WLI

Negotiated cash fed cattle trade was yet to fully develop through Friday afternoon but was shaping up lower. Live prices in the Southern Plains were $1 lower than the previous week at $121/cwt. Although too few to trend, early live sales in Nebraska were also $1 lower at $121, while early dressed sales were $1-$2 lower at $193-$195.

The lack of firm cash direction and weaker outside markets helped cap Live Cattle futures and pressure Feeder Cattle as Lean Hogs continued to extend gains.

Except for 5¢ lower in away Feb, Live Cattle futures closed an average of 14¢ higher.

Feeder Cattle futures closed an average of 55¢ lower (7¢ to 92¢ lower).

Wholesale beef values were lower 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 81¢ lower Friday afternoon at $210.12/cwt. Select was $2.07 lower at $203.89.

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

Soybean futures closed unchanged to 1¢ higher through near Jly and then mostly 4¢ lower.

*******************************

Despite stronger U.S. employment numbers than expected, estimates of declining GDP growth in China, due to novel coronavirus, weighed on major U.S. financial indices Friday.

Total non-farm payroll employment rose by 225,000 in January, according to the U.S. Bureau of Labor Statistics. That left the unemployment rate little changed at 3.6%. 

Average hourly earnings for all employees on private non-farm payrolls rose by 7¢ to $28.44. Over the past 12 months, average hourly earnings increased by 3.1%.

The Dow Jones Industrial Average closed 277 points lower. The S&P 500 closed 18 points lower. The NASDAQ was down 51 points.

*******************************

Beef demand is strong and with U.S. cattle numbers plateauing, prices are likely to be stronger in the year ahead as consumers at home and abroad support industry profitability, according to CattleFax, at their 2020 Industry Outlook in San Antonio last week.

“With strong demand for U.S. beef at home and rising demand overseas, the modest increases in supply will be more than offset by a growing consumer appetite for our product,” says Kevin Good, CattleFax Vice President of Industry Relations and Analysis.

Specifically, CattleFax projects the all-fresh retail price 5¢ higher than last year at an average of $5.87/lb. and composite cutout prices $3 higher $222/cwt. 

In terms of cattle prices, Good says CattleFax projects fed steer prices to average $120/cwt. during 2020, which would $3 more than last year. He notes there is downside risk at $108 and resistance at $130.

CattleFax forecasts steer calf prices (550 lbs.) this year $6 higher than last year at an average of $170/cwt., across a range of $155-$180.

As for feeder steer prices (750 lbs.), CattleFax projects an average increase of $6, compared to last year, at an average of $150/cwt., across a range of $140-$160.

Good notes additional supplies of utility cows, the product of several years of aggressive expansion, are likely to challenge the cull cow market. However, he explains, “Increased demand for lean trim and a decline in the availability of imported grass-fed trim from Australia and New Zealand will be supportive of cow prices.” He projects utility cow prices at an average of $65/cwt., ranging from the low $70s to a fall low near $55.

CattleFax anticipates the average bred cow price steady with last year at $1,500.

On the input side of the equation, Mike Murphy, CattleFax Vice President of Research and Risk Management Services predicts acres planted to corn will increase 4 million acres to 94 million acres this year and that soybean acres will increase 7 million acres to reach 83 million acres. He pegs spot corn prices at $3.50-$4.00/bu., which would be 15¢ to 20¢/bu. less than last year, notwithstanding significant weather pressure.

“There is strong demand for our product, but that’s the result of the fact that our business has paid attention to market signals and we’ve been producing a consistent, quality product that has gained a greater piece of that retail dollar. We need to protect that,” says Randy Blach, CattleFax CEO. “We must pay attention to what the consumer is telling us. That means conversations about topics like traceability and sustainability only become more important as time goes on. We have to listen to the consumer and respond with action to meet their needs and demands if we’re going to continue to be successful in a hypercompetitive global protein market.”

Negotiated cash fed cattle trade remained undeveloped through Thursday afternoon.

Despite the lack of cash direction and recent softness, limit-up moves across most Lean Hog contracts helped buoy Cattle futures.

Live Cattle futures closed an average of 48¢ higher. Open interest continued its recent steep decline with 61,318 fewer contracts (-15.3%) between Jan. 21 and Feb. 5.

Feeder Cattle futures closed an average of 93¢ higher (22¢ to $1.52. higher).

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 21¢ higher Thursday afternoon at $210.93/cwt. Select was $1.98 lower at $205.96.

Corn futures closed mostly 1¢ to 3¢ lower.

Soybean futures closed 1¢ to 2¢ lower.

*******************************

Major U.S. financial indices extended gains on Thursday, buoyed by cooling fears about the impact of novel coronavirus and reports of China’s announcement it will halve tariffs on $75 billion worth of U.S. imports, as part of the phase-one trade agreement.

The Dow Jones Industrial Average closed 88 points higher. The S&P 500 closed 11 points higher. The NASDAQ was up 63 points.

*******************************

U.S. beef exports last year totaled 1.32 million metric tons (mt), 2.5% below the previous year’s record volume, according to data released by USDA and compiled by the U.S. Meat Export Federation (USMEF). Beef export value was 3% less at $8.1 billion. Beef export value per head of fed slaughter last year was $309.75, down 4%.

USMEF attributes part of the decline to decreased exports to Japan, borne by the tariff disadvantage of the U.S., compared to its competitors. U.S. beef exports to Japan were 6% less in both volume (311,146 mt) and value ($1.95 billion). Recent ratification of a new trade agreement by the Japanese Parliament should offer some relief. As of Jan. 1, the tariff rate declined from 38.5% to 26.6%, the same as other major competitors, according to USMEF. There will be another rate cut April 1.

“It was gratifying to see beef exports to Japan perform so well in December, given that the first tariff rate cut was pending,” Halstrom says. “Buyers in Japan have been waiting a very long time for tariff relief and have already responded enthusiastically. We look forward to solid growth in 2020 and beyond.”

South Korea made a strong push to become the leading value market for U.S. beef in 2019, finishing a close second to Japan at a record $1.84 billion (up 5% from a year earlier). Korea was also the second largest volume market for U.S. beef at 255,758 mt (up 7%, also a new record). The United States captured a larger share of Korea’s chilled beef imports in 2019 at 62%, up from 58% the previous year. U.S. beef accounted for 51.5% of Korea’s total beef and beef variety meat imports and more than one-third of Korea’s total beef consumption.

“U.S. beef is achieving remarkable success in Korea’s traditional retail and foodservice sectors and is well-positioned to capitalize on growth in e-commerce, the institutional sector and other emerging sales channels,” Halstrom explains. “As U.S. beef moves steadily toward duty-free status in Korea, it becomes accessible and affordable for a wider range of customers whose appetite for U.S. beef continues to grow. We are seeing many new menu concepts in this dynamic market and continued excitement about U.S. beef.”

Pork Exports Record Large

U.S. pork exports posted new volume and value records in 2019, 10% more than the previous year in volume (2.67 million mt) and 9% higher in value ($6.95 billion).

“Despite retaliatory duties and the other barriers U.S. pork faces in China, exports to the China/Hong Kong region closed 2019 with tremendous momentum,” Halstrom says. “We look forward to continued success in 2020, especially if U.S.-China trade relations continue to trend in a positive direction. The coronavirus situation is certainly concerning and disruptive, but it hasn’t dampened our enthusiasm for the potential this market holds for U.S. red meat.”

Negotiated cash fed cattle trade remained undeveloped through Wednesday afternoon.

There were 627 head offered in the weekly Fed Cattle Exchange auction and no takers.

After hints of early support, Cattle futures trailed lower Wednesday, pressured by the ongoing retreat of open interest in Live Cattle, softer wholesale beef values and the lack of cash direction.

Live Cattle futures closed an average of 69¢ lower.

Feeder Cattle futures closed an average of $1.59 lower.

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

Choice boxed beef cutout value was 21¢ lower Wednesday afternoon at $210.72/cwt. Select was 43¢ higher at $207.94.

Corn futures closed mostly 1¢ lower.

Soybean futures closed mostly fractionally higher to 1¢ higher

*******************************

Major U.S. financial indices charged higher Wednesday. Runaway fears over novel coronavirus continued to subside with chatter about development of an effective vaccine. Investors also took heart in positive economic news.

For instance, private-sector, non-farm employment increased by 291,000 jobs from December to January according to the ADP National Employment Report®. That was more than the trade expected.

The Dow Jones Industrial Average closed 483 points higher. The S&P 500 closed 37 points higher. The NASDAQ was up 40 points.

*******************************

Today’s Cattle Current is abbreviated, as I’m at the Cattle Industry Convention in San Antonio where the Cattlemen’s College was held Wednesday. Based on sessions I attended, there was lots of focus on sustainability and part of that being the continued evolution of the cattle and beef industries away from commodity production toward specification, value-added production…more tomorrow.

Feeder Cattle futures extended gains on Tuesday, while Live Cattle closed a touch softer as open interest continues to decline, but retained most of the previous session’s gain.

Except for 5¢ higher in away Feb, Live Cattle futures closed an average of 21¢ lower.

Feeder Cattle futures closed an average of 68¢ higher.

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

Choice boxed beef cutout value was 63¢ lower Tuesday afternoon at $210.93/cwt. Select was 9¢ higher at $207.51.

Corn futures closed mostly 1¢ to 3¢ higher.

Soybean futures closed mostly 2¢ to 3¢ higher.

*******************************

Major U.S. financial indices jumped Tuesday, with support including news of China taking efforts to stimulate economic growth in the wake of novel coronavirus.

The Dow Jones Industrial Average closed 407 points higher. The S&P 500 closed 48 points higher. The NASDAQ was up 194 points.

*******************************

Agricultural producer sentiment rose sharply in January, according to the Purdue University/CME Group Ag Economy Barometer. It increased 17 points from December to a reading of 167, led by a significant jump of 24 points in the Index of Future Expectation, one of two sub-indexes that comprise the barometer. The other, the Index of Current Conditions increased 1 point.

Keep in mind the monthly survey of 400 agricultural producers took place around the time that the U.S. and China signed the phase-one trade deal.

“The Phase One Trade Agreement has largely been considered a win for U.S. exporters, although few details are available regarding how the additional $200 billion in purchases by China will be distributed over the next two years and how much impact it will have on the U.S. farm sector,” says James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture.

Even so, producer expectations continue to improve for increased U.S. agricultural exports over the next five years. As recent as October, only 55% of producers surveyed expected agricultural exports to increase. From November through January, about 70% of those surveyed expect to see an increase in U.S. agricultural exports in the next five years.

Consistently, a small percentage of respondents queried each winter plan to grow rapidly, while a relatively large group has no plans to grow or plans to exit or retire from farming. Those saying they have no growth plans and/or expect to exit/retire has been rising steadily since 2018. In January this year, a combined 56% of respondents said they have no plans to grow or plan to exit/retire, up from 50% in 2019, and up from 39% in 2018.

“The tremendous volatility the ag sector has experienced the last couple of years could be interpreted as a signal to producers to be more cautious regarding future expansion plans,” Mintert says.