WLI

Negotiated cash fed cattle trade remained undeveloped through Tuesday afternoon.

Feeder Cattle futures mostly edged higher and Live Cattle mostly wandered lower.

Live Cattle futures closed an average of 38¢ lower (5¢ to 95¢ lower) to an average of 7¢ higher.

Feeder Cattle futures closed an average of 14¢ higher, except for 10¢ and 27¢ lower on either end of the board.

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

Choice boxed beef cutout value was $4.27 lower Tuesday afternoon at $212.81/cwt. Select was $2.04 lower at $203.47.

Corn futures closed mostly 1¢ higher through Jly ‘21; and then fractionally lower to 1¢ lower.

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

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Major U.S. financial indices crept higher Tuesday. Support included more new housing starts than expected.

Total housing starts increased 3.2% in November to a seasonally adjusted annual rate of 1.37 million units, according to a report from the U.S. Housing and Urban Development and Commerce Department.

The November reading of 1.37 million starts is the number of housing units builders would begin if they kept this pace for the next 12 months, according to the National Association of Home Builders (NAHB). Within this overall number, single-family starts increased 2.4% to a 938,000 seasonally adjusted annual rate off downwardly revised estimates for recent months.

“Market conditions for single-family starts are positive, given a lack of resale inventory, low interest rates and a solid job market,” says Greg Ugalde, NAHB chairman and a home builder and developer from Torrington, Conn. “Builder confidence points to additional gains as we look forward.”

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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“Despite wholesale prices declining from abnormally high levels in mid November, packers continue to pay higher prices to bid cattle out of the feedlots,” say analysts with USDA’s Economic Research Service (ERS), in the latest monthly Livestock, Dairy and Poultry Outlook. “Greater fed cattle slaughter may in part reflect the packers’ inclination to capture stronger than typical margins as wholesale boxed beef prices averaged well above 2018 during November and into early December. Feedlots also have a higher proportion of cattle on feed over 150 days, and the narrowing of the Choice-Select spread may also be providing incentives to bring additional cattle to market.”

USDA recently increased its projected fourth-quarter fed steer price by $2 to $114/cwt. Forecast prices for the first two quarters of next year were raised to $122 and $118, respectively.

In turn, ERS also increased projected prices for feeder cattle (basis Oklahoma City).

Based on recent price data, the fourth-quarter 2019 feeder steer price was raised by $3 to $147/cwt. The 2020 annual price forecast for feeder steers was raised by $2 to $144.

Quarterly feeder steers prices for 2020 are projected at: $140 in the first quarter, $142 in the second quarter and $147 in the third quarter.

As for cull cows, ERS analysts point out the average price for the week ending Dec. 6 was $53.76/cwt., which was 16% higher than a year earlier. “This, coupled with tight forage supplies for some producers, is likely encouraging a higher culling rate.” Beef cow slaughter continues well above last year’s pace.

Negotiated cash fed cattle trade ended up steady to $1 higher in the Southern Plains last week at $119/cwt. on a live basis; steady to $2.50 higher in the Northern Plains at $119.00-$120.50. Dressed trade was steady to $2 higher at $188-$190.

Week to week the 5-area average direct live steer price was just 25¢ higher at $119.17, but with average live weights 34 lbs. heavier at 1,506 lbs. In the beef, the average steer price was 10¢ less at $188.00 with average dressed weights 45 lbs. heavier at 992 lbs.

Cattle futures wandered narrowly lower Monday, maintaining most of the previous session’s strong gains, and in the face of higher Corn futures.

Live Cattle futures closed an average of 18¢ lower, except for 5¢ higher in the back contract.

Feeder Cattle futures closed an average of 43¢ lower, except for 5¢ higher in the back contract

Wholesale beef values were higher on light to moderate demand and offerings, according to the Agricultural Marketing Service. Gains over the last two days suggest the seasonal bottom might be established.

Choice boxed beef cutout value was 79¢ higher Monday afternoon at $217.08/cwt. Select was $1.27 higher at $205.51.

Corn futures closed mostly 5¢ to 6¢ higher through Jly ‘21; and then mostly 2¢ to 3¢ higher.

Soybean futures closed 10¢ to 14¢ higher through Jan. ’21 and then mostly 3¢ higher.

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Major U.S. financial indices closed higher on Monday, with follow-through optimism from the U.S.-China phase-one trade deal announced last week.

The Dow Jones Industrial Average closed 100 points higher. The S&P 500 closed 22 points higher. The NASDAQ was up 79 points.

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Hide prices continue to dilute byproduct value, which ranged from $8.24/cwt. to $9.30 so far this year.

“Hide values are down 32% from a year ago from January to November,” say analysts with the Livestock Marketing Information Center (LMIC). “On a per hundredweight basis, January through November of 2019 (hides) averaged $47.85/cwt. compared to $70.37 in 2018. This year’s values will be the lowest annual average for hides since the start of this data set in 1992.”

Based on data from USDA’s Foreign Agricultural Service (FAS) for January through October, they say cattle hides that were sold as parts are 74% less than last year and those sold whole are down 5%.

Meat and bone meal is 14% less than the same period last year, although some offal prices are higher, such as for tripe and tongues, which are up 34% and 25%, respectively.

In the latest Livestock Monitor, LMIC analysts say most offal products are consumed overseas. For example, they explain South Africa is the largest destination for U.S. bovine kidneys. Purchases by that nation are up 26% year-over-year and kidney prices are 13% higher.

Similarly, Egypt buys more than half of the beef livers exported by the U.S,; those prices are up 3%.

Negotiated cash fed cattle trade continued to develop through Friday afternoon at no worse than steady money, according to USDA reports. Early live sales were at $119/cwt. in Nebraska and at $120 in the western Corn Belt. Early dressed sales were steady in the western Corn Belt at $188 and as much as $6 higher in Nebraska at $188-$194. Earlier in the week, live sales were steady in Kansas at $119. The Texas Cattle Feeders Association reported its members selling steers steady at $119 and heifers $1 higher at nearly $119.

Cattle futures closed sharply higher Friday, buoyed by strong demand and anticipation of snugger fed cattle supplies heading into the next quarter. Trader optimism was likely heightened by the phase-one trade agreement between the U.S. and China.

“U.S. pork and beef products have been subject to burdensome retaliatory duties in China since 2018, and this has made it very difficult for the U.S. industry to capitalize on China’s rapidly growing need for high-quality proteins. But long before retaliatory duties entered the picture, non-tariff barriers were a major, persistent obstacle for U.S. exporters looking to expand their business in China,” says Dan Halstrom, president and CEO of the U.S. Meat Export Federation. “China is the world’s largest and fastest-growing destination for imported red meat, and the U.S. industry is excited about the prospects for expanded opportunities in China.”

Live Cattle futures closed an average of $1.42 higher (70¢ to $2.45 higher).

Feeder Cattle futures closed an average of $2.09 higher ($1.42 to $3.12 higher).

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

Choice boxed beef cutout value was 64¢ higher Friday afternoon at $216.29/cwt. Select was $1.68 higher at $204.24.

Corn futures closed mostly 2¢ to 3¢ higher through Jly ‘21; and then mostly unchanged.

Soybean futures closed 7¢ to 9¢ higher through Jan. ’21 and then mostly 3¢ to 5¢ higher.

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Major U.S. financial indices edged higher on Friday, more subdued than might be expected, given the aforementioned phase-one trade agreement between the U.S. and China. But then, there weren’t many details to go along with the announcement.

“The United States and China have reached an historic and enforceable agreement on a Phase One trade deal that requires structural reforms and other changes to China’s economic and trade regime in the areas of intellectual property, technology transfer, agriculture, financial services, and currency and foreign exchange,” according to a statement from the U.S. Trade Representative on Friday. “The Phase One agreement also includes a commitment by China that it will make substantial additional purchases of U.S. goods and services in the coming years. Importantly, the agreement establishes a strong dispute resolution system that ensures prompt and effective implementation and enforcement. The United States has agreed to modify its Section 301 tariff actions in a significant way.”

The United States first imposed tariffs on imports from China based on the findings of the Section 301 investigation on China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation.  The United States will be maintaining 25% tariffs on approximately $250 billion of Chinese imports, along with 7.5% tariffs on approximately $120 billion of Chinese imports.

The Dow Jones Industrial Average closed 3 points higher. The S&P 500 closed fractionally higher. The NASDAQ was up 17 points.

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“A smaller forecasted spring-born 2020 calf crop and a normal summer growing season sets the stage for next year’s fall-weaned calves to price near to slightly above 2017’s prices (i.e., above both 2018 and 2019 prices),” say analysts with the Livestock Marketing Information Center (LMIC), in the latest Livestock Monitor.

That’s based on low feed costs and fed cattle prices projected to be 1-4% higher year over year, strengthened by another year of declining domestic per capita beef supplies, as beef imports decrease and beef exports increase.

Other than the ever-present risk of drought, LMIC analysts believe the primary potential headwind to the price forecast would come with faltering trade relative to growing total red meat and poultry production.

“U.S. per capita supply of all red meat and poultry was record large in 2019,” say LMIC analysts. “Next year (2020) there will be significantly more, and that assumes exports of beef, pork, chicken, and turkey all establish new all-time highs.”

Negotiated cash fed cattle trade was light on light to moderate demand in Kansas through Thursday afternoon, based on USDA reports. Prices were steady with last week at $119/cwt.

Cattle futures closed narrowly mixed again on Thursday.

Live Cattle futures closed from an average of 18¢ lower to an average of 14¢ higher.

Feeder Cattle futures closed from an average of 25¢ lower to an average of 13¢ higher.

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

Choice boxed beef cutout value was $3.00 lower Thursday afternoon at $215.65/cwt. Select was $1.16 lower at $202.56.

Corn futures closed mostly 4¢ to 6¢ higher; 9¢ higher in spot Dec.

Soybean futures closed 2¢ to 4¢ higher through Nov. ’20 and then fractionally higher to 1¢ higher.

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Major U.S. financial indices closed higher on Wednesday, buoyed by reports that the U.S. and China reached a phase-one trade deal, which awaited President Trump’s signature.

The Dow Jones Industrial Average closed 220 points higher. The S&P 500 closed 26 points higher. The NASDAQ was up 63 points.

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“Most current signals indicate the overall domestic economy is on firm footing, thanks almost exclusively to the consumer,” says Dan Kowalski, vice president of CoBank’s Knowledge Exchange division (CKE). “However, without a meaningful U.S.-China trade deal, the U.S. agricultural economy will continue to struggle with uncertainty in 2020.”

For perspective, CKE analysts explain GDP growth in rural counties since 2014 has averaged almost 1% less than in urban counties. That trend is likely to continue without a significant upswing in agricultural commodity prices, energy exploration, rural manufacturing and other industries upon which rural economic growth depend.

Despite that bearish prognosis, and lingering uncertainty surrounding trade issues, CKE analysts believe some agriculture sectors will see stronger exports and higher prices next year.

CoBank’s 2020 Year Ahead outlook report, released Thursday, examines 10 key factors that will shape agriculture and market sectors that serve and impact rural communities throughout the U.S.

Among the highlights:

Animal Protein and Dairy

With dairy and animal protein production looking toward another year of increased production in 2020, a rebound in exports will be critical to profitability in both sectors, according to CKE. Per capita consumption of animal protein in the U.S. will likely set a new record in 2019. Strong demand and rising exports, though, will not erase financial stress at the farm level. Producers of beef, pork, poultry, and dairy will likely experience stress from higher feed costs due to lower crop yields this fall.

Grain, Farm Supply and Biofuels

Challenges for the grain sector will persist in 2020, fueled by commodity price pressure, policy uncertainty and export weakness amid growing global supply abundance, especially for corn and soybeans. U.S. wheat producers and exporters, though, may benefit from an improved export pace in 2020 with the Russian wheat crop struggling. Biofuels also face challenges in 2020. U.S. ethanol production, according to the U.S. Energy Information Administration, is expected to fall by 1.9% in 2019 to 15.8 billion gallons and remain flat in 2020.

Global Economy

Consumer strength the world over has prevented further slowing in the global economy. The direction and severity of the U.S.-China trade dispute will continue to have the most significant influence on the world economy in 2020. A leveling off of trade tensions would allow global economic growth to bottom out in early 2020 before showing signs of life later in the year. However, the vulnerable state of the global economy makes it susceptible to contraction if trade conditions worsen.

U.S. Economy

The U.S. economy will enter 2020 decisively split—powered by a resilient and confident consumer but hamstrung by a risk-averse business sector that has stopped investing. Now that stimulus effects from the 2017 tax reform and the 2018 spending bill have faded, the economic expansion will show its age, losing steam in the coming year. There is evidence that since 2017 more people, including those in rural communities, have broadly shared the benefits of economic growth, despite the continual rise in wealth inequality.