WLI

After early support, then pressure, then support again, Cattle futures continued to rebound from the recent selloff. Friday’s Cattle inventory report likely offered some support, with less estimated year-over-year feeder cattle supply outside feedlots Jan. 1: 26.45 million head, which was is 0.40% less (-105,300 head). 

Live Cattle futures closed an average of 57¢ higher, from 30¢ to $1.05 higher. 

Except for $1.25 lower in away-Jan, Feeder Cattle futures closed an average of 98¢ higher (57¢ to $1.12 higher).

Wholesale beef values were lower on Choice and sharply 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 $1.44 lower Monday afternoon at $211.56/cwt. Select was $3.24 lower at $207.42.

Corn futures closed mostly 1¢ lower.

Soybean futures closed mostly 3¢ to 4¢ higher through Mar ’21 and then mostly 1¢ higher.

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Major U.S. financial indices rebounded some on Monday. Although fears about the potential economic impact of novel coronavirus continued, positive economic news took the spotlight.

For instance, contrary to trader expectations, the manufacturing sector expanded last month.

“The January PMI® (Purchasing Managers Index) registered 50.9%, an increase of 3.1 percentage points from the seasonally adjusted December reading of 47.8%,” according to Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee. “Global trade remains a cross-industry issue, but many respondents were positive for the first time in several months.”

The Dow Jones Industrial Average closed 143 points higher. The S&P 500 closed 23 points higher. The NASDAQ was up 122 points.

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“The inventory of beef replacement heifers is 18.4% of the beef cow inventory, a level that historically has not indicated significant liquidation” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, providing more perspective to Friday’s USDA Cattle report, in his weekly market comments. “However, in 2019, replacement heifers were 18.6% of the beef cow inventory, but sharply higher beef cow slaughter at the end of the year pushed the culling rate fractionally over 10% and resulted in modest reduction in the herd inventory. The number of beef heifers expected to calve in 2020 is 3.5 million head, 0.8% lower year over year.”

The USDA report pegged beef cows Jan. 1 at 31.31 million head, which was 1.18% less (-374,000 head) than the previous year.

“The peak beef cow inventory for 2019 was 31.7 million (revised down by 75,000 head from the previous report). This means that the total herd expansion in this cycle was an increase of 2.73 million head from the 2014 low of 29.0 million cows,” Peel says. “That is a total cyclical expansion of 9.4% or an average of 1.9% per year for the five years of expansion.”

Of course, there could be renewed expansion.

“Modestly higher prices projected in 2020, combined with improved international market potential, could restart herd expansion,” Peel says.  “Alternatively, continued political and economic turbulence or shocks, such as coronavirus, could drag markets down and hold cattle inventories flat or fall into more liquidation.”

Negotiated cash fed cattle trade ended the week generally $2-$3 lower on a live basis at $122/cwt. in the Southern Plains and Nebraska; $122-$123 in the western Corn Belt. Dressed sales were $3-$4 lower at $195.

Although increasing worries about the economic impact of coronavirus weighed on equity markets Friday, Cattle futures—especially Feeder Cattle—continued to emerge from the week’s doldrums, likely helped along by short covering, month-end positioning and bullish expectations for Jan. 1 cattle numbers (see below).

Live Cattle futures closed narrowly mixed, from an average of 32¢ lower to an average of 14¢ higher.

Except for 37¢ lower in newly minted away-Jan, Feeder Cattle futures closed an average of 68¢ higher (40¢ to $1.30 higher)

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

Choice boxed beef cutout value was 35¢ lower Friday afternoon at $213.00/cwt. Select was 82¢ lower at $210.66.

Corn futures closed mostly fractionally higher to 1¢ higher.

Soybean futures closed mostly 2¢ to 3¢ lower. 

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Major U.S. financial indices dove lower Friday, fueled by growing fears about novel coronavirus and its potential impact on the global economy.

A day after the World Health Organization declared novel coronavirus a public health emergency of international concern, but made no recommendation for travel restrictions to China, major U.S. airlines suspended flights between the U.S. and China.

As well, U.S. Health and Human Services (HHS) declared the virus a public health emergency in this country.

“While this virus poses a serious public health threat, the risk to the American public remains low at this time, and we are working to keep this risk low,” according to Health and Human Services Secretary Alex M. Azar II.  “We are committed to protecting the health and safety of all Americans, and this public health emergency declaration is the latest in the series of steps the Trump Administration has taken to protect our country.”

The Dow Jones Industrial Average closed 603 points lower. The S&P 500 closed 58 points lower. The NASDAQ was down 148 points.

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USDA’s Cattle report issued Friday provides markets ample food for thought. There were fewer beef cows and dairy cows than pre-report estimates but more beef replacement heifers and slightly more total cattle and calves.

USDA pegs the Jan. 1 inventory of all cattle and calves at 94.41 million head, which is 0.41% less (-391,400 head) than a year earlier. Analysts surveyed by Urner Barry and reported by the Daily Livestock Report estimated a decline of 0.5% less.

Beef cows Jan. 1 were 31.31 million head, which was 1.18% less (-374,000 head) than the previous year. Analysts responding to the Urner Barry survey looked for a decline of 0.6%.

Beef replacement heifers Jan 1 of 5.77 million head were 1.92% fewer (-113,000 head) than the previous year. Ahead of the report, analysts surveyed by Urner Barry projected a 3.5% decline.

Milk cows Jan. 1 of 9.33 million head were 2.10% less (-113,000 head) than the same time a year earlier, compared to pre-report estimates of 1.2% less.

The 2019 calf crop was estimated at 36.06 million head, which was 0.70% less (-253,100 head) than in 2018

Cattle on feed Jan. 1—for all feedlots—of 14.68 million head was 2.16% more (309,800 head) than the previous year.

The estimated feeder cattle supply outside feedlots Jan. 1 of 26.45 million head is 0.40% less (-105,300 head) than a year earlier.

There were 1.61 million head grazing small grain pastures in Kansas, Oklahoma and Texas on Jan. 1. That was 15.26% less (-290,000 head) than a year earlier.

Cow Inventory Down In Most Leading Cow States

States with 1 million or more beef cows at the beginning of the year, and the ranking by size, were the same as a year earlier. In order of size, with Jan. 1 cow numbers in parenthesis: Texas (4.57 million); Oklahoma (2.09 million); Missouri (2.08 million); Nebraska (1.92 million); South Dakota (1.73 million); Kansas (1.43 million); Montana (1.43 million); Kentucky (1.01 million).

Of those eight states, beef cow numbers increased year over year in Missouri (+24,000 head or 1.17%) and Kentucky (+4,000 head or 0.39%).

For the other six states, year-over-year declines in beef cow numbers ranged from -19,000 head in Nebraska (-0.98%) to -96,000 head in Kansas (-6.28%).

Negotiated cash fed cattle trade was slow with moderate demand in the Southern Plains through Thursday afternoon. Based on USDA reports, live prices were steady with the previous day at $122/cwt., which was $2 less than last week.

Cattle futures finally firmed on Thursday after taking their lumps for the previous five sessions, and in the face of another limit and near limit-down day for Lean Hogs.

Except for 2¢ lower in near Apr, Live Cattle futures close an average of 29¢ higher (2¢ to 62¢ higher).

Except for unchanged in the back contract, Feeder Cattle futures closed an average of 25¢ higher (5¢ to 67¢ higher).

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

Choice boxed beef cutout value was 17¢ lower Thursday afternoon at $213.35/cwt. Select was 45¢ lower at $211.48.

Corn futures closed 4¢ to 5¢ lower through Jly ’21 and then mostly 1¢ lower.

Soybean futures closed 12¢ to 16¢ lower through Jan ’21 and then 5¢ to 10¢ lower.

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Major U.S. financial indices closed higher Thursday, after being sharply lower for most of the session. Various chatter assigned the late-day turnaround to comments from the World Health Organization (WHO), which declared novel coronavirus a public health emergency of international concern (PHEIC) but made no recommendation for travel restrictions to China.

According to a statement from WHO’s Emergency Committee: “The Committee believes that it is still possible to interrupt virus spread, provided that countries put in place strong measures to detect disease early, isolate and treat cases, trace contacts, and promote social distancing measures commensurate with the risk…”

The Dow Jones Industrial Average closed 124 points higher. The S&P 500 closed 10 points higher. The NASDAQ was up 23 points.

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“Despite the perceived ‘health halo,’ synthetic meats are a long way off from being a magical mixture of vegetables. If you’re looking for a healthy snack, you can do better than these industrial food-like substances,” says Will Coggin, managing director of the nonprofit Center for Consumer Freedom (CCF).

Unbeknownst to many consumers, the folks at CCF point out plant-based meats are ultra-processed foods, which the National Institute of Health says may cause overeating and weight gain. According to the NOVA food classification system, ultra-processed foods are created by a series of industrial techniques and processes. Ingredients in synthetic meats include methylcellulose, which is commonly used in laxatives and lubricant, titanium dioxide, often used in paint, and propylene glycol, used in antifreeze.

That’s the gist of an ad CCF will air during this weekend’s Super Bowl. It features a spelling bee, where children are asked to spell some of the chemical ingredients in synthetic meats. You can see it here.

“In addition to ads CCF has run, the campaign has also been featured in articles by The New York Times, The Washington Post, and The Wall Street Journal,” Coggin says. You can see previous ads in the campaign here.

Negotiated cash fed cattle trade remained undeveloped through Wednesday afternoon, based on USDA reports.

There were 477 head offered in the weekly Fed Cattle Exchange auction and no takers.

Slaughter steers and heifers sold $1-$2 lower at Sioux Falls in South Dakota with 105 Ch 2-3 steers brought an average price of $120.43/cwt. at an average weight of 1,441 lbs. Country trade in the western Corn Belt last week was at mostly $124-$125.

After glimmers of support early on, Cattle futures continued to trek lower with the overall lack of commodity support, no cash direction and longs fleeing the market.

 Live Cattle futures closed an average of 48¢lower. Between Jan. 21 and 28, open interest declined by 30,377 contracts (down 7.6%)

 Except for 5¢higher in soon-to-expire Jan, Feeder Cattle futures closed an average of 71¢lower.

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

Choice boxed beef cutout value was 67¢ higherWednesday afternoon at $213.52/cwt. Select was 23¢ lower at $211.93.

Corn futures closed mostly 1¢ to 2¢ lower.

Soybean futures closed mostly 1¢ lower.

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Major U.S. financial indices closed narrowly mixed Wednesday, with little additional news regarding the spread of coronavirus balanced by positive quarterly earnings reports from bellwethers, such as Apple, and by the Fed’s decision to leave lending rates unchanged.

“Information received since the Federal Open Market Committee (FOMC) met in December indicates that the labor market remains strong and that economic activity has been rising at a moderate rate. Job gains have been solid, on average, in recent months, and the unemployment rate has remained low,” according to the FOMC statement. “Although household spending has been rising at a moderate pace, business fixed investment and exports remain weak. On a 12‑month basis, overall inflation and inflation for items other than food and energy are running below 2%.”

The Dow Jones Industrial Average closed 11 points higher. The S&P 500 closed 2 points lower. The NASDAQ was up 5 points.

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President Trump signed the U.S.-Mexico-Canada Agreement (USMCA) Wednesday, paving the way for the three nations to begin hashing out uniform regulations for the new agreement that replaces the North American Free Trade Agreement (NAFTA). And, the Canadian Parliament must ratify the pact but is expected to do so.

“This agreement shows the rest of the world the United States is open for business,” says U.S. Secretary of Agriculture, Sonny Perdue. “USMCA is critical for America’s farmers and ranchers, who will now have even more market access to our neighbors to the north and the south.”

Canada and Mexico are the first and second largest export markets for United States food and agricultural products, totaling more than $39.7 billion food and agricultural exports in 2018.

With USMCA, all food and agricultural products that have zero tariffs under NAFTA will remain at zero tariffs. Since the original NAFTA did not eliminate all tariffs on agricultural trade between the United States and Canada, the USMCA will create new market access opportunities for United States exports to Canada of dairy, poultry, and eggs, and in exchange the United States will provide new access to Canada for some dairy, peanut, and a limited amount of sugar and sugar-containing products.

U.S. red meat exports to Mexico and Canada in 2019 totaled about 1.25 million metric tons valued at $3.8 billion, according to the U.S. Meat Export Federation.

Futures and equity markets recovered some ground on Tuesday from the previous day’s steep selloff tied to growing fears about the global spread of novel coronavirus. 

Although mainly lower, the decline in Cattle futures was soft rather than the limit and near limit-down moves in the previous session.

Live Cattle futures close an average of 38¢ lower, as open interest continued to dwindle.

Except for 15¢ and 22¢ higher in the front two contracts, Feeder Cattle futures closed an average of 29¢ lower.

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

Choice boxed beef cutout value was 74¢ lower Tuesday afternoon at $212.85/cwt. Select was $1.66 higher at $212.16.

Corn futures closed mostly 2¢ to 5¢ higher through Jul ’21 and then mostly 1¢ higher.

Soybean futures closed mostly 2¢ lower.

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Investors seemed to take a more measured view of the global spread of coronavirus, pushing major U.S. financial indices higher Tuesday, led by tech and financial stocks.

The Dow Jones Industrial Average closed 187 points higher. The S&P 500 closed 32 points higher. The NASDAQ was up 130 points.

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Consumer appetite for Prime beef continues strong, based on year-over-year increases for Prime premiums, relative to the increased percentage of carcasses hitting the grade for the first few weeks of the year.

For the first four weeks of 2020, according to USDA reports, the Prime premium was $12.63 to $13.19/cwt., compared to $9.42-$9.44 a year earlier, or about 34-40% higher. At the same time, through the first three weeks, the percentage of fed cattle grading Prime was 9.39% to 9.85% compared to 9.16% to 9.31% at the same time last year.

“Heavier cattle weights could be a contributing factor, but within the last three years, there seems to be a clear push from cattle feeders to achieve the higher Prime grade,” say analysts with the Livestock Marketing Information Center (LMIC), in the latest Livestock Monitor. “Spreads between Prime and Choice have not been as low as they were in 2018 but have not been maintaining historical premiums either.”

For perspective, the premium for Prime was $20-$24 in September and October.

LMIC analysts note Prime supplies seemed to outpace the market as recently as 2018, when the Prime-Choice spread dropped as the percentage of carcasses grading Prime increased from 6.0% to 7.95% year over year. It averaged 8.60% last year.

The Prime market remains potentially fragile, though.

“Interest from retailers, such as Costco and Walmart to offer Prime cuts may be short-lived,” say LMIC analysts. “A U.S. recession and/or contraction in the cattle industry could put pressure on future demand for Prime-graded beef moving forward, if it no longer is price competitive or consumers are watching their wallets.”