WLI

Negotiated cash fed cattle traded in the Southern Plains and Nebraska at $110/cwt. on a live basis Monday, which was $3 lower; $2-$5 lower in the western Corn Belt at the same money. Early dressed sales were $5-$7 lower at $175-$176.

Three lots—460 head—were offered in the weekly Fed Cattle Exchange auction. All sold for an average weighted price of $110/cwt., with delivery of 1-9 days for 384 head; 1-17 days for the remainder.

Cattle futures reversed directions again Wednesday, closing mostly limit-down and subsumed once again by coronavirus fears and sharply lower outside markets.

Live Cattle futures closed an average of $2.84 lower.

Feeder Cattle futures closed an average of $4.48 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 8¢ higher Wednesday afternoon at $207.17/cwt. Select was $2.22 lower at $196.49.

Corn futures closed mostly 2¢ to 4¢ lower.

Soybean futures closed 3¢ to 5¢ lower.

Incidentally, CME Group announced Wednesday evening that it will close its Chicago trading floor as of the close of business this Friday the 13th, as a precaution to reduce large gatherings that can contribute to the spread of coronavirus, in line with the advice of medical professionals. All products will continue to trade on CME Globex as they do today.

That organization joins an expanding list of companies, groups and sports leagues cancelling, suspending and altering. You may have heard the Houston Stock Show and Rodeo cancelled the remainder of this year’s run Wednesday afternoon, with 11 days left; the NCAA also announced attendance at the upcoming March Madness basketball tournaments for both women and men will be limited to players, families and essential staff…the list goes on.

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Major U.S. financial indices tanked on Wednesday after the World Health Organization (WHO) declared COVID-19 a global pandemic.

In a Wednesday press briefing, Dr. Tedros Adhanom Ghebreyesus, WHO director general said, “We’re deeply concerned, both by the alarming level and spread, and by the alarming levels of inaction. We have, therefore, made the assessment that COVID-19 can be characterized as a pandemic. Pandemic is not a word to be used lightly or carelessly. It’s a word, if misused, can cause unreasonable fear or unjustifiable acceptance that the fight is over, leading to unnecessary suffering and death.”

At the time, there were 118,000 cases of COVID-19 in 114 countries and 4,291 fatalities.

According to Dr. Tedros more than 90% of current COVID-19 cases are in four countries, with the epidemic declining significantly in two of those: China and Korea. As of noon Wednesday, the Center for Disease Control and Prevention cited 938 U.S. cases, in 38 states and the District of Columbia; 29 deaths.

The Dow Jones Industrial Average closed 1,464 points lower. The S&P 500 closed 140 points lower. The NASDAQ was down 392 points.

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USDA lowered expected fed steer prices (five-area direct) for this year by $2.50 from the previous month to $114.50/cwt., in the latest World Agricultural Supply and Demand Estimates (WASDE). That’s based on current price weakness, as well as increased expected beef production.

Compared to the previous month, analysts with USDA’s Economic Research Service (ERS) increased anticipated beef production this year by 220 million lbs. to 27.7 billion lbs., which would be 549 million lbs. more (+2.02%) than last year.

Total red meat and poultry production for 2020 was estimated 647 million lbs. more than the previous month at 109.43 billion lbs. That would be 4.17 billion lbs. more (+3.96%) than in 2019.

ERS pegs fed steer prices at $118 in the first quarter, $114 in the second quarter, $111 in the third quarter and $114 in the fourth quarter.

“The 2020 beef import forecast is raised from last month on higher expected imports of processing grade beef, while the export forecast is reduced on weaker anticipated demand in several markets,” say ERS analysts.

Among other WASDE highlights:

U.S. corn supply and use outlook for 2019-20 was unchanged. The season-average corn price received by producers was lowered 5¢ to $3.80/bu. based on observed prices to date.

U.S. soybean supply and use projections for 2019-20 were mostly unchanged. The U.S. season-average soybean price is projected at $8.70/bu., down 5¢. The soybean oil price is projected at 31.5¢/lb., down 2¢. Soybean meal prices are unchanged at $305/short ton.

U.S. wheat supply and demand outlook was unchanged. The projected season-average farm price is also unchanged at $4.55/bu.

Cattle futures finally found some traction Tuesday, gaining back a little better than half of the previous day’s sharp losses, once gain following the same trajectory as equity markets.

Live Cattle futures closed an average of $1.79 higher ($1.10 higher to $2.60 higher in spot Apr). 

Feeder Cattle futures closed an average of $2.51 higher ($1.55 higher in spot Mar to $3.10 higher). 

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

Choice boxed beef cutout value was 27¢ lower Tuesday afternoon at $207.09/cwt. Select was $3.61 lower at $198.71.

Corn futures closed mostly 3¢ to 4¢ higher through Jly ’21 and then 1¢ to 2¢ higher.

Soybean futures closed mostly 4¢ to 7¢ higher.

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Major U.S. financial indices closed sharply higher Tuesday after a whipsaw ride and buoyed by chatter out of the White House about economic stimulus to bolster the domestic economy in the wake of coronavirus.

It also helped that crude oil recovered some of the previous day’s sharp selloff.

West Texas Intermediate Crude Oil futures on the CME closed $2.90 to $3.23 higher through the front six contracts.

The Dow Jones Industrial Average closed 1,167 points higher. The S&P 500 closed 135 points higher. The NASDAQ was up 393 points.

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U.S. beef exports in January were 2.5% more than a year earlier at 107,347 metric tons (mt) and export value was 5% more at $672.7 million according to data released by USDA and compiled by the U.S. Meat Export Federation (USMEF).

In fact, beef muscle cut exports were the highest ever for the month of January at 81,342 mt, up 4% from a year ago, while muscle cut value increased 5% to $589.2 million.

Export value per head of fed slaughter was $302.93, up 3% from a year ago.

USMEF President and CEO Dan Halstrom notes coronavirus had an impact on red meat exports, which will likely be more evident in February and March data. At the same time, he says a number of supply and demand fundamentals and market access improvements underpinned continued strong export volumes.

“The first quarantine actions in China were taken in late January and the calendar had turned to February before coronavirus became a major health concern in countries such as South Korea and Japan,” Halstrom explains. “But despite logistical challenges, a severe decline in tourism and a notable impact on sit-down dining, overall demand for red meat in these markets is quite resilient. Retail meat sales remained strong and both retailers and restaurateurs are utilizing e-commerce and delivery services at unprecedented levels. While it’s definitely a challenging situation, the Asian food industry is adapting to these conditions and finding creative ways to accommodate consumers.”

Also positive for beef is the fact that U.S. pork exports in January were 36% higher year over year at 273,603 mt, while pork export value was 50% higher at $738.7 million—the second highest levels on record for both volume and value.

Pork exports to China/Hong Kong led the way: 263% more for volume and 361% more for value at $245.3 million.

Pork exports to Mexico, which were hampered by retaliatory duties in the first five months of 2019, increased 6% in volume and jumped 40% in value to $134.7 million.

“The January data really underscore the difficult situation U.S. pork was facing in Mexico a year ago,” Halstrom explains. “Exporters kept much of the volume moving, but the U.S. industry absorbed most of the 20% duty in the form of lower prices. With duty-free access restored and the U.S.-Mexico-Canada Agreement moving toward implementation, we look forward to a continued rebound in Mexico’s demand for U.S. pork.”

The weekly weighted average five-area direct price for fed steers was $1.68 lower on a live basis last week at $113.17/cwt. Steer prices in the beef were $3.98 lower at $180.80.

There were too few transactions to trend negotiated cash fed cattle in any region on Monday, but early sales were decidedly pessimistic with some live trade in Nebraska and the western Corn Belt at $110/cwt.; early dressed sales at $175.

Cattle futures started the week limit down and near limit-down as equity markets plunged amid continued uncertainty about COVID-19, coupled with the outbreak of an oil price war over the weekend that sent crude oil prices into free-fall.

Live Cattle futures closed an average of $2.89 lower.

Feeder Cattle futures closed limit-down $4.50 across the board.

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

Choice boxed beef cutout value was 11¢ lower Monday afternoon at $207.36/cwt. Select was 25¢ lower at $202.32.

Corn futures closed 2¢ to 5¢ lower.

Soybean futures closed mostly 15¢ to 21¢ lower.

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Major U.S. financial indices plunged Monday, to their lowest levels since early 2019, fueled by the continued spread of COVID-19 and the panic it spawns, as well as an oil price war.

The simple version goes something like this: Saudi Arabia and most of its OPEC allies wanted to cut oil production in an effort to stabilize oil prices, which were losing significant ground due to the COVID-19-slowed global economy. Russia said no, so Saudi Arabia set about offering oil at lower prices. As oil prices plummet, so does the economic health of companies tied to the energy sector.

Crude Oil futures—West Texas Intermediate on the CME—closed $8.98 to $10.15 lower through the front six contracts. Spot Apr closed $10.15 lower (-24.59%) than the previous session and $15.62 lower (-33.4%) week to week.

The Dow Jones Industrial Average closed 2,013 points lower. The S&P 500 closed 225 points lower. The NASDAQ was down 624 points.

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Although it’s too soon to tell if COVID-19 is impacting beef demand, or to what degree, Derrell Peel, Extension livestock marketing specialist at Oklahoma State University says it’s certainly possible there are negative impacts, especially where exports are concerned.

“There are a multitude of market factors to sort out including: new trade agreements, macroeconomic changes (stock market, interest rates, etc.), exchange rates, African Swine Fever, and others that will make it more difficult to determine the more direct impacts of COVID-19 on international and domestic beef markets,” Peel says. 

In the meantime, there has been little seasonal improvement to wholesale beef prices.

Compared to the prior year, for Choice, Peel says rib primal prices last week were 10.4% less, loin values were 10.8% less, brisket values were 13.8% less, chuck values were down 7% and rounds were 1.3% less. He adds Select primal values are also lower year over year.

“Weakness in boxed beef prices does not necessarily mean that beef demand is lower,” Peel says. “Beef production is up 5.1% year over year for the first eight weeks of 2020. Beef prices would normally be pressured with higher beef production even with stable demand.” 

Negotiated cash fed cattle trade ended up $2 lower on a live basis last week in Nebraska and the Southern Plains at $113/cwt. It was $1 higher to $2 lower in the western Corn Belt at $113-$115. Dressed trade was $5 lower in Nebraska at $180-$182; steady to $5 lower at the same money in the western Corn Belt.

Cattle futures dropped like a rock again Friday.

Live Cattle futures closed an average of $2.42 lower ($1.82 lower at the back to $2.90 lower in spot Apr).

Spot Apr Live Cattle closed at $105.75 on Friday. That’s $22.20 less (-17.35%) than the recent high of $127.95 Jan. 10 and lower than the $110.17 shortly after the Tyson plant fire.

Feeder Cattle futures closed an average of $3.36 lower.

Spot Mar Feeder Cattle closed at $130.70 on Friday, which was $16.75 less (-11.36%) than the recent high Jan. 10, but still slightly higher than the first week of September.

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

Choice boxed beef cutout value was 22¢ higher Friday afternoon at $207.47/cwt. Select was $1.51 higher at $202.57.

Corn futures closed 1¢ to 7¢ lower through May ’21 and then fractionally higher to 1¢ higher.

Soybean futures closed 2¢ to 5¢ lower through Jan ’21 and then mostly 2¢ to 3¢ higher.

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Major U.S. financial indices continued to extend losses Friday as the number of COVID-19 cases and deaths escalated in the U.S. and around the world.

That was despite a U.S. employment report that was significantly more positive than the trade expected.

Total nonfarm payroll employment rose by 273,000 in February, according to the U.S. Bureau of Labor Statistics. The unemployment rate was little changed at 3.5%. Average hourly earnings for all employees on private nonfarm payrolls in February increased by 9¢ to $28.52. Over the past 12 months, average hourly earnings increased by 3.0%.

The Dow Jones Industrial Average closed 256 points lower. The S&P 500 closed 51 points lower. The NASDAQ was down 162 points.

Crude Oil futures—West Texas Intermediate on the CME—closed $3.90 to $4.62 lower through the front six contracts. Those contracts were an average of $11.48 lower over the past two weeks.

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Although there’s no way to estimate the eventual long-term economic implications of COVID-19, Aaron Smith, crop marketing specialist at the University of Tennessee suggests a couple of areas that bear watching.

“First, the disruption to global markets and consequently exports of agricultural products may be substantial and could get worse,” says Smith, in his weekly market comments. “For agricultural commodities and products, both logistical issues and economic activity are at the forefront of trade issues. Getting vessels loaded or unloaded at ports can be problematic (both domestically and internationally). For example, there can be challenges with refrigeration units as a limited number of places to “plug in” large containers are available at importing ports. This could create issues with unloading ships and may result in perishable cargos being rendered unusable. From an economic activity standpoint, the restrictions to travel and the quarantining of some cities/regions reduces consumer spending (affecting economic growth/GDP) as dollars are not circulated in economies and thus impact demand for agricultural products. This is an oversimplification of very complex economic systems, but it is worthwhile to consider the short and long-term implications on US agricultural exports.”

Further, Smith says securing agricultural inputs produced in China could become a challenge for the upcoming planting season.

“The longer logistical disruptions continue, the greater the strain could be on domestic supplies of certain agricultural (and non-agricultural) inputs. This also may have longer term consequences as large multinational companies evaluate supply chains and risks,” Smith says.