WLI

Negotiated cash fed cattle trade was light to moderate on moderate demand in Nebraska and the western Corn Belt through Friday afternoon, but there were too few transactions to trend. Early dressed sales in both regions were at $200/cwt. Early live sales in the western Corn Belt were at $124-$126.

Hints of steady to higher cash pries and strong fundamentals helped lift Cattle futures Friday.

Live Cattle futures closed an average of 32¢ higher.

Feeder Cattle futures closed an average of 96¢ higher.

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

Choice boxed beef cutout value was 8¢ higher Friday afternoon at $210.04/cwt. Select was 13¢ lower at $206.55.

Corn futures closed mostly 2¢ higher.

Soybean futures closed 1¢ to 3¢ higher through Jul ’21 and then fractionally higher.

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Major U.S. financial indices closed lower Friday, amid less robust job and wage growth than the trade expected.

Total nonfarm payroll employment rose by 145,000 in December, according to the U.S. Bureau of Labor Statistics. That left the unemployment rate unchanged at 3.5%.

Average hourly earnings for all employees on private nonfarm payrolls in December rose by 3¢ to $28.32. Over the last 12 months, average hourly earnings increased by 2.9%.

The Dow Jones Industrial Average closed 133 points lower. The S&P 500 closed 9 points lower. The NASDAQ was down 24 points.

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The latest World Agricultural Supply and Demand Estimates (WASDE) reduced forecast 2020 beef production on lighter expected carcass weights. However, quarterly beef production was increased in the first half of the year and reduced in the second half of the year due to higher-than-expected cattle placements in late 2019 and a reduced placement forecast for early 2020.

WASDE estimates 2020 beef production at 27.44 billion lbs., which is 75 million lbs. less (-0.27%) than the December forecast. That would be 289 million lbs. more (+1.06%) than in 2019.

Anticipated first-quarter cattle prices were raised, reflecting current early-year price strength. Anticipated average cash fed steer prices (five-area direct) for 2020 are forecast at $125/cwt. in the first quarter, $118 in the second, $112 in the third and $114 in the fourth. The annual average price for 2020 is projected at $117.50, which is 50¢ more than the previous month’s estimate and 72¢ more than the estimated average in 2019.

Total red meat and poultry production for 2020 was estimated at 108.15 billion lbs., which would be 2.94 billion lbs. more (+2.79%) than in 2019.

Cattle futures closed narrowly mixed on Thursday, capped by pressure from Lean Hogs and the lack of cash direction. Perhaps there was also some hesitation over what Friday’s monthly World Agricultural Supply and Demand Estimates could say about feed prices.

Live Cattle futures closed an average of 26¢ higher.

Feeder Cattle futures closed narrowly mixed, from an average of 9¢ higher across the front half of the board to an average of 19¢ lower.

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

Choice boxed beef cutout value was 46¢ higher Thursday afternoon at $209.96/cwt. Select was 15¢ higher at $206.68.

Corn futures closed mostly fractionally mixed to 1¢ lower.

Soybean futures closed mostly 4¢ lower.

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Major U.S. financial indices posted another day of strong gains Thursday, led by tech stocks.

The Dow Jones Industrial Average closed 211 points higher. The S&P 500 closed 21 points higher. The NASDAQ was up 74 points.

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Agricultural producer sentiment declined in December, driven by the outlook for current economic conditions, according to the Purdue University/CME Group Ag Economy Barometer.

Specifically, the overall index declined 3 points from November to a reading of 150, while the Index of Current Conditions—one of the sub-indexes—declined 12 points to a reading of 141. Conversely, the index of Future Expectations increased 2 points to a reading of 155.

“These results are indicative of the variability in economic conditions on U.S. farm operations, with some farms performing better than expected and others worse than expected,” says James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture.

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

Producers were asked whether their farm’s 2019 financial performance was better than expected, as expected, or worse than their initial budget projections. Just over half (52% percent) said their initial projections matched their farm’s financial performance; 30% said it was worse; and 19% said it was better than expected.

To better assess the level of financial stress among U.S. farms, November and December surveys asked producers whether they expected their farm’s 2020 operating loan to be larger, about the same, or smaller than in 2019.

Approximately one out of five respondents in the two surveys expected to have a larger operating loan in 2020 compared to 2019. Of those, three out of 10 indicated the reason was unpaid operating debt from 2019. Carrying over unpaid operating debt from year to year is an indicator of financial stress, and these results suggest that about 6% of farms surveyed for the Ag Barometer in late 2019 were experiencing financial stress.

Producers remained relatively optimistic about the ongoing trade dispute between the U.S. and China being resolved soon and to the benefit of U.S. agriculture.

In December, 54% of respondents stated they expect a resolution soon, which was 3% less than the previous month, but the second most positive response since last March.

The percentage of producers who expect a favorable outcome to U.S. agriculture declined 8 points to 72%. Since the question was first posed in March 2019, more than 70% of respondents have, on average, indicated they expect a favorable outcome to the trade dispute for U.S. agriculture.

Negotiated cash fed cattle trade remained undeveloped through Wednesday afternoon, based on USDA reports. Early indications are for steady to higher prices again this week, with the expectation of a bit snugger harvest-ready supplies.

There were 525 head offered in the year’s first weekly Fed Cattle Exchange auction, and no takers. Two lots of steers from Texas and Kansas were passed on at $123.00/cwt. and $124.25, respectively.

Cattle futures mostly rebounded from the previous session’s softer tones, led by Feeder Cattle.

Except for 17¢ and 32¢ lower in the front two contracts, Live Cattle futures closed an average of 32¢ higher.

Feeder Cattle futures closed an average of 91¢ higher (40¢ to $1.40 higher).

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

Choice boxed beef cutout value was 6¢ lower Wednesday afternoon at $209.50/cwt. Select was 29¢ lower at $206.53.

Corn futures closed mostly unchanged to fractionally higher.

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

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Major U.S. financial indices closed higher Wednesday, amid increasing confidence that the tensions between the U.S. and Iran are easing. For instance, West Texas Intermediate crude oil futures (CME) closed $2.71 to $3.09 lower through the front six contracts.

The Dow Jones Industrial Average closed 161 points higher. The S&P 500 closed 15 points higher. The NASDAQ was up 60 points.

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Although trailing the previous year’s record pace, U.S. beef export value through November was the second highest on record, according to data released by USDA and compiled by the U.S. Meat Export Federation (USMEF).

For January through November, beef exports were 3% less in both volume of 1.21 million metric tons (mt) and value of $7.4 billion. Year over year, November beef exports were 4% less in volume (108,662 mt) and 7% less in value ($658.1 million).

Among highlights, U.S. beef exports to Korea were on a record pace, up 6% in volume through November and up 6% in value at $1.69 billion. U.S. share of Korea’s chilled beef imports reached 62%, up from 58% in 2018. U.S. beef accounted for 51% of Korea’s total beef and beef variety meat imports and more than one-third of Korea’s total beef consumption.

Beef exports to Taiwan were also on a record pace, for the fourth consecutive year. Through November, U.S. exports to that nation were 8% more than the previous year for volume and value was 4% higher at $513.3 million.

However, reduced exports to Japan—the largest destination for U.S. beef exports—offset gains made in Korea and Taiwan.

Through November, exports to Japan were 6% less year over year in volume and 7% less in value at $1.8 billion. Tariff relief, beginning Jan. 1 provides more optimism for 2020.

“The Japanese market performed extremely well for U.S. beef in 2018, even though we were already facing a tariff rate disadvantage versus Australia,” says Dan Halstrom, USMEF president and CEO. “More competitors saw tariff rate cuts in 2019 under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which further tilted the playing field against U.S. beef. For example, Canada’s beef exports to Japan increased 57% last year. So the rate cuts Japan recently implemented for U.S. beef are long overdue, and USMEF is working aggressively with U.S. exporters and the Japanese trade to capitalize.”

Beef export value per head of fed slaughter was $307.55 in November, down 15% from a year earlier. Through November, per-head U.S. export value averaged $308.74, down 4%.

Cattle futures retraced some ground from the previous session’s strong and somewhat surprising rally, but kept the lion’s share of gains.

Live Cattle futures closed an average of 57¢ lower.

Feeder Cattle futures closed an average of 80¢ lower (40¢ lower to $1.52 lower in spot Jan).

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

Choice boxed beef cutout value was 9¢ lower Monday afternoon at $209.56/cwt. Select was 2¢ higher at $206.82.

Corn futures closed unchanged to fractionally mixed.

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

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Major U.S. financial indices closed lower Tuesday, with most of the investor unease seeming to stem from uncertainty around recently escalated tensions with Iran.

The Dow Jones Industrial Average closed 119 points lower. The S&P 500 closed 9 points lower. The NASDAQ was down 2 points.

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The weighted 5-area average live steer (FOB) price in December was $120/cwt., which was $4.65 more than the previous month and 64¢ more than the same time a year earlier, according to USDA. In the beef (delivered), the average weighted price was $191.18, which was $9.27 more than the previous month and $2.81 more than a year earlier.

“Fed cattle prices tend to increase seasonally from late summer lows to the end of the year. It’s also not uncommon for prices to weaken between Thanksgiving and Christmas, and again in February, before the spring rally,” says David Anderson, Extension livestock economist at Texas A&M University.

In the latest issue of In the Cattle Markets, Anderson explains the five-year (2013-17) average price increase during the fall rally was $11/cwt. or 8.8%. It was $15 in 2018 for an increase of 14%. In 2019, though, fed cattle prices increased by $22 or 22.6%.

What’s more, Anderson points out, “Fed cattle movement ramped up in December with total steer and heifer slaughter up about 5%. It’s worth noting the reopening of the fed cattle plant (Tyson) in early December. That has contributed to packer demand for fed cattle, helping to boost fed cattle prices and slaughter….All cow slaughter was up almost 7%. All of the increase in cow slaughter during the quarter came from beef cows, as dairy slaughter declined from a year ago.”

The five-area direct weighted average fed steer price last week was $124.21/cwt., which was $1.93 more than the previous week. The weighted average price of $198.60 in the beef was $3.38 higher.

Stronger cash prices, the promise of improving wholesale beef values and a return to full trade following the holidays all helped underpin the significant rally in Cattle futures Monday. Stabilizing outside markets were also positive.

Except for $1.70 lower in the back contract, Live Cattle futures closed an average of $1.66 higher (95¢ to $2.55 higher in spot Feb).

Feeder Cattle futures closed an average of $2.92 higher ($2.02 higher at the back to $4.07 higher in spot Jan).

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

Choice boxed beef cutout value was $1.16 higher Monday afternoon at $209.65/cwt. Select was $1.41 higher at $206.80.

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

Soybean futures closed 2¢ to 3¢ higher.

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Major U.S. financial indices closed higher Monday, regaining some of the previous session’s selloff as reports indicated the U.S. military action in Iran was unlikely to hamper oil production or trade flows.

The Dow Jones Industrial Average closed 68 points higher. The S&P 500 closed 11 points higher. The NASDAQ was up 50 points.

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“The beef supply situation is expected to be more supportive in the coming year, with cyclical herd expansion over and beef production peaking,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “The current status of the cattle cycle will be confirmed in the Cattle inventory report to be released at the end of January. “In general, cattle numbers are expected to be down slightly year over year. Beef production is expected to peak fractionally higher in 2020, with heavier carcass weights offsetting a slight decline in cattle slaughter. Carcass weights finished 2019 above year-earlier levels and will bear watching in the coming year.”

Overall, Peel explains the anticipated increase in U.S. beef exports and reduction in U.S. beef imports should offset a significant portion of increased domestic production.

“The international market situation is somewhat clearer now after trade disruptions and uncertainty strangled many agricultural markets for much of the past two years,” Peel says. “The likely completion of the revised NAFTA agreement (USMCA) in the coming weeks removes a significant source of uncertainty for agricultural markets. A new bilateral trade agreement with Japan will restore a more competitive position for beef and should stop the erosion of U.S. market share, which became very apparent in that important beef export market in the second half of 2019. Though details are currently lacking, the anticipated phase-one trade agreement with China is expected to significantly improve the trade situation for numerous agricultural markets and may allow beef to begin building a meaningful market position in the rapidly growing beef market in China.”

As for challenges that could add market uncertainty and volatility, Peel cites ongoing geopolitical tensions, African Swine Fever, energy prices, currency values and the presidential election.

“In summary, 2020 offers better opportunities for cattle and beef markets, but producers are advised to keep an eye on a host of macro-economic and global factors, as well as evolving cattle market conditions, and proceed with caution,” Peel says.