WLI

Cattle futures firmed and gained on Monday, supported by currently positive fundamentals, including seasonal strength for wholesale beef values and cash fed cattle prices.

Live Cattle futures closed an average of 56¢ higher.

Feeder Cattle futures closed an average of 92¢ higher (57¢ to $1.25 higher).

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

Choice boxed beef cutout value was 53¢ lower Monday afternoon at $238.59/cwt. Select was 43¢ higher at $213.69.

Corn futures closed 4¢ lower through Jly ’20 and then mostly 2¢ lower.

Soybean futures closed 10¢ to 14¢ lower through Nov ’20 and then 5¢ to 9¢ lower.

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Major U.S. financial indices closed marginally mixed on Monday, amid mixed news.

The Dow Jones Industrial Average closed 10 points higher. The S&P 500 closed 6 points lower. The NASDAQ was down 11 points.

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“Prices for most weight classes of feeder cattle increased last week, suggesting that the last week of October may have been the seasonal low,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University. “However, cold weather this week may dampen demand and could pressure prices a bit more as large fall run numbers will likely continue for another couple of weeks.”

In his weekly market comments, Peel explains price patterns are typical for the time of year in Oklahoma, with prices per hundredweight decreasing sharply from 400 to 600 lbs. and prices largely unchanged at weights from 600 to 800 lbs.

“The current price patterns suggest marketing considerations for both cow-calf sellers and stocker buyers. For example, the value of additional weight for retained weaned calves depends on the weaning weight of the animals and the amount of additional weight planned,” Peel explains. “At 450 lbs., the value of 50 lbs. of weight gain is only $34/head but the value of 50 additional lbs. for a steer weighing 550 lbs. at weaning is $46/head. However, under the current price pattern, the value per pound of additional weight is higher as more weight is added. Of course, prices at this point in time do not account for price changes over the time it takes to add additional weight. However, current price patterns provide information about potential value relative to additional costs to add weight.”

Cash fed cattle trade ended the week at $114-$115/cwt. in the Southern Plains, which was mainly $2 higher in Kansas and $2-$3 higher in the Texas Panhandle. In Nebraska, live trade was unevenly steady at $114-$116. Prices in the western Corn Belt were $1-$2 higher at $114-$115. Dressed trade was $1-$2 higher at $181-$182.

Cattle futures closed narrowly mixed to marginally higher with positive Live Cattle fundamentals tempered by the more price-positive outlook for corn prices (see World Agricultural Supply and Demand Estimates below).

Except for 20¢ lower in the back contract, Live Cattle futures closed an average of 19¢ higher.

Feeder Cattle futures closed narrowly mixed (27¢ lower to 22¢ higher).

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

Choice boxed beef cutout value was 83¢ higher Friday afternoon at $239.12/cwt. Select was 24¢ higher at $213.26.

Corn futures closed 2¢ higher through Jly ’20 and then mostly 1¢ higher.

Soybean futures closed mostly 3¢ to 5¢ Lower. 

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Major U.S. financial indices edged higher on Friday, with continued optimism regarding progress in U.S.-China trade talks.

The Dow Jones Industrial Average closed 6 points higher. The S&P 500 closed 7 points higher. The NASDAQ was up 40 points.

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Forecast total red meat and poultry production for this year increased by 257 million lbs. to 105.02 billion lbs. (+0.25%) in the monthly World Agricultural Supply and Demand Estimates (WASDE) issued Friday.

Projected beef production increased 88 million lbs. to 27.04 billion lbs. (+0.32%) on higher expected slaughter of fed cattle and non-fed cattle.

The expected average fed steer price (5-area direct) for this year increased 50¢ from the previous month to $116/cwt., based on recent price strength. Fourth-quarter price is projected at $112.

Forecast total red meat and poultry production for next year increased by 45 million lbs. to 107.46 billion lbs., with increased broiler and turkey production offsetting lower anticipated beef production. That would be 2.44 billion lbs. (+2.32%) more than this year.

Total projected beef production for next year was lowered by 120 million lbs. (-0.43%) on a slower expected pace of gains in carcass weights. That would be 514 million lbs. (+1.90%) more than this year.

The annual fed steer price for next year is projected at $116, with the first-quarter price at $120 and the second-quarter price at $117.

Corn

WASDE increased the season-average corn price by 5¢ to $3.85/bu., based on current prices.

This month’s 2019-20 U.S. corn outlook is for lower production, reduced use, and smaller ending stocks.

Corn production is forecast at 13.66 billion bu., down 118 million from last month with reduced yield of 1.4 bu. to 167.0 bu./acre. Corn ending stocks are lowered 18 million bu. 

Soybeans

The U.S. soybean outlook is for slightly lower production of 3.55 billion bu., down less than 1 million bu. from the previous month, on fractionally lower yields and unchanged harvested area. But, ending stocks were projected higher on reduced crush.

The U.S. season-average soybean price for 2019-20 is forecast at $9/bu., unchanged from last month. The soybean meal price forecast is also unchanged at $325/short ton. The soybean oil price is forecast at 31¢/lb., up 1¢ from last month, on sharply higher reported prices through October.

Wheat

The outlook for 2019-20 U.S. wheat is for smaller supplies, reduced domestic use, and lower stocks. Projected wheat supplies were lowered by 42 million bu., based on updated production estimates for the states resurveyed following the NASS Small Grains Summary, issued September 30.

The season-average farm price was reduced 10¢/bu. to $4.60, based on NASS prices reported to date and expectations for cash and futures prices the remainder of the 2019-20 marketing year.

Negotiated cash fed cattle trade remained largely undeveloped through Thursday afternoon, based on USDA reports. There was some early dressed trade in Nebraska at $181-$182/cwt., which was $1-$2 higher than last week. Although too few to trend, there were also some dressed sales in the western Corn Belt at $181-$182 and some live at $114.

Continued higher wholesale beef values, the positive outlook for cash prices and higher outside markets helped lift Cattle futures Thursday.

Except for unchanged in spot Dec, Live Cattle futures closed an average of 42¢ higher.

Except for 2¢ lower in spot Nov, Feeder Cattle futures closed an average of 96¢ higher (40¢ to $1.52 higher).

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

Choice boxed beef cutout value was $1.15 higher Thursday afternoon at $238.29/cwt. Select was $1.49 higher at $213.02.

Grain futures were mixed as traders positioned themselves ahead of Friday’s monthly World Agricultural Supply and Demand Estimates.

Corn futures closed 2¢ to 4¢ lower through Sep ’20 and then mostly 1¢ lower.

Soybean futures closed 7¢ to 10¢ higher through Aug ’20 and then mostly 2¢ to 5¢ higher.

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Major U.S. financial indices climbed on Thursday, with reports that the U.S. and China are making progress on a trade deal, including agreement to roll back some existing tariffs if and when a deal is struck.

The Dow Jones Industrial Average closed 182 points higher. The S&P 500 closed 8 points higher. The NASDAQ was up 23 points.

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“Fed cattle, feeder cattle, and calf cash prices have all been stronger than expected through this fall. Live Cattle and Feeder Cattle futures contract prices have also shaken off the pessimism of abundant supplies, compounded by the unexpected closure of the Tyson beef plant in southwest Kansas,” says Stephen Koontz, agricultural economist at Colorado State University, in the latest issue of In the Cattle Markets.

He explains part of the support comes from the supply side, including the lighter year-over-year carcass weights for much of the year, as well as packers running substantial Saturday kills for a long while.

“What is being discussed less is the strong retailer and, by definition, consumer effects,” Koontz says. “Packers margins have been very strong in August and September, and likely October, approaching $500 per head. These are the live-to-wholesale beef price spreads. This value is much higher than other months and much higher than prior year highs. This is, of course, due in part to the plant closure. But it is interesting that the live-to-retail price spread has moved little in these same two months. The live-to-retail spread is up less than 2-3%. The retailer margin or the wholesale-to-retail spread has declined sharply. Again, the live-to-wholesale spread is up, the live-to-retail spread is even, so it is the retailer that has taken a chunk out of their margin.”

Koontz also points to the current Choice-Select spread of more than $25/cwt. compared to what’s typically about $10 this time of year.

“It is clear the retailer has helped the cattle market turn the corner on any pessimism from summer supplies and slaughter disruption. And, there does not appear to be any pushback from the consumer,” Koontz says.

Negotiated cash fed cattle trade remained undeveloped through Wednesday afternoon, but early indications were positive.

Choice steers and heifers sold $1.75-$2.00 higher at the fat auction in Tama, IA. There were 192 head of Ch 2-4 steers weighing an average of 1,455 lbs. that brought an average price of $116.28/cwt. That was $2-$3 higher than last week’s country trade in the region.

Likewise, slaughter steers and heifers traded $1-$2 higher at Sioux Falls Regional in South Dakota. There were 348 head of Ch 2-3 steers weighing an average of 1,468 lbs. and bringing an average price of $113.03.

Only 547 head were offered in Wednesday’s weekly Fed Cattle Exchange auction, and no takers. There were two heifer lots from the Southern Plains passed on with bids of $114/cwt. and $113.

Cattle futures softened, though, likely with some defensiveness ahead of the Goldman Roll, when the Goldman Sachs Commodity Index rolls its futures holdings forward from the expiring month.

Live Cattle futures closed an average of 57¢ lower, except for 2¢ higher in near Feb.

Feeder Cattle futures closed an average of $1.03 lower (67¢ to $1.35 lower).

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

Choice boxed beef cutout value was $1.09 higher Wednesday afternoon at $237.14/cwt. Select was $1.71 higher at $211.53.

Corn futures closed 2¢ to 4¢ lower through Sep ’20 and then mostly unchanged to fractionally lower.

Soybean futures closed 3¢ to 6¢ lower across most of the board.

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Major U.S. financial indices basically hovered in place on Wednesday, with continued strong quarterly corporate earnings tempered by lingering uncertainty about a U.S.-China trade deal.

The Dow Jones Industrial Average closed fractionally lower. The S&P 500 closed 2 points higher. The NASDAQ was down 24 points.

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U.S. beef exports in September were steady with last year in volume at 109,799 metric tons (mt), but value was 4% less at $661.3 million, according to data released by USDA and compiled by the U.S. Meat Export Federation (USMEF).

Through the first three quarters of the year, beef exports were 2% below last year’s record pace in both volume (991,325 mt) and value ($6.1 billion).

“While red meat exports face obstacles in some key markets, global demand dynamics are strong and we see opportunities for significant growth in the fourth quarter and into 2020,” says USMEF President and CEO Dan Halstrom. “Progress is being made on market access improvements and this makes for a very positive outlook going forward.”

With that said, lingering trade issues continue to constrain potential. For instance the recently signed U.S.-Japan trade agreement awaits approval, and tariff relief, from the Japanese Parliament. In the meantime, September beef exports to that leading market were 14% below last year in both volume (24,041 mt) and value ($148.3 million).

“Japan is still delivering excellent value for U.S. beef producers, but tariff relief cannot come soon enough,” Halstrom says. “With a level playing field, the U.S. beef industry will move a wider range of products to our loyal customers in Japan and will definitely capitalize on emerging growth opportunities.”

Beef export value per head of fed slaughter averaged $318.54 in September, up significantly from the previous month but 5% below last year. The January-September average was down 3% at $310.77.

U.S. Pork Exports Churn Higher

U.S. pork exports in September increased 13% from a year ago in both volume (202,248 mt) and value ($532.2 million). For January-September, pork export volume was 5% ahead of last year’s pace at 1.9 million mt, while value increased 2% to $4.89 billion.

“Although the U.S. industry has made rebuilding pork demand in Mexico a top priority, there is definitely a lingering effect from the retaliatory duties, which were in place for nearly a full year,” Halstrom explains. “While it is a great relief to once again move pork to Mexico duty-free, ratification of the U.S.-Mexico-Canada Agreement would certainly help the psychology of the market and bolster our major customers’ confidence in the U.S. supply chain.”