WLI

Negotiated cash fed cattle trade on Thursday continued $1 higher than last week in the Southern Plains at $120/cwt. Live prices were steady to $1 higher in Nebraska at $119-$120 and steady in the beef at $190.

Near term, increased slaughter numbers and heavier carcass weights year over year, magnified by the mostly open winter so far are keeping a firmer seasonal lid on wholesale beef prices. The average steer carcass weight the week ending Feb. 8 was 903 lbs., according to USDA’s Actual Slaughter Under Federal Inspection report. That was 6 lbs. more than the previous week and 18 lbs. more than the same week a year earlier. The average dressed heifer weight of 834 lbs. was 1 lbs. more than the previous week and 12 lbs. more than the same week last year.

Weaker outside markets amid the daily up and down tied to novel coronavirus also helped pressure Cattle futures Thursday.

Live Cattle futures closed an average of $1.03 lower (70¢ to $1.65 lower), but still higher week to week.

Except for 2¢ higher in spot Mar, Feeder Cattle futures closed an average of 78¢ lower. 

Analysts surveyed by Urner Barry and reported by the Daily Livestock Report expect to see January feedlot placements 1.9% more than the previous year, in Friday’s monthly Cattle on Feed report. They anticipate January marketings to be 1% more and the Feb. 1 on-feed inventory to be 2.4%  more.

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

Choice boxed beef cutout value was $1.07 lower Thursday afternoon at $204.50/cwt. Select was 16¢ lower at $201.60.

Corn futures closed mostly 1¢ to 2¢ lower.

Soybean futures closed 4¢ to 7¢ lower.

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Major U.S. financial indices closed lower Thursday, presumably on profit taking and vacillating concerns about novel coronavirus..

The Dow Jones Industrial Average closed 128 points lower. The S&P 500 closed 12 points lower. The NASDAQ was down 66 points.

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USDA projects U.S. beef and veal export value for the current fiscal year (FY) 2020 at $7.5 billion, in the quarterly Outlook for U.S. Agricultural Trade—released Thursday—from the Economic Research Service (ERS) and the Foreign Agricultural Service (FAS). That’s $100 million less than the November estimate but would be $200 million more than FY 2019. Analysts explain the reduced quarter-to-quarter estimate is based on slightly higher expected prices unable to offset what’s expected to be a slight reduction in volume.

“Livestock, poultry, and dairy exports are forecast up $500 million from the November projection to $32.4 billion as stronger demand for poultry and products, dairy, and variety meats more than offsets declines for beef,” say ERS-FAS analysts.

Overall, U.S. agricultural exports are projected $500 million more for FY 2020, compared to the November forecast, with increased soybean, wheat, and poultry export forecasts more than offsetting reductions in corn and soybean meal. The estimated $139.5 billion this fiscal year would be $4 billion more than last year, when trade wars and issues disrupted export flows.

“Exports for China are raised $3.0 billion from the November forecast to $14.0 billion, largely based on higher projected volumes for soybeans,” say ERS-FAS analysts. “The current outlook for exports to China is tempered by significant uncertainties surrounding the Covid-19 outbreak (novel coronavirus), which may affect the timing of China’s purchases under the Phase One Agreement during the calendar year.”

Despite novel coronavirus, ERS and FAS left expectations for world per capita gross domestic product (GDP) growth little changed. However, those analysts explain, a slowdown across the Eurozone, declining growth rates in China and the damaging global impact of novel coronavirus is expected to dampen growth prospects worldwide.

Negotiated cash fed cattle trade remained largely undeveloped through Wednesday afternoon, based on USDA reports, but had a firm to higher feel.

For one thing, there were some early live trades in the Texas Panhandle at $120/cwt., which was $1 higher than last week.

Earlier in the day, there were three Southern Plains lots (422 head) offered in the weekly Fed Cattle Exchange auction, and no takers. One lot was passed out at $119.75/cwt.

Up North, Choice steers and heifers sold $1.75-$2.25 higher at the fat auction in Tama, IA Wednesday. There were 91 Choice 2-4 steers weighing an average of 1,434 lbs. and bringing an average of $123.15/cwt. Country trade in the western Corn Belt was $119 last week.

Similarly, slaughter steers also sold $2-$3 higher at Sioux Falls Regional in South Dakota, where 184 Choice 2-3 steers weighing an average of 1,447 lbs. brought an average of $120.74.

Feeder Cattle futures gained more ground Wednesday on strong fundamentals, and perhaps positioning ahead of the monthly Cattle on Feed report due out Friday. That helped underpin Live Cattle. 

Live Cattle futures closed narrowly mixed and mostly higher, from unchanged to an average of 11¢ lower in three contracts to an average of 20¢ higher.

Feeder Cattle futures closed an average of 75¢ higher (47¢ to $1.47 higher in spot Mar). That makes for an average of $5.87 higher over the last five sessions.

Wholesale beef values were weak on Choice and 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 56¢ lower Wednesday afternoon at $205.57/cwt. Select was $1.97 lower at $201.76.

Corn futures closed mostly 1¢ to 2¢ lower.

Except for 5¢ and 3¢ higher in the front two contracts, Soybean futures closed 1¢ to 2¢ higher.

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Major U.S. financial indices closed higher Wednesday, buoyed in part by various reports suggesting China is containing novel coronavirus.

The Dow Jones Industrial Average closed 115 points higher. The S&P 500 closed 15 points higher. The NASDAQ was up 84 points.

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America’s ranchers and farmers took another step toward collectively telling agriculture’s positive sustainability story to consumers and policy makers Wednesday with announcement of Farmers for a Sustainable Future (FSF), a coalition of agricultural organizations committed to environmental and economic sustainability.

“Today’s launch of the Farmers for a Sustainable Future is a defining moment,” said Ethan Lane, Vice President of Government Affairs for the National Cattlemen’s Beef Association (NCBA), who spoke at the FSF rollout event in Washington. “Twenty-one agricultural groups—which represent the vast majority of the agricultural industry in our country—are standing side by side in unity to correct a false narrative that has haunted us for as long as I can remember. We’re here because we support incentivizing innovation, science-based research, resilient infrastructure, and focusing on outcomes.”

Along with NCBA, other founding FSF members include the American Farm Bureau Federation, USA Rice, American Sugar Alliance, the National Corn Growers Association, and the National Pork Producers Council.

“We know that consumers care how beef is produced, and they want to know that it’s done in a way that’s environmentally and socially sustainable,” Lane explains. “In fact, the U.S. is the leader in sustainable beef production, with a carbon footprint 10 to 50 times lower than the rest of the world. And while we’ve already made a lot of progress, American cattle farmers and ranchers are committed to continuous improvement by producing high-quality beef even more sustainably for generations to come.”

NCBA is also a founding member of the U.S. Roundtable for Sustainable Beef, a multi-stakeholder organization composed of more than 220 ranchers, feed yard operators, packers, food service companies, research institutions, and NGOs that share a mission to advance, support, and communicate about beef’s sustainability.

The coalition will share with elected officials, media and the public U.S. agriculture’s commitment to sustainability and the incredible strides already made to reduce agriculture’s environmental footprint. As policy proposals are developed and considered, the goal is for the coalition and its guiding principles to serve as a foundation to ensure the adoption of meaningful and constructive policies and programs affecting agriculture.

FSF’s guiding principles call for policies that support science-based research, voluntary incentive-based conservation programs, investment in infrastructure, and solutions that ensure vibrant rural communities and a healthy planet.

Cattle futures on Tuesday picked up where they left off last week, gaining more ground, albeit with light and two-sided trade.

Live Cattle futures closed an average of 31¢ higher.

Feeder Cattle futures closed an average of 74¢ higher (30¢ to $1.10 higher).

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

Choice boxed beef cutout value was $1.13 lower Tuesday afternoon at $206.13/cwt. Select was $2.45 lower at $203.73.

Corn futures closed 4¢ to 5¢ higher through Jly ’21 and then 1¢ to 2¢ higher.

Soybean futures closed 1¢ to 2¢ lower.

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Major U.S. financial indices mainly softened Tuesday, with most of the pressure attributed to continued worries about the impact of novel coronavirus on global economic growth.

The Dow Jones Industrial Average closed 165 points lower. The S&P 500 closed 9 points lower. The NASDAQ was up 1 point.

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“The lower year-over-year 2019 calf crop will reduce the number of steers and heifers available for slaughter in the second half of the year and place upward pressure on feeder steer prices,” say analysts, with USDA’s Economic Research Service (ERS), in the latest monthly USDA Livestock, Dairy and Poultry Outlook.

Based on current prices, ERS increased the annual expected feeder cattle price (basis Oklahoma City) by $1 to $146/cwt. By quarter, feeder steers prices are projected at $145 in the first and second quarters, at $148 in the third quarter and at $146 in the fourth quarter.

ERS increased anticipated U.S. beef production for the first half of 2020, reflecting a faster pace of slaughter, but lowered second-half expectations on the anticipation of fewer steers and heifers available for slaughter, due to a slower pace of placements during 2020.

ERS lowered its expected first-quarter fed steer price to $123/cwt. on recent price weakness.

Through Friday, the five-area direct price for steers was $118.90/cwt. on a live basis and $190.27 in the beef. Week to week, that was $2.15 lower and $2.91 lower, respectively.

Futures and equity markets were closed Monday, in observance of Presidents Day, so it will be another day before finding out if the late-week momentum in Cattle futures carries ahead.

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 83¢ lower Monday afternoon at $207.26/cwt. Select was 47¢ higher at $206.18.

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“Heavier carcass weights in 2020 are expected to keep total beef production at or near record levels even as cattle slaughter decreases slightly,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his latest weekly market comments. “Moreover, steer and heifer carcass weights in 2020 may indicate whether the industry is resuming the long-term trend of ever-larger carcasses.”

Steer carcass weights averaged 879.0 lbs. last year, according to Peel. That was 1.5 lbs. less than the previous year. Heifer carcass weights last year averaged 813.1 lbs., down 3.4 lbs. from the prior year. 

“Monthly steer carcass weights were lower year over year for the first nine months of 2019 before moving sharply higher at the end of the year. In fact, monthly steer carcass weights were lower year over year for 31 of 41 months from May 2016 through September 2019,” Peel says. “Heifer carcass weights were lower 26 of 38 months from August 2016 through September 2019. However, steer and heifer carcass weights jumped sharply higher in November and December compared to the previous year and appear to have resumed the long-term trend of higher carcass weights.”

For longer term perspective, Peel explains annual steer carcass weights peaked in 2015 at 892.0 lbs. but averaged lower since then. Heifer carcass weights peaked in 2016 at 821.5 lbs. and have averaged lower through 2019.

“The moderation of carcass weights since 2016 has raised the question of whether the long trend of higher carcass weight was over,” Peel says. “Since 1960, steer carcass weights have averaged 3.8 lbs. larger each year, increasing from 656.3 lbs. in 1960 to 879 lbs. in 2019. Heifer carcass weights have increased an annual average of 4.5 lbs. per year from 545.6 lbs. in 1960 to 813.1 lbs. in 2019.”

As an aside, although economic incentive suggests a continuation of increasing carcass weights, you can find some cattle feeders who believe cattle physiology will cap future carcass growth. Said differently, there are some who think cattle weights are growing beyond the ability of cattle skeletal structure and internal organs to support them.

Moreover, Peel points out, “Multiple research studies have shown that bigger carcasses and the larger beef cuts (bigger steaks) that result have some negative demand implications. If the larger carcass trend resumes, these issues will continue to grow resulting in increased product fabrication needs and alternative product marketing.”