mexico-Canada trade agreement.

“Robust demand provides incentives for the continued growth of the U.S. livestock sector over the next 10 years,” say USDA analysts. “In the beef cattle industry, the feed price ratio (cattle price/feed price) is expected to decline over the projection period, reflecting both modestly lower cattle prices and slowly rising feed prices, suggesting lower returns to production.”

Macroeconomic assumptions to the projections (completed in August last year) include:

Global macroeconomic conditions reflect real economic growth that is lower than in the 2010-2019 period, a relatively strong but declining U.S. dollar, and rising oil prices, which are expected to reach $91 per barrel by 2029.

Global real economic growth is projected to average 2.7% annually over the next decade, 2020-29. The United States is expected to average 1.8% growth annually, while developed countries, as a group, are expected to experience an average of 1.5% percent annual growth. Meanwhile, growth in the developing countries remains faster than the global average, but declines from 4.8% annual average growth during 2010-19, to 4.3% during 2020-29.

Steady global economic growth supports longer-term gains in world food demand, global agricultural trade, and U.S. agricultural exports. Economic growth in developing countries is especially important because food consumption and feed use are particularly responsive to income growth in those countries.

Lower prices for negotiated cash fed cattle continued in Nebraska and the western Corn Belt late Wednesday and Thursday with live sales $2-$3 lower at $119/cwt. and dressed sales $3 lower at $190.

Cattle futures continued to regain some footing amid more active trade and expanding open interest for the first time in a spell.

Live Cattle futures closed an average of 79¢ higher, from 40¢ higher to $1.40 higher in the back contract.

Feeder Cattle futures closed an average of $1.26 higher, from 60¢ higher to $1.77 higher toward the front of the board.

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

Choice boxed beef cutout value was 14¢ higher Thursday afternoon at $206.45/cwt. Select was $1.51 lower at $203.79.

Corn futures closed mostly fractionally lower to 1¢ lower.

Soybean futures closed 2¢ to 3¢ higher.

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Major U.S. financial indices softened Thursday, amid reports of a jump in Chinese coronavirus cases and questions about how China is counting diagnosed and confirmed cases.

The Dow Jones Industrial Average closed 128 points lower. The S&P 500 closed 5 points lower. The NASDAQ was down 13 points.

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“There are a number of factors that indicate that the land market will continue to be steady in 2020,” says Randy Dickhut, senior vice president of real estate operations for Farmers National Company (FNC). “Interest rates are low and are poised to remain so during the foreseeable future and government support through MFP payments will likely continue if Chinese trade issues are not fully resolved. Overall, agriculture is in adequate financial shape, but there are individual and regional concerns.”

FNC analysts add that buyer demand, relative to the supply, needs to continue for prices to maintain the plateau trend of the past few years. In 2019, for instance, they say prices held steady with less than the average supply of agricultural land for sale. 

“Investor interest in cropland increased somewhat in 2019 with several new entities entering the market and also from an increase in purchasing activity by existing institutional investors,” Dickhut says.

With buyers generally more cautious last year, some markets saw a move to private treaty listings or bid sales instead of the traditional public land auction, according to FNC.