WLI

Negotiated cash fed cattle trade remained undeveloped through Thursday afternoon.

Despite the lack of cash direction and recent softness, limit-up moves across most Lean Hog contracts helped buoy Cattle futures.

Live Cattle futures closed an average of 48¢ higher. Open interest continued its recent steep decline with 61,318 fewer contracts (-15.3%) between Jan. 21 and Feb. 5.

Feeder Cattle futures closed an average of 93¢ higher (22¢ to $1.52. higher).

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 21¢ higher Thursday afternoon at $210.93/cwt. Select was $1.98 lower at $205.96.

Corn futures closed mostly 1¢ to 3¢ lower.

Soybean futures closed 1¢ to 2¢ lower.

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Major U.S. financial indices extended gains on Thursday, buoyed by cooling fears about the impact of novel coronavirus and reports of China’s announcement it will halve tariffs on $75 billion worth of U.S. imports, as part of the phase-one trade agreement.

The Dow Jones Industrial Average closed 88 points higher. The S&P 500 closed 11 points higher. The NASDAQ was up 63 points.

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U.S. beef exports last year totaled 1.32 million metric tons (mt), 2.5% below the previous year’s record volume, according to data released by USDA and compiled by the U.S. Meat Export Federation (USMEF). Beef export value was 3% less at $8.1 billion. Beef export value per head of fed slaughter last year was $309.75, down 4%.

USMEF attributes part of the decline to decreased exports to Japan, borne by the tariff disadvantage of the U.S., compared to its competitors. U.S. beef exports to Japan were 6% less in both volume (311,146 mt) and value ($1.95 billion). Recent ratification of a new trade agreement by the Japanese Parliament should offer some relief. As of Jan. 1, the tariff rate declined from 38.5% to 26.6%, the same as other major competitors, according to USMEF. There will be another rate cut April 1.

“It was gratifying to see beef exports to Japan perform so well in December, given that the first tariff rate cut was pending,” Halstrom says. “Buyers in Japan have been waiting a very long time for tariff relief and have already responded enthusiastically. We look forward to solid growth in 2020 and beyond.”

South Korea made a strong push to become the leading value market for U.S. beef in 2019, finishing a close second to Japan at a record $1.84 billion (up 5% from a year earlier). Korea was also the second largest volume market for U.S. beef at 255,758 mt (up 7%, also a new record). The United States captured a larger share of Korea’s chilled beef imports in 2019 at 62%, up from 58% the previous year. U.S. beef accounted for 51.5% of Korea’s total beef and beef variety meat imports and more than one-third of Korea’s total beef consumption.

“U.S. beef is achieving remarkable success in Korea’s traditional retail and foodservice sectors and is well-positioned to capitalize on growth in e-commerce, the institutional sector and other emerging sales channels,” Halstrom explains. “As U.S. beef moves steadily toward duty-free status in Korea, it becomes accessible and affordable for a wider range of customers whose appetite for U.S. beef continues to grow. We are seeing many new menu concepts in this dynamic market and continued excitement about U.S. beef.”

Pork Exports Record Large

U.S. pork exports posted new volume and value records in 2019, 10% more than the previous year in volume (2.67 million mt) and 9% higher in value ($6.95 billion).

“Despite retaliatory duties and the other barriers U.S. pork faces in China, exports to the China/Hong Kong region closed 2019 with tremendous momentum,” Halstrom says. “We look forward to continued success in 2020, especially if U.S.-China trade relations continue to trend in a positive direction. The coronavirus situation is certainly concerning and disruptive, but it hasn’t dampened our enthusiasm for the potential this market holds for U.S. red meat.”

Negotiated cash fed cattle trade remained undeveloped through Wednesday afternoon.

There were 627 head offered in the weekly Fed Cattle Exchange auction and no takers.

After hints of early support, Cattle futures trailed lower Wednesday, pressured by the ongoing retreat of open interest in Live Cattle, softer wholesale beef values and the lack of cash direction.

Live Cattle futures closed an average of 69¢ lower.

Feeder Cattle futures closed an average of $1.59 lower.

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

Choice boxed beef cutout value was 21¢ lower Wednesday afternoon at $210.72/cwt. Select was 43¢ higher at $207.94.

Corn futures closed mostly 1¢ lower.

Soybean futures closed mostly fractionally higher to 1¢ higher

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Major U.S. financial indices charged higher Wednesday. Runaway fears over novel coronavirus continued to subside with chatter about development of an effective vaccine. Investors also took heart in positive economic news.

For instance, private-sector, non-farm employment increased by 291,000 jobs from December to January according to the ADP National Employment Report®. That was more than the trade expected.

The Dow Jones Industrial Average closed 483 points higher. The S&P 500 closed 37 points higher. The NASDAQ was up 40 points.

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Today’s Cattle Current is abbreviated, as I’m at the Cattle Industry Convention in San Antonio where the Cattlemen’s College was held Wednesday. Based on sessions I attended, there was lots of focus on sustainability and part of that being the continued evolution of the cattle and beef industries away from commodity production toward specification, value-added production…more tomorrow.

Feeder Cattle futures extended gains on Tuesday, while Live Cattle closed a touch softer as open interest continues to decline, but retained most of the previous session’s gain.

Except for 5¢ higher in away Feb, Live Cattle futures closed an average of 21¢ lower.

Feeder Cattle futures closed an average of 68¢ higher.

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

Choice boxed beef cutout value was 63¢ lower Tuesday afternoon at $210.93/cwt. Select was 9¢ higher at $207.51.

Corn futures closed mostly 1¢ to 3¢ higher.

Soybean futures closed mostly 2¢ to 3¢ higher.

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Major U.S. financial indices jumped Tuesday, with support including news of China taking efforts to stimulate economic growth in the wake of novel coronavirus.

The Dow Jones Industrial Average closed 407 points higher. The S&P 500 closed 48 points higher. The NASDAQ was up 194 points.

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Agricultural producer sentiment rose sharply in January, according to the Purdue University/CME Group Ag Economy Barometer. It increased 17 points from December to a reading of 167, led by a significant jump of 24 points in the Index of Future Expectation, one of two sub-indexes that comprise the barometer. The other, the Index of Current Conditions increased 1 point.

Keep in mind the monthly survey of 400 agricultural producers took place around the time that the U.S. and China signed the phase-one trade deal.

“The Phase One Trade Agreement has largely been considered a win for U.S. exporters, although few details are available regarding how the additional $200 billion in purchases by China will be distributed over the next two years and how much impact it will have on the U.S. farm sector,” says James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture.

Even so, producer expectations continue to improve for increased U.S. agricultural exports over the next five years. As recent as October, only 55% of producers surveyed expected agricultural exports to increase. From November through January, about 70% of those surveyed expect to see an increase in U.S. agricultural exports in the next five years.

Consistently, a small percentage of respondents queried each winter plan to grow rapidly, while a relatively large group has no plans to grow or plans to exit or retire from farming. Those saying they have no growth plans and/or expect to exit/retire has been rising steadily since 2018. In January this year, a combined 56% of respondents said they have no plans to grow or plan to exit/retire, up from 50% in 2019, and up from 39% in 2018.

“The tremendous volatility the ag sector has experienced the last couple of years could be interpreted as a signal to producers to be more cautious regarding future expansion plans,” Mintert says.

After early support, then pressure, then support again, Cattle futures continued to rebound from the recent selloff. Friday’s Cattle inventory report likely offered some support, with less estimated year-over-year feeder cattle supply outside feedlots Jan. 1: 26.45 million head, which was is 0.40% less (-105,300 head). 

Live Cattle futures closed an average of 57¢ higher, from 30¢ to $1.05 higher. 

Except for $1.25 lower in away-Jan, Feeder Cattle futures closed an average of 98¢ higher (57¢ to $1.12 higher).

Wholesale beef values were lower on Choice and sharply 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 $1.44 lower Monday afternoon at $211.56/cwt. Select was $3.24 lower at $207.42.

Corn futures closed mostly 1¢ lower.

Soybean futures closed mostly 3¢ to 4¢ higher through Mar ’21 and then mostly 1¢ higher.

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Major U.S. financial indices rebounded some on Monday. Although fears about the potential economic impact of novel coronavirus continued, positive economic news took the spotlight.

For instance, contrary to trader expectations, the manufacturing sector expanded last month.

“The January PMI® (Purchasing Managers Index) registered 50.9%, an increase of 3.1 percentage points from the seasonally adjusted December reading of 47.8%,” according to Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee. “Global trade remains a cross-industry issue, but many respondents were positive for the first time in several months.”

The Dow Jones Industrial Average closed 143 points higher. The S&P 500 closed 23 points higher. The NASDAQ was up 122 points.

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“The inventory of beef replacement heifers is 18.4% of the beef cow inventory, a level that historically has not indicated significant liquidation” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, providing more perspective to Friday’s USDA Cattle report, in his weekly market comments. “However, in 2019, replacement heifers were 18.6% of the beef cow inventory, but sharply higher beef cow slaughter at the end of the year pushed the culling rate fractionally over 10% and resulted in modest reduction in the herd inventory. The number of beef heifers expected to calve in 2020 is 3.5 million head, 0.8% lower year over year.”

The USDA report pegged beef cows Jan. 1 at 31.31 million head, which was 1.18% less (-374,000 head) than the previous year.

“The peak beef cow inventory for 2019 was 31.7 million (revised down by 75,000 head from the previous report). This means that the total herd expansion in this cycle was an increase of 2.73 million head from the 2014 low of 29.0 million cows,” Peel says. “That is a total cyclical expansion of 9.4% or an average of 1.9% per year for the five years of expansion.”

Of course, there could be renewed expansion.

“Modestly higher prices projected in 2020, combined with improved international market potential, could restart herd expansion,” Peel says.  “Alternatively, continued political and economic turbulence or shocks, such as coronavirus, could drag markets down and hold cattle inventories flat or fall into more liquidation.”

Negotiated cash fed cattle trade ended the week generally $2-$3 lower on a live basis at $122/cwt. in the Southern Plains and Nebraska; $122-$123 in the western Corn Belt. Dressed sales were $3-$4 lower at $195.

Although increasing worries about the economic impact of coronavirus weighed on equity markets Friday, Cattle futures—especially Feeder Cattle—continued to emerge from the week’s doldrums, likely helped along by short covering, month-end positioning and bullish expectations for Jan. 1 cattle numbers (see below).

Live Cattle futures closed narrowly mixed, from an average of 32¢ lower to an average of 14¢ higher.

Except for 37¢ lower in newly minted away-Jan, Feeder Cattle futures closed an average of 68¢ higher (40¢ to $1.30 higher)

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

Choice boxed beef cutout value was 35¢ lower Friday afternoon at $213.00/cwt. Select was 82¢ lower at $210.66.

Corn futures closed mostly fractionally higher to 1¢ higher.

Soybean futures closed mostly 2¢ to 3¢ lower. 

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Major U.S. financial indices dove lower Friday, fueled by growing fears about novel coronavirus and its potential impact on the global economy.

A day after the World Health Organization declared novel coronavirus a public health emergency of international concern, but made no recommendation for travel restrictions to China, major U.S. airlines suspended flights between the U.S. and China.

As well, U.S. Health and Human Services (HHS) declared the virus a public health emergency in this country.

“While this virus poses a serious public health threat, the risk to the American public remains low at this time, and we are working to keep this risk low,” according to Health and Human Services Secretary Alex M. Azar II.  “We are committed to protecting the health and safety of all Americans, and this public health emergency declaration is the latest in the series of steps the Trump Administration has taken to protect our country.”

The Dow Jones Industrial Average closed 603 points lower. The S&P 500 closed 58 points lower. The NASDAQ was down 148 points.

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USDA’s Cattle report issued Friday provides markets ample food for thought. There were fewer beef cows and dairy cows than pre-report estimates but more beef replacement heifers and slightly more total cattle and calves.

USDA pegs the Jan. 1 inventory of all cattle and calves at 94.41 million head, which is 0.41% less (-391,400 head) than a year earlier. Analysts surveyed by Urner Barry and reported by the Daily Livestock Report estimated a decline of 0.5% less.

Beef cows Jan. 1 were 31.31 million head, which was 1.18% less (-374,000 head) than the previous year. Analysts responding to the Urner Barry survey looked for a decline of 0.6%.

Beef replacement heifers Jan 1 of 5.77 million head were 1.92% fewer (-113,000 head) than the previous year. Ahead of the report, analysts surveyed by Urner Barry projected a 3.5% decline.

Milk cows Jan. 1 of 9.33 million head were 2.10% less (-113,000 head) than the same time a year earlier, compared to pre-report estimates of 1.2% less.

The 2019 calf crop was estimated at 36.06 million head, which was 0.70% less (-253,100 head) than in 2018

Cattle on feed Jan. 1—for all feedlots—of 14.68 million head was 2.16% more (309,800 head) than the previous year.

The estimated feeder cattle supply outside feedlots Jan. 1 of 26.45 million head is 0.40% less (-105,300 head) than a year earlier.

There were 1.61 million head grazing small grain pastures in Kansas, Oklahoma and Texas on Jan. 1. That was 15.26% less (-290,000 head) than a year earlier.

Cow Inventory Down In Most Leading Cow States

States with 1 million or more beef cows at the beginning of the year, and the ranking by size, were the same as a year earlier. In order of size, with Jan. 1 cow numbers in parenthesis: Texas (4.57 million); Oklahoma (2.09 million); Missouri (2.08 million); Nebraska (1.92 million); South Dakota (1.73 million); Kansas (1.43 million); Montana (1.43 million); Kentucky (1.01 million).

Of those eight states, beef cow numbers increased year over year in Missouri (+24,000 head or 1.17%) and Kentucky (+4,000 head or 0.39%).

For the other six states, year-over-year declines in beef cow numbers ranged from -19,000 head in Nebraska (-0.98%) to -96,000 head in Kansas (-6.28%).