WLI

Growing fears about the global spread of novel coronavirus hammered equity and futures markets Monday.

Live Cattle futures close an average of $2.29 lower, from $1.35 lower at the back to limit-down $3.00 toward the front.

Other than 5¢ higher in waning spot Jan, Feeder Cattle futures closed an average of $3.84 lower, from $3.17 lower toward the back to limit-down $4.50 toward the front.

Wholesale beef values were lower 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 90¢ lower Monday afternoon at $213.59/cwt. Select was 20¢ lower at $210.50.

Corn futures closed mostly 2¢ to 6¢ lower.

Soybean futures closed 4¢ to 5¢ lower through Jan ‘21 and then mostly 1¢ higher. 

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As alluded to earlier, equity markets sank Monday beneath the weight of increasing fears about the global spread of coronavirus and its potential economic impact, especially given that the epicenter is in China, a driver of the world’s economic growth.

The Dow Jones Industrial Average closed 453 points lower. The S&P 500 closed 51 points lower. The NASDAQ was down 175 points.

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“With total cattle inventories at or just past a cyclical peak, feedlot inventories will likely peak in the next few months,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “However, average feedlot inventories are currently record large. After peaking last August then declining for two months, the 12-month moving average of feedlot inventories moved higher the last three months and is currently at 11.639 million head, record large for the current data series back to 1996.” He explains the 12-month moving average removes seasonality, allowing month-to-month comparisons of annual average feedlot inventories.

In reviewing Friday’s monthly Cattle on Feed report, Peel points out the 11.96 million head of cattle on Feed Jan. 1 (feedlots with 1,000 head or more capacity) were the most for the month since 2008. December placements of 1.83 million head were the most for the month since 2011 and December marketings of 1.83 million head represented the highest total for the month since 2010.

“Cattle slaughter is expected to decrease in 2020, including a slight year-over-year decline in steer and heifer slaughter and lower cow slaughter,” Peel says.  “However, large current feedlot inventories confirm that slaughter will be higher early in the year before decreasing in the second half of 2020. Total annual beef production is expected to be slightly higher year over year as heavier carcass weights offset lower slaughter. Beef production in the first half of the year will be higher on increased slaughter and larger carcass weights before lower slaughter pulls beef production down late in the year.”

Negotiated cash fed cattle trade ended up generally steady to firm last week, with live prices in the Southern Plains and Nebraska at $124/cwt. and at $124-$126 in the western Corn Belt. Dressed prices were at $199 in Nebraska and mostly $198-$199 in the western Corn Belt.

Cattle futures continued lower, to a lesser degree than the previous session, helped along by weaker outside markets.

Other than an average of 13¢ higher in three contracts, Live Cattle futures close an average of 24¢ lower.

Feeder Cattle futures closed an average of 69¢ lower. 

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

Choice boxed beef cutout value was 83¢ lower Friday afternoon at $214.49/cwt. Select was 50¢ lower at $210.70.

Corn futures closed mostly 3¢ to 5¢ lower.

Soybean futures closed mostly 5¢ to 8¢ lower through Nov ‘21 and then mostly 1¢ higher. 

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Growing fears about coronavirus and its potential impact on the fragile global economy pressured equity markets Friday.

The Dow Jones Industrial Average closed 170 points lower. The S&P 500 closed 30 points lower. The NASDAQ was down 87 points.

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Traders will likely view Friday’s monthly USDA Cattle on Feed report as neutral, given the fact that estimates basically mirrored pre-report expectations.

December placements in feedlots with 1,000 head or more capacity were 1.83 million head, which was 3.45% (+61,000 head) more year over year. That was 0.15% more than average estimates ahead of the report.

Marketings in December of 1.83 million head were 5.34% (+93,000 head) more than a year earlier. In terms of placement weights, 50.32% went on feed weighing 699 lbs. or less, 38.73% weighed 700-899 lbs. and 10.94% weighed more than 900 lbs.

Cattle on feed Jan. 1 of 11.96 million head were 2.29% (+268,000 head) more than the same date a year earlier. That was 0.19% more than average estimates ahead of the report.

Negotiated cash fed cattle trade continued steady to firm Thursday with live sales at $124/cwt. in Nebraska and at $125 in the western Corn Belt. Dressed sales were at $199 in Nebraska and at $198.00-$199.50 in the western Corn Belt. For the week, live sales in the Southern Plains also were steady at $124.

Cattle futures weakened, though, closing down triple digits, amid active trade. Pressure could have included the bounce higher in nearby Corn futures, demand wonderments related to the global spread of the coronavirus, as well as positioning ahead of the monthly Cattle on Feed report (see below) that will be released Friday afternoon. Definitive explanations were elusive, though.

Live Cattle futures close an average of $1.88 lower.

Feeder Cattle futures closed an average of $2.40 lower for an average of $3.47 lower in the last two sessions.

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

Choice boxed beef cutout value was 36¢ higher Thursday afternoon at $215.32/cwt. Select was 82¢ lower at $211.20.

Corn futures closed 4¢ to 5¢ higher through the front three contracts and then mostly 1¢ to 2¢ higher.

Soybean futures closed 3¢ to 4¢ lower in the front six contracts and then mostly 1¢ to 4¢ higher. 

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Major U.S. financial indices closed narrowly mixed Thursday. Most of the unease seemed to continue to stem from the spread of novel coronavirus. However, the World Health Organization (WHO) offered some optimism in a statement.

“On 22 January, the members of the Emergency Committee expressed divergent views on whether this event constitutes a Public Health Emergency of International Concern (PHEIC) or not,” according to the statement. “At that time, the advice was that the event did not constitute a PHEIC, but the Committee members agreed on the urgency of the situation and suggested that the Committee should be reconvened in a matter of days to examine the situation further.”

The Dow Jones Industrial Average closed 26 points lower. The S&P 500 closed 3 points higher. The NASDAQ was up 18 points.

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Heading into Friday’s monthly Cattle on Feed report, analysts surveyed by Urner Barry expected, on average, December feedlot placements to be 3.3% higher year over year, according to the Daily Livestock Report.

Those analysts expect to see December marketings up 5.3% and total cattle on feed Jan. 1—in feedlots with 1,000 head or more capacity—to be up 2.1%.

In the meantime, cattle feeding economics grow more positive, according to the most recent Historical and Projected Kansas Feedlot Net Returns, from Kansas State University.

Net returns projected for closeouts in December are +$51.13 per head for steers and +$40.44 per head for heifers, according to the report. That’s with estimated feedlot cost of gain (FCOG) of $89.49/cwt. for steers and $95.78 for heifers.

Moreover, the report projects positive net returns for steers in six of the next eight months, counting January with a range of -$12.44 (June) to +$122.26 (January) with FCOG of $85.75 (July) to $94.77 (February).

KSU projects positive net returns for heifers in the next eight months, ranging from +$3.60 (August) to +$146.75 (January) with FCOG of $93.01 (August) to $99.88 (February).

Keep in mind that these estimates are cash to cash and do not account for price risk management.

Negotiated cash fed cattle trade and demand was moderate in the Southern Plains through Wednesday afternoon, with live prices steady with the prior week at $124/cwt.

That matched the weighted average price of $124 for the single lot (112 head) of Kansas heifers that sold in the weekly Fed Cattle Exchange auction. The total offering was 561 head (four lots).

Likewise, Choice steers and heifers sold steady at the fat auction in Tama, IA with 123 head of Ch 2-3 steers bringing an average price of $125.84 at an average weight of 1,472 lbs.

At Sioux Falls Regional in South Dakota, though, slaughter steers sold steady to $1 lower: 223 head of Ch 2-3 steers weighing an average of 1,569 lbs. and bringing an average price of $120.06.

Cattle futures softened Wednesday, led by Feeder Cattle, as the lack of detail and purchases associated with the phase-one trade deal between the U.S. and China continues to create unease in commodity markets.

Other than 2¢ higher in away Apr, Live Cattle futures close an average of 36¢ lower.

Feeder Cattle futures closed an average of $1.07 lower (45¢ to $1.62 lower).

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

Choice boxed beef cutout value was 45¢ higher Wednesday afternoon at $214.96/cwt. Select was $1.45 lower at $212.02.

Corn futures closed mostly unchanged to 1¢ lower.

Soybean futures closed fractionally lower to 2¢ lower.

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Major U.S. financial indices closed mixed and little changed Wednesday. Competing news included more positive quarterly earnings than expected from IBM and the previous day’s confirmation of coronavirus in a Chinese traveler in Seattle.

The Dow Jones Industrial Average closed 9 points lower. The S&P 500 closed fractionally higher. The NASDAQ was up 12 points.

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Total pounds of beef in freezers as of Dec. 31 were 1% more than the previous month at 481.01 million lbs., but down 3% from the previous year, according to USDA’s monthly Cold Storage report released Wednesday.

Frozen pork supplies were up 1% from the previous month at 580.1 million lbs., which was 15% more than a year earlier.

Total red meat supplies in freezers were 1.01 billion lbs., up 1% from the previous month and up 5% from the prior year.

Total frozen poultry supplies were down 1% from the previous month but up 1% from a year earlier at 1.20 billion lbs.

Cattle futures closed narrowly mixed on Tuesday, amid lackluster trade and little direction.

Other than 2¢ higher in spot Feb, Live Cattle futures close an average of 9¢ lower.

Feeder Cattle futures closed narrowly mixed, from an average of 26¢ lower across the front half of the board to an average of 20¢ higher across the back half.  

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

Choice boxed beef cutout value was 13¢ lower Tuesday afternoon at $214.51/cwt. Select was 1¢ lower at $213.47. Other than a single day last February, the Choice-Select spread the past four days ($1.04 to $1.43) is the narrowest since September of 2017.

Corn futures closed 1¢ lower across the front half of the board and then fractionally lower.

Soybean futures closed 10¢ to 13¢ lower through Sep ’20 and then mostly 6¢ to 7¢ lower.

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Major U.S. financial indices closed lower Tuesday, with some of the pressure reportedly stemming from confirmation of coronavirus in a Chinese traveler in Seattle and the potential impact on international travel and tourism.

The Dow Jones Industrial Average closed 152 points lower. The S&P 500 closed 8 points lower. The NASDAQ was down 18 points.

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USDA adjusted forecast fourth-quarter 2019 beef production 15 million lbs. higher than the previous month to 7.0 billion lbs., based on the increased pace of non-fed cattle slaughter in December, especially beef cow slaughter.

In the latest monthly Livestock, Dairy and Poultry Outlook, analysts with USDA’s Economic Research Service (ERS) say beef cow slaughter is significantly higher since the third quarter last year—13% to 25% more than the same period a year earlier, for the first four weeks of December. That’s based on weekly Actual Slaughter Under Federal Inspection reports.

“Since the week ending Nov. 15, prices for live cutter cows have remained more than 10% above prices for the same period a year ago. This, coupled with tight forage supplies for some producers, has likely encouraged higher culling rates” ERS analysts explain.

As for fed cattle, more feedlot placements than expected last month point toward increased fed cattle marketing and beef production in the second quarter this year than originally anticipated, according to ERS.

“However, because those calves were likely placed in feedlots rather than remaining on winter wheat pastures as expected, the placement forecast for first-half 2020 was reduced,” say ERS analysts. “As a result, fewer fed cattle marketings are anticipated in second-half 2020, contributing to less expected beef production during that time.”