WLI

Negotiated cash fed cattle trade developed on Friday with live sales $2 higher at $124/cwt. in the Southern Plains and Nebraska; $2-$4 higher in the western Corn Belt at $125. Dressed sales were mostly $4 higher in Nebraska at mainly $199 and $3-$4 higher in the western Corn Belt at $198-$199.

Cattle futures softened though, amid lower outside markets fueled by heightened geopolitical tensions (the U.S. military strike in Iran), as well as what appeared to be some liquidation by non-commercial traders in the previous session. There was also some question about how the military action in Iran might affect the scheduled signing of the phase-one trade deal between the U.S. and China. Lean Hogs closed limit-down in spot Feb and near limit-down in the next two contracts.

Except for 35¢ higher in away Apr, Live Cattle futures closed an average of 65¢ lower (7¢ lower to $1.05 lower in spot Feb).

Except for 7¢ higher in in the back contract, Feeder Cattle futures closed an average of 96¢ lower.

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

Choice boxed beef cutout value was 24¢ higher Friday afternoon at $208.49/cwt. Select was $2.76 higher at $205.39.

Grain futures lost ground on the day, between anemic weekly export data, as well as wonderments about the potential fallout from the U.S. defensive action in Iran.

Corn futures closed 3¢ to 5¢ lower through Dec ’20 and then mostly 2¢ lower.

Soybean futures closed 10¢ to 14¢ lower through Sep ’20 and then mostly 3¢ to 5¢ lower.

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Major U.S. financial indices closed strongly lower Friday, pressured by the U.S. air strike in Iran and the subsequent spike in oil prices.

West Texas Intermediate Crude Oil futures on the CME closed $1.58 to $1.87 higher through the front six contracts, but well off of session highs.

Weaker than expected manufacturing data also weighed on markets.

Although the overall economy grew for the 128th consecutive month, economic activity in the manufacturing sector contracted in December, according to the latest Manufacturing ISM® Report On Business®.

“The December PMI® registered 47.2%, a decrease of 0.9 percentage point from the November reading of 48.1%. This is the PMI’s lowest reading since June 2009, when it registered 46.3%,” says Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee. “…Global trade remains the most significant cross-industry issue, but there are signs that several industry sectors will improve as a result of the phase-one trade agreement between the U.S. and China. Among the six big industry sectors, Food, Beverage & Tobacco Products remains the strongest, while Transportation Equipment is the weakest. Overall, sentiment this month is marginally positive regarding near-term growth.”

The Dow Jones Industrial Average closed 233 points lower. The S&P 500 closed 23 points lower. The NASDAQ was down 71 points.

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Although the impact of African Swine Fever (AFS) on domestic animal protein prices was slow to materialize, it began to show up by the end of the year.

“As a large share of beef from Australia and New Zealand go to China, it is forcing a reduction in the quantity of manufacturing beef to the U.S.,” explained RaboResearch Food and Agribusiness analysts, in that organizations November quarterly report. “As a result, prices of Australian and New Zealand 90% trimmings delivered to the U.S. currently hold a $54/cwt. premium (USD) to domestic trimmings. This is forcing U.S. quick service burger restaurants to look for domestic alternatives for supplies, supporting U.S. cattle and beef prices. This situation is not expected to be quickly resolved and will be an interesting market development to watch in the coming year.”

Until ASF, China produced about half of the world’s pork supply.

“By the end of 2020, China’s total swine herd is forecast to decline to 275 million head, down nearly 40% since the beginning of 2018, before the crisis began,” according to Livestock and Poultry: World Markets and Trade from USDA’s Foreign Agricultural Service (FAS). “Many producers have exited the industry and others are reluctant to restock due to ongoing disease risk. Pork production is forecast 25% lower in 2020 due to a sharply lower swine herd. Lower domestic supplies will boost demand for foreign pork, resulting in record imports. However, consumers will feel the pinch of lower pork supplies, with a 32% decline in per capita pork consumption over two years.”

Negotiated cash fed cattle trade remained undeveloped through Thursday afternoon. There were a few early live sales in the western Corn Belt at $125/cwt., but too few to trend. Prices in that region last week were at $121-$123.

Cattle futures mostly edged lower, with the heaviest trade since the middle of last month.

Except for $3.00 lower in newly minted away Jun, Live Cattle futures closed an average of 22¢ lower.

Except for 25¢ higher in Oct, Feeder Cattle futures closed an average of 26¢ lower.

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 $1.17 lower Thursday afternoon at $208.25/cwt. Select was 51¢ higher at $202.63.

Corn futures closed 1¢ to 3¢ higher.

Soybean futures closed mostly 2¢ to 3¢ higher

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Major U.S. financial indices closed sharply higher Thursday, with more optimism regarding China—this time, the move by that country to effectively interject more cash into its economy, via the lowering of reserve cash requirements for its banks.

The Dow Jones Industrial Average closed 330 points higher. The S&P 500 closed 27 points higher. The NASDAQ was up 119 points.

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“Consumer strength the world over has prevented further slowing in the global economy. Without that strength, several European countries and Japan would most likely have fallen into recession by now,” says Dan Kowalski, vice president of CoBank’s Knowledge Exchange Division (CKED), in that organization’s 2020 Outlook. “The powerhouse economies of Europe, Japan, and China depend heavily on manufacturing and exports, and have been hit exceptionally hard as global trade growth has plumbed decade lows.

“We expect business investment and exports in all three economies to continue slowing through early 2020. Europe’s growth will be weighed down by risks of a no-deal Brexit, along with the potential for U.S. automobile tariff tensions to resurface. Japan will try to keep consumers spending and prevent economic contraction despite another increase in its national sales tax, this time from 8% to 10%. China will make good on its goal to double the size of its economy between 2010 and 2020, but it will do so while growing at its slowest pace since 1990. Its GDP growth will fall below 6% as Beijing attempts to balance the need for credit while containing financial risks.”

The International Monetary Fund (IMF), in October’s quarterly World Economic Outlook, projected global economic growth at 3.0% for 2019 and at 3.4% for 2020.

“The risks to this baseline outlook are significant,” explained IMF analysts. “…should stress fail to dissipate in a few key emerging market and developing economies that are currently underperforming or experiencing severe strains, global growth in 2020 would fall short of the baseline. Further escalation of trade tensions and associated increases in policy uncertainty could weaken growth relative to the baseline projection.”

As expected, negotiated cash fed cattle trade remained undeveloped through Tuesday afternoon.

Cattle futures closed mostly narrowly lower, amid light holiday trade.

Except for 2¢ to 60¢ higher in three contracts, Live Cattle futures closed an average of 26¢ lower.

Except for 2¢ higher in Sep, Feeder Cattle futures closed an average of 13¢ lower.

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

Choice boxed beef cutout value was 24¢ lower Tuesday afternoon at $209.42/cwt. Select was $3.29 lower at $202.12.

Corn futures closed fractionally lower to 1¢ lower.

Soybean futures closed 1¢ to 3¢ higher (mostly 1¢ higher).

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Major U.S. financial indices closed higher Tuesday, recovering about half of the previous session’s losses.

The Dow Jones Industrial Average closed 76 points higher. The S&P 500 closed 9 points higher. The NASDAQ was up 26 points.

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“The U.S. economy will enter 2020 decisively split, powered by a resilient and confident consumer, but hamstrung by a risk-averse business sector that has stopped investing,” say analysts with CoBank Knowledge Exchange Division (CKED), in that organization’s 2020 outlook. “And now that the stimulus effects from the 2017 tax reform and the 2018 spending bill have faded, the expansion will show its age, losing steam in the coming year.”

Depending on which data you assess, domestic economic growth, as measured by Gross National Product (GNP) will continue to grow at a slow pace in 2020.

As an example, in its forecast for the U.S. economy, the Conference Board pegs real annual GDP at 2.0% in 2020, compared to expectations of 2.3% in 2019.

However, according to the Federal Reserve Bank of St. Louis, “The consensus of professional forecasters is that real GDP growth will dip below 2% in 2020.

Real GDP growth in 2020 could rise above 2% if the economy’s headwinds—trade disputes and slowing global growth—were to diminish.”

Hopefully part of those headwinds will lose some force with the announced phase-one trade deal between the U.S. and China.

The 5-area direct weighted average price for steers last week was $122.28/cwt. on a live basis and $195.22 in the beef. Week to week, that was $1.92 higher and $3.37 higher, respectively.

Cattle futures hovered on either side of even Monday, amid light holiday trade.

Live Cattle futures closed narrowly mixed, from an average of 16¢ lower to an average of 24¢ higher (60¢ higher in nearly spent spot Dec).

Feeder Cattle futures closed narrowly mixed, from an average of 25¢ lower across the front half of the board to an average of 37¢ higher.

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

Choice boxed beef cutout value was 70¢ higher Monday afternoon at $209.66/cwt. Select was 84¢ higher at $205.41.

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

Soybean futures closed 8¢ to 11¢ higher through Sep ’20 and then mostly 3¢ to 5¢ higher. Presumably, support included more positive chatter about the Phase-one U.S.-China trade deal being signed as early as next week.

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Major U.S. financial indices closed lower Monday, with little news and likely year-end profit taking and positioning.

The Dow Jones Industrial Average closed 183 points lower. The S&P 500 closed 18 points lower. The NASDAQ was down 60 points.

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Between a likely smaller calf crop and slightly less per capita domestic beef availability, the Livestock Marketing Information Center (LMIC) projects cash fed cattle prices in 2020 to be 1-4% higher than this year, with most of the gains coming in the second half of the year.

“A smaller forecasted spring-born 2020 calf crop and a normal summer growing season sets the stage for next year’s fall-weaned calves to price near to slightly above 2017’s prices,” LMIC analysts say.

That gibes with early-release tables from USDA’s Long-Term Agricultural Projections (to-2029), which will be published in February.

USDA projects the annual average 5-area direct fed steer price in 2020 at $116.00/cwt., compared to $115.50 this year. The price in 2021 is forecast at $120.93.

Likewise, USDA projects the annual feeder steer price in 2020 (basis Oklahoma City) at $141.00, compared to $140.50 this year. The average price in 2021 is forecast at $151.11.