WLI

Negotiated cash fed cattle trade continued $2 less than last week on Thursday at $113/cwt. in the Southern Plains and Nebraska. Although too few to trend there were some early dressed sales in Nebraska at $182, which was $3-$5 less than the previous week.

Cattle futures followed outside markets lower.

Live Cattle futures closed an average of 93¢ lower (40¢ lower to $2.62 lower in spot Apr).

Feeder Cattle futures closed an average of $1.87 lower ($1.70 to $2.77 lower).

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

Choice boxed beef cutout value was 43¢ higher Thursday afternoon at $207.25/cwt. Select was 45¢ lower at $201.06.

Carcass weights continue heavier year over year, according to USDA’s latest Actual Slaughter Under Federal Inspection report for the week ending Feb. 22.

The average dressed steer weight was 900 lbs., which was 26 lbs. more the same week a year earlier. The average dressed heifer weight was 13 lbs. more than a year earlier at 831 lbs. Week to week, dressed steer and heifer weights were 5 lbs. and 2 lbs. lighter, respectively.

Corn futures closed mostly 2¢ lower.

Soybean futures closed mostly 8¢ to 10¢ lower.

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Major U.S. financial indices dove South Thursday, driven once again by fears about coronavirus.

The Dow Jones Industrial Average closed 969 points lower. The S&P 500 closed 106 points lower. The NASDAQ was down 279 points.

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The U.S. inventory of all cattle and calves started the year 391,400 head fewer (-0.41%) than a year earlier at 94.41 million head. There were 374,000 fewer beef cows (-1.18%) at 31.32 million, according to the Jan. 1 Cattle report.

Herd contraction north of the border was more significant, according to USDA’s United States and Canadian Cattle and Sheep report published Thursday.

All cattle and calves in Canada Jan. 1 were 11.22 million head, which was 220,000 head fewer (-1.92%) than a year earlier. Beef cows of 3.56 million head were 94,600 head fewer (-2.59%).

Combined, the number of cattle and calves in the U.S. and Canada Jan. 1 were 105.63 million head, which was 611,400 head fewer (-0.58%) than the previous year. There were 34.88 million beef cows, which were 468,600 fewer (-1.33%).

Negotiated cash fed cattle trade developed in the Southern Plains Wednesday at $113/cwt., which was $2 lower than last week. Trade was light to moderate on moderate demand.

There were 566 head (three lots) offered in the weekly Fed Cattle Exchange auction at an offer price of $114; with no takers.

Cattle futures continued joined at the hip to equity markets on Wednesday, surging higher on the day.

Live Cattle futures closed an average of 92¢ higher (50¢ to $1.17 higher).

Feeder Cattle futures closed an average of $1.92 higher ($1.32 to $2.72 higher).

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

Choice boxed beef cutout value was 20¢ higher Wednesday afternoon at $206.82/cwt. Select was $1.19 lower at $201.51.

Corn futures closed 1¢ to 5¢ higher through Mar ’21 and then mostly unchanged to fractionally mixed.

Soybean futures closed 1¢ to 5¢ higher through the front three contracts and then mostly 6¢ lower.

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Major U.S. financial indices soared, Monday, amid positive economic news that included a steeper increase in private payrolls than expected.

Private sector employment rose by 183,000 last month, according to the ADP National Employment Report®.

“COVID-19 will need to break through the job market firewall if it is to do significant damage to the economy,” says Mark Zandi, chief economist of Moody’s Analytics. “The firewall has some cracks, but judging by the February employment gain it should be strong enough to weather most scenarios.”

Presumably, investors also were responding to the Super Tuesday Democratic Primary won by former vice-president, Joe Biden, who is seen as the more business friendly option on that side of the ticket.

The Dow Jones Industrial Average closed 1,175 points higher. The S&P 500 closed 126 points higher. The NASDAQ was up 334 points.

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Agricultural producer sentiment was record high in February, according to the Purdue/CME Group Ag Economy Barometer, which was up 1 point from the previous month to 168. Optimism stemmed from producer sentiment regarding current conditions.

“Almost across the board, producers indicated they were more optimistic about current conditions on their farms and in U.S. agriculture, and retained most of the improvement in future expectations exhibited in January,” says James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture. “Optimism about the agricultural trade outlook was underpinned by recent trade agreements and appeared to be the primary driver behind the improvement in sentiment.”

The Index of Current Conditions increased 12 points from January to a reading of 154. Meanwhile, the Index of Future Expectations fell 4 points below the record high set in January to a reading of 175.

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

Over three-fourths (76%) of respondents said the USMCA and the China Phase One agreements either relieved their concerns about the effect of tariffs on their farms’ income “somewhat” (69%) or “completely” (7%); 17% said, “not at all”.

Although some voiced concerns about the possible impact of the COVID-19 virus on agricultural trade in mid-February, when the survey was conducted, producers remained relatively optimistic about the resumption of trade with China.

“As the COVID-19 virus footprint continues to expand, it remains to be seen whether it will impact farmer sentiment at home,” Mintert says.

Expectations for an improvement in farmland values also rose to an all-time high in February. When asked to look ahead five years, 59% of producers said they expect farmland values to rise, up from 50% in January. This was the most positive response to the question since data collection began in 2015.

Equities climbed early Tuesday, helping to drag Cattle futures along, but late pressure took them lower.

Other than 5¢ lower in spot Apr, Live Cattle futures closed an average of $1.03 lower (60¢ to $1.47 lower). 

Except for 2¢ lower in spot Mar, Feeder Cattle futures closed an average of $1.96 lower ($1.17 to $2.50 lower).

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

Choice boxed beef cutout value was 9¢ higher Tuesday afternoon at $206.62/cwt. Select was $1.54 higher at $202.70.

Corn futures closed 3¢ to 7¢ higher.

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

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Equities started Tuesday’s Wall Street session extending the previous day’s gains, helped along by the Federal Reserve announcing a 0.50% rate cute, ahead of its regular meeting.

“The fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity. In light of these risks and in support of achieving its maximum employment and price stability goals, the Federal Open Market Committee decided today to lower the target range for the federal funds rate by 0.50% to 1.0% to 1.25%,” according to the Fed statement. “The Committee is closely monitoring developments and their implications for the economic outlook and will use its tools and act as appropriate to support the economy.”

Investor attitudes soured later in the session, though, pushing major U.S. financial indices lower. One theory is that investors took the early rate cut by the Fed to mean that worse economic data than expected is in the wings.

The Dow Jones Industrial Average closed 785 points lower. The S&P 500 closed 86 points lower. The NASDAQ was down 268 points.

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Demand for meat is accelerating with $50.5 billion in sales for 2019, according to The Power of Meat 2020—the 15th-annual in-depth study of meat and poultry through shoppers’ eyes—from the Food Industry Association (FMI), the Foundation for Meat and Poultry Research and Education and the foundation for the North American Meat Institute (Meat Institute).

Meat department sales are strong in dollars and volume, driven by beef and chicken, and spending per household increased. When it comes to meat consumption, moderation is far more popular than elimination, with flexitarians (12%) looking to reduce their animal protein through smaller portion sizes and/or a day without meat/poultry.

“One of the most compelling storylines in the analysis is that 83% of shoppers purchase specific cuts of meat and they are eating smaller portions, but with total volume sales up slightly, that means they are eating less more often,” says Rick Stein, FMI Vice President, Fresh Foods.

Among the top 10 findings of the Power of Meat 2020:

Plant-based meat alternatives are a small but growing market. Total store plant-based meat alternative sales were $760 million in 2019 and grew 11.8%. They are mostly an occasional choice driven by perceived health benefits, being a good source of protein, just something different and for environmental reasons. Blended vegetable/meat items, such as mushroom burgers, have a higher and greater cross-population appeal, and can be a bridge to the societal and health benefits people look for, while keeping meat on the plate.

Time-saving solutions drive meat and cooking appliance choices.  While the number of weekly home-cooked meals dropped to 4.5 over 2019, dinners containing animal protein increased to 3.9. Newer cooking appliances, including the Instant Pot and air fryer, continue to make inroads in both ownership and being used to prepare meat and poultry.

Production claims remain popular. Organic, grass-fed and no-antibiotics-ever offerings saw robust sales gains, but overall trust in such claims is only moderate. Building trust in and understanding of claims is key to continued growth.

Supermarkets remain meat powerhouses with some gains in online meat sales. More than half of shoppers primarily buy meat and poultry at supermarkets. Forty percent of shoppers ordered groceries and 19% ordered meat and poultry online, up from 14% last year.

Brands continued to benefit from being a preferred purchase among younger shoppers. 2019 was a strong year for private brands (+12.3%). Shoppers want to hear from brands about nutrition (58%), food safety practices (57%), animal care practices (46%) and the brand’s environmental impact (40%).

Sixty-eight percent of shoppers feel it is important for grocery stores to provide transparency into how and where livestock was raised.

Sustainability concerns impact meat and poultry choices, but 49% believe, if done properly, animal agriculture does not have negative impacts on the planet. Environmental sustainability is affecting protein choices. While 34% of consumers believe raising livestock has some or a lot of negative impact on the planet, this belief is much stronger among younger generations. The industry has an opportunity to improve the availability of unbiased environmental impact information to educate on steps taken to protect the planet.

Feeder Cattle futures led Live Cattle higher Monday. New-month positioning was likely a contributor. As well, the declining number of new coronavirus cases in China suggest the worst may be over in that nation, paving the way toward a resumption toward normal levels of commerce.

Other than 75¢ lower in recently minted away Aug, Live Cattle futures closed an average of $1.82 higher (62¢ higher toward the back to $2.77 higher toward the front). 

Feeder Cattle futures closed an average of $2.09 higher ($1.32 to $2.45 higher).

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

Choice boxed beef cutout value was $1.23 higher Monday afternoon at $206.53/cwt. Select was $2.25 higher at $201.16.

Corn futures closed 3¢ to 8¢ higher through Mar ’21 and then mostly fractionally higher to 1¢ higher.

Soybean futures closed 7¢ to 9¢ higher.

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Major U.S. financial indices charged higher Monday, despite key indicators of slowing manufacturing growth in the U.S. and China.

Although manufacturing in the U.S. continued to grow in February, based on the Institute for Supply Management® (ISM) Purchasing Managers Index® (PMI), growth was slower than expected, down 0.8 percentage points in February to 50.1.

“Comments from the panel were generally positive, with sentiment cautious compared to January,” says Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee. “Global supply chains are impacting most, if not all, of the manufacturing industry sectors.”

A respondent to the survey from the computer and electronic products sector noted: “There are always supply chain challenges with Lunar New Year shutdowns, and this year is no different. Coronavirus is wreaking havoc on the electronics industry. Companies are delayed in starting up production, which is resulting in longer lead times, constraints and increased pricing. It’s a mad dash to dual source stateside in case China isn’t back online soon.”

The closely watched Caixin China General Manufacturing PMI™—a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy—dropped 10.8 points month to month to 40.3 in February, the lowest reading since it began in 2004.

“Production, new work and staffing levels all fell at the quickest rates since the survey began nearly 16 years ago as companies extended their usual Lunar New Year shutdowns to help stem the spread of the virus,” according to the report from Caixin and IHS Markit. “Supply chains were also hit heavily, with average delivery times increasing at the quickest pace on record, leading firms to increase their use of current stocks. However, firms anticipate a recovery in production over the next year due to expectations that production will be ramped up once any coronavirus-related restrictions are lifted. Notably, the degree of positive sentiment was the strongest seen for five years.”

Chatter late in the session about the potential of coordinated rate cuts among the world’s major central banks, in response to the economic impact of coronavirus, added optimism.

The Dow Jones Industrial Average closed 1,293 points higher. The S&P 500 closed 136 points higher. The NASDAQ was up 384 points.

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Higher markets Monday were more than welcome, but likely speak more to the volatility ahead, due to unknowns associated with COVID-19, rather than a market bottom being established.

“Clearly, the uncertainty has not peaked yet and the best we can hope for, from a market perspective, is that there will come a time when it appears the worst is over and we can see a path to a lengthy recovery in markets,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “It seems unlikely that any definitive news is forthcoming, certainly not in the next few weeks, which would allow markets to bounce back with any confidence.”

Near term, at least the next 30-60 days, Peel believes producers should expect markets to remain weak, if not weaker.

“Obviously, the news about COVID-19 is changing constantly and may support brief short-lived market bounces,” Peel says. “Longer term, I don’t think we are ready yet to change the overall outlook for the year, but the prospect is growing that we might have to trim back our expectations for 2020.

“Producers probably should not make dramatic changes to production and marketing plans just yet, but it would be a good idea to think about how you will adjust things if we have to shift from offense to defense for the entire year.”

Through Friday afternoon, negotiated cash fed cattle prices for the week were $4-$5 less on a live basis at $115/cwt. in the Southern Plains and Nebraska. Dressed trade was $3-$5 less in Nebraska at $185-$187 and mostly $7 lower in the western Corn Belt at mainly $183.

Through Thursday, the average five-area direct steer price was $115.07/cwt. on a live basis, which was $4.70 less than a week earlier. The average dressed steer price of $185.45 was $4.65lower.

Cattle futures took another strong step lower Friday, with ongoing pressure in outside markets from novel coronavirus fears, as well as week-end and month-end position squaring. 

Other than 7¢ higher in expiring Feb, Live Cattle futures closed and average of $2.04 lower ($1.45 lower toward the back to $2.90 lower at the front).

Feeder Cattle futures closed an average of $1.62 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 24¢ lower Friday afternoon at $205.30/cwt. Select was 78¢ lower at $198.91.

Corn futures closed mostly fractionally mixed to 1¢ lower.

Soybean futures closed mostly 2¢ to 4¢ lower.

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Major U.S. financial indices mostly fell hard again Friday but closed off of session lows. Fears about novel coronavirus and its potential impact on the domestic and global economies continued to fuel the pressure. Federal Reserve Chair Jerome H. Powell, quelled some fears with this statement late Friday:

“The fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity. The Federal Reserve is closely monitoring developments and their implications for the economic outlook. We will use our tools and act as appropriate to support the economy.”

The Dow Jones Industrial Average closed 357 points lower. The S&P 500 closed 24 points lower. The NASDAQ was fractionally higher.

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Increasing market uncertainty last week, tied to the global spread of novel coronavirus, (COVID-19) took Cattle futures down as steeply as last summer’s plunge following the packinghouse fire in Kansas.

Week to week on Friday, Feeder Cattle futures closed an average of $7.74 lower, while Live Cattle futures closed an average of $6.34 lower. The week following the Tyson fire, Feeder Cattle were down an average of $5.48 and Live Cattle were down an average of $6.53.

Managed money—lots of it—and electronic, algo trading at lightening speeds is likely magnifying market volatility and momentum.

COVID-19 is nothing new, making headlines since the first case was identified in China last December. But fears ratcheted higher last week as economic impact appeared more pronounced in countries like China and South Korea as the likelihood of a pandemic grew.

For instance, the USDA Foreign Agricultural Service (FAS) issued an assessment last week about the current economic impact of COVID-19 in South Korea. “The local economy is slowing down due to weak retail sales and reduced economic activity. Many companies have temporarily closed their offices and processing facilities for the week of Feb. 23 to prevent spread of the virus,” according to the report. “The Korea Economic Research Institute (KERI) reported Feb. 24 that its Business Survey Index (BSI) for February 2020 fell to 78.9, down 7.6 points from January, the lowest level since February 2009.”

As of Feb. 26, 1,146 people in South Korea tested positive for the virus; 11 deaths. A week earlier, the number of cases in Korea was 51.

Meanwhile, according to the World Health Organization, there were 79,394 confirmed COVID-19 cases in China as of Feb. 29. Estimates of current and future economic impact vary widely. Already, companies like Apple are telling investors that previous revenue guidance for the next quarter is likely overstated as COVID-19 in China slows production, constrains supply chains and dampens demand in that nation.

Here at Home

As of Saturday, according to WHO, there were 62 COVID-19 cases in the U.S. The first death, due to the disease, was confirmed over the weekend.

“For the general American public, who are unlikely to be exposed to this virus at this time, the immediate health risk from COVID-19 is considered low. However, it’s important to note that current global circumstances suggest it is likely that this virus will cause a pandemic…,” according to last Tuesday’s situation summary from the Centers for Disease Control and Prevention (CDC).

Wednesday evening, CDC confirmed an infection with the virus that causes COVID-19 in California, in a person who reportedly did not have relevant travel history or exposure to another known patient with COVID-19.

“It’s possible this could be an instance of community spread of COVID-19, which would be the first time this has happened in the United States,” according to the CDC statement. “Community spread means spread of an illness for which the source of infection is unknown. It’s also possible, however, that the patient may have been exposed to a returned traveler who was infected.” So far there are 15 confirmed COVID-19 cases in the U.S.