WLI

Last week’s weighted average 5-area direct price for fed steers was 59¢ higher at $115.19/cwt. on a live basis and 68¢ higher in the beef at $181.72.

Cattle futures firmed to start the week, helped along by the Tyson announcement regarding the reopening of its Kansas plant (see below).

Other than 40¢ and 2¢ lower at either end of the board, Live Cattle futures closed an average of 32¢ higher. 

Feeder Cattle futures closed an average of 35¢ higher.

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

Choice boxed beef cutout value was $1.68 lower Monday afternoon at $239.12/cwt. Select was $1.26 higher at $215.59.

Corn futures closed mostly 2¢ to 3¢ lower.

Soybean futures closed mostly 6¢ to 8¢ lower Jul ’21 and then 4¢ lower.

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Major U.S. financial indices edged higher Monday, with little definitive impetus one way or the other.

The Dow Jones Industrial Average closed 31 points higher. The S&P 500 closed 1 point higher. The NASDAQ was up 9 points.

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Tyson Fresh Meats—the beef and pork subsidiary of Tyson Foods, Inc.—announced Monday that efforts to resume harvest operations at its Holcombe, KS beef plant will begin the first week of December, with intentions to be fully operational by the first week of January. It plans to resume receiving cattle at the facility the first week of December.

“We recognize the disruption the fire caused for our suppliers and our customers and are more than pleased to announce we are in the final stages of reconstruction,” says Steve Stouffer, group president, Tyson Fresh Meats. “Our team is ready to begin the process of ramping back up, recognizing that there will be testing and adjustments over the first few weeks to ensure equipment functionality while maintaining our commitment to team member safety and food safety.”

The Aug. 9 fire that disrupted operations severely damaged a critical part of the plant containing the hydraulic and electrical systems that support the harvest floor and cooler areas.

Before the fire, the plant was harvesting about 6,000 head of fed cattle per day, accounting for about 6% of total U.S. fed cattle packing capacity.

Reconstruction included completely replacing support beams and the roof, hydraulic piping and pumps, installing over 50,000 feet of new wiring and the reconstruction of all new electrical panel rooms and equipment.

Since the fire, cattle have been diverted to the company’s other beef facilities, where they were able to offset some of the production volume losses, to try and help mitigate disruption to cattle producers and customers and has continued to pay active, full-time team members for 40 hours per week. Team members have been instrumental in helping with cleanup and the reconstruction process.

Negotiated cash fed cattle trade ended the week mainly steady to $1 higher at $115/cwt. on a live basis and at $182 in the beef, based on USDA reports.

There were 1,264 head offered in a Friday edition of the Fed Cattle Exchange auction, and no takers.

Cattle futures traded sideways and closed marginally mixed Friday.

Other than 2¢ and 5¢ higher in the front two contracts, Live Cattle futures closed an average of 17¢ lower. 

Other than 37¢ lower in spot Nov and 15¢ lower in Sep Feeder Cattle futures closed an average of 16¢ higher.

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

Choice boxed beef cutout value was 26¢ lower Friday afternoon at $240.80/cwt. Select was $1.51 lower at $214.33.

Corn futures closed mostly 3¢ to 4¢ lower.

Soybean futures closed fractionally higher to 1¢ higher.

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Major U.S. financial indices closed strongly higher Friday, buoyed by reports that the U.S. and China are getting closer to a trade deal.

The Dow Jones Industrial Average closed 222 points higher. The S&P 500 closed 23 points higher. The NASDAQ was up 61 points.

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“As the Choice-Select price spread stays abnormally high, packers appear to be paying higher prices to bid cattle out of the feedlots, as the spread is likely incentivizing feedlots to keep cattle on feed longer,” say analysts with USDA’s Economic Research Service (ERS), in the latest monthly Livestock, Dairy and Poultry Outlook. “Packers’ willingness to pay higher prices is likely supported by the strong boxed beef market going into the holiday season.”

USDA increased the expected fed steer price (5-area direct) $2 for the fourth quarter to $112/cwt. with a forecast annual price this year of $116. Average prices through the first three quarters of next year are projected at $113 (third quarter) to $120 (first quarter).

In turn, feeder steer prices finally started to increase.

ERS analysts point out feeder steers weighing 750-800 lbs. traded $13 higher ($148.04/cwt.) at Oklahoma City the week of Nov. 4, compared to the recent low the week of Sept. 9.

“Based on recent price data, the fourth-quarter 2019 feeder steer price was raised by $3 to $144/cwt. (basis Oklahoma City),” say ERS analysts. “The first-quarter price forecast for 2020 was raised by $2 to $138. The annual price forecast for feeder steers is raised by $1 to $142.

Projected feeder steer prices are expected to increase in 2020, especially in the latter half, compared to 2019. Year over year, the forecast first-quarter average price next year is $2.76 lower at $138/cwt., about even in the second at $130, but $6.81 higher in the third quarter at $147.90. The projected annual average price is $1.50 higher at $143.

Negotiated cash fed cattle trade on Thursday continued steady with last week in Nebraska and the western Corn Belt at mostly $115/cwt. on a live basis. Dressed sales were steady to $1 higher at $182.

Cattle futures strengthened on Thursday, regaining some of the losses from the previous session, with continued overall strength in beef demand.

Live Cattle futures closed an average of 59¢ higher (32¢ higher to 97¢ higher in spot Dec).

Feeder Cattle futures closed an average of 84¢ higher, (42¢ to $1.22 higher).

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

Choice boxed beef cutout value was $1.28 lower Thursday afternoon at $241.06/cwt. Select was $1.69 lower at $215.84.

Steer carcasses weighed an average of 903 lbs. for week ending Nov. 2, which was 3 lbs. lighter than the previous week, but 4 lbs. heavier than the same time a year earlier, according to the most recent USDA Actual Slaughter Under Federal Inspection report. Fed heifer carcasses weighed an average of at 835 lbs., on par with the previous week and year.

Corn futures closed mostly 1¢ higher.

Soybean futures closed mostly unchanged to 3¢ lower, but 1¢ higher in a couple of the front months.

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Major U.S. financial indices closed little changed Thursday.

The Dow Jones Industrial Average closed 1 point lower. The S&P 500 closed 2 points higher. The NASDAQ was down 3 points.

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So far, rather than swap alternative proteins for real meat, it appears consumers in the western world are adding alternatives to what they already eat, according to the annual global animal protein outlook from RaboResearch Food & Agribusiness (RRFA).

“Contrary to expectations, the growing interest in alternative proteins has added to total protein consumption; the substitution effect is not yet clear in the consumption data,” according to RRFA analysts. “At the same time, animal

protein consumption has been stable, or up slightly, in the E.U. and U.S. in recent years. This is despite double-digit growth in alternatives’ sales: 16% year-over-year growth for 2018 in the U.S. and a compound annual growth rate of 16% in the Netherlands since 2016.”

Rabobank expects alternative protein consumption to grow next year, along with meat and seafood consumption.

“We also expect more clarity as to whether alternatives are an addition to or a substitute for meat and seafood. Alternatives will need to improve their nutritional profile and eating quality, and address regulatory barriers such as terminology, in order to maintain current growth rates,” according to RRFA analysts.

Negotiated cash fed cattle trade developed in the Southern Plains Wednesday with prices steady to $1 higher at $115/cwt. on a live basis.

There were 1,393 head offered in the weekly Fed Cattle Exchange Auction, and no takers. Two lots from the Southern Plains were passed at bids of $115.00 and $115.50/cwt.

Choice steers and heifers sold $1.50-$2.00 higher at the fat auction in Tama, IA on Wednesday. There were 358 Choice 2-4 steers weighing an average of 1,452 lbs. and bringing an average price of $117.68. Country trade in the region last week was at $114-$115.

Cattle futures stepped lower, though, with heavy volume and about even open interest. Rather than the beginning of a correction, one could argue retrenchment ahead of what looks to be a higher trending market.

Live Cattle futures closed an average of $1.60 lower.

Feeder Cattle futures closed an average of $3.13 lower, ($2.25 to $4.30 lower). A day earlier, the CME Feeder Cattle Index reached the highest level since last December at $147.44. 

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

Choice boxed beef cutout value was $1.84 higher Wednesday afternoon at $242.34/cwt. Select was $1.30 higher at $217.53.

Corn futures closed 2¢ to 3¢ lower.

Soybean futures closed mostly 2¢ lower.

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Major U.S. financial indices closed mixed on Wednesday, with support from positive news, including a stout pop in Disney shares, capped by another see-saw chapter of U.S.-China trade talks; reports that there was yet another snag.

The Dow Jones Industrial Average closed 92 points higher. The S&P 500 closed 2 points higher. The NASDAQ was down 3 points.

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“Besides the impact of ASF (African Swine Fever), many trade disputes and issues are causing uncertainty for global animal protein, with the US-China trade war the most apparent, but not the only trade uncertainty,” says Justin Sherrard, Global Strategist, Animal Protein at RaboResearch Food & Agribusiness (RRFA). “In addition, the ongoing rise of alternative proteins also adds to the uncertainty, even though Rabobank has a less bullish view of alternatives than others do.”

RRFA released its annual global animal protein outlook Wednesday.

Rabobank projects protein growth in most regions next year, but analysts say production losses, due to ASF, particularly in China, will exceed combined production growth in all other regions.

For North America, Rabobank anticipates production growth from all species, led by pork and followed by poultry and then beef.

“We expect U.S. beef production to be up slightly, by less than 1% in 2020,” according to the report. “Non-fed slaughter could also be up a little, as a result of liquidation. We expect the calf crop to come down slightly, reflecting weather conditions at calving and in the spring. We expect carcass weights to return to trend, offsetting any reduction in numbers.

“With only a fractional increase in production and solid exports, U.S. fed cattle prices are expected to change little. We expect a spring high of $128-$130/cwt. and a summer low of $100-$105.”

Cattle futures traded either side of steady on Tuesday, awaiting further direction from the cash market.

Live Cattle futures closed narrowly mixed but mostly marginally higher, from an average of 8¢ lower to an average of 11¢ higher.

Feeder Cattle futures closed narrowly mixed, from 17¢ lower to 22¢ higher.

Currently strong market fundamentals should grow more positive when Tyson reopens the Kansas plant that was shuttered by fire in August. During a Tuesday conference call to share the company’s fourth-quarter fiscal results, Noel White, Tyson CEO said the company expects to have the plant fully operational within 60 days, and potentially sooner.

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

Choice boxed beef cutout value was $1.91 higher Tuesday afternoon at $240.50/cwt.—the highest since June of 2017. Select was $2.54 higher at $216.23.

Corn futures closed 3¢ to 4¢ higher through Jly ’20 and then mostly 1¢ higher.

Soybean futures closed fractionally mixed to 1¢ lower.

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Major U.S. financial indices mainly edged higher on Tuesday, supported once again by positive quarterly corporate earnings.

The Dow Jones Industrial Average closed unchanged. The S&P 500 closed 4 points higher. The NASDAQ was up 21 points.

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Increased uncertainty and price pressure from the Tyson plant fire may have helped encourage some cow-calf producers to begin herd liquidation, says Elliott Dennis, livestock marketing economist at the University of Nebraska-Lincoln.

To illustrate the market uncertainty leading into the fire, Dennis uses the example of a cow-calf producer in the Northern Plains, who calves in March or April and then sells weaned calves in October. At calving time, Dennis points out Feeder Cattle futures for Oct were around $157. After higher Corn futures rose in response to late and poor planting conditions, and applied price pressure to Feeder Cattle, he explains the October Feeder Cattle contract fluctuated between $132 and $145 in June, July and August, before sinking to $127, in the wake of the Tyson plant fire. By expiration, the contract was back up $145.

“How risk averse producers were likely determined price risk management used and ultimately gross revenue received for sold calves,” Dennis says, in the latest issue of In the Cattle Markets. He adds that cow-calf producers could respond to the increased market volatility by selling cows and exiting the market or by retaining beef cows for breeding.

Although the number of beef cows bred and the number of heifers retained for breeding this year won’t be known until the Jan. 1 USDA Cattle report, Dennis says cow slaughter provides some indication of producer response.

Beef cow slaughter numbers this year tracked close to last year’s pace through much this year. However, Dennis says, USDA’s Cow Slaughter Under Federal Inspection reports suggest a large beef cow sell-off since the week of September 14. He adds that beef cow slaughter numbers are on an upward trend and show no sign of slowing down.

Besides the fire, Dennis explains cow slaughter likely increased, due to skyrocketing prices for 90% lean beef, tighter hay supplies borne by the wet spring and summer, and the slow recovery of cash prices.

“In the short term, this reduction in beef cows affects the number of calves born next year, and feeder cattle available to enter feedlots,” Dennis says. “In the long term, it could ultimately signal that the industry is beginning to enter a contraction phase of the cattle cycle.”