WLI

Negotiated cash fed cattle trade opened higher on Thursday, with live prices in the Texas Panhandle $3 higher than the previous week at $106/cwt.

Cash optimism helped Cattle futures fade some early pressure and edge higher, although trade was sluggish and open interest continued to decline.

Live Cattle futures closed an average of 33¢ higher.

Feeder Cattle futures closed an average of 32¢ higher. 

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

Choice boxed beef cutout value was 91¢ lower Thursday afternoon at $212.06/cwt. Select was $1.31 higher at $187.21.

Corn futures closed fractionally higher to 1¢ higher.

Except for 1¢ higher in the back three contracts, Soybean futures closed mostly 1¢ to 2¢ lower.

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Major U.S. financial indices closed higher on Thursday, curbing steep losses from the previous two sessions. The popular notion for support was thinking that odds favored the Fed cutting interest rates at the end of the month.

The Dow Jones Industrial Average closed 122 points higher. The S&P 500 closed 23 points higher. The NASDAQ was up 87 points.

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More optimism by restaurant operators about the six-month outlook boosted the National Restaurant Association’s (NRA) Restaurant Performance Index (RPI) in August for the first time in three months.

Overall, the RPI— a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry—was 100.7 in August, which was 0.3% more than the previous month, according to NRA.

The Expectations Index was 101.2 in August, up 1.1% from the previous month, with restaurant operators slightly more optimistic about the direction of the economy. Operator outlook for capital spending was the highest in five months.

“Although the forward-looking indicators improved from last month, they remain tepid by historical standards,” say NRA analysts. “Only one in three operators expect their sales to be higher in six months, while just one in five think the economy will improve. Headlined by softer same-store sales readings and a net decline in customer traffic levels, current situation indicators trended lower in August.”

The Current Situation Index was down 0.5% from the previous month to 100.3. It lost ground mostly due to a net decline in customer levels, say NRA analysts.

Negotiated cash fed cattle trade remained undeveloped through Thursday afternoon, but early indications appeared positive.

For instance, 264 head of Choice 2-4 steers weighing an average of 1,402 lbs. brought an average of $108.16/cwt. at the fat auction in Tama, IA. Country trade in the region last week was at $104-$106.

At Sioux Falls Regional in South Dakota, slaughter steers and heifers sold $2-$4 higher than a week earlier, with instances of up to $5 higher. One example: 330 head of Choice 2-3 steers weighing an average of 1,467 lbs. brought an average of $103.84.

There were only 846 head offered in the weekly Fed Cattle Exchange auction, and no takers.

Cattle futures recovered the majority of the previous session’s decline, helped along by lower Corn futures and the firmer feel to cash prices.

Live Cattle futures closed an average of 79¢ higher.

Except for 27¢ higher in the back contract, Feeder Cattle futures closed an average of 96¢ higher. 

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

Choice boxed beef cutout value was 50¢ lower Wednesday afternoon at $212.97/cwt. Select was 15¢ lower at $185.90.

Corn futures closed mostly 2¢ to 4¢ lower.

Soybean futures closed 1¢ to 5¢ lower through May ’20 and then mostly 1¢ to 4¢ higher. 

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Major U.S. financial indices closed sharply lower on Wednesday, with follow-through pressure from the previous day’s weak manufacturing data and growing concerns about economic growth, tied to the ongoing uncertainty about a U.S.-China trade deal.

The Dow Jones Industrial Average closed 494 points lower, making for a decline of 837 points in the last two sessions. The S&P 500 closed 52 points lower—down 88 points in the last two days. The NASDAQ was down 123 points—213 points lower in the last two sessions.

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Analysts with CoBank’s Knowledge Exchange division (CKE) say trade volume is expanding and will begin to yield benefits to producers across the meat and poultry industries.

“Beef exports have improved from the sluggish start at the beginning of the year. May and June exports were flat year over year, an improvement from February, March and April when exports were down approximately 5%,” say CKE analysts, in CoBank’s Quarterly U.S. Rural Economic Review. “The outlook for beef exports brightened after the U.S. and Japan signed an important trade agreement in late August with Japan announcing in late September it will phase in tariff reductions on beef, which currently carries a hefty 38.5% tariff. This will likely pave the way for U.S. beef to regain a competitive footing with countries in the CPTPP, which the U.S. opted out of last year.”

Moreover, CKE analysts say the impact of African Swine Fever on global pork supplies is just beginning to be felt in the U.S. animal protein sector. U.S. pork exports to China were up 28% through the first half of the year, but they say those gains were offset by declining exports to Mexico, Korea and Japan.

“As we look to the remainder of 2019, though, the U.S. has resolved some key

trade disputes in the steel and aluminum tariffs with Mexico, and signed a new trade agreement with Japan. Also, and likely more importantly, the U.S. set a new record for pork exports to China in July,” explain CEK analysts. “If these trends continue, and exports improve to Mexico and Japan, then U.S. supply and demand will continue to improve to a greater degree through the remainder of 2019 than the futures market indicates.”

As for U.S. beef and China, according to the CoBank report, “While it’s unlikely that the U.S. will export beef to China, China’s overall beef imports continue to climb, thus helping to tighten trade flows that may have historically competed with the U.S. market.”

Cattle futures closed lower Tuesday, with pressure including technical correction, sharp declines in front-month Lean Hogs and the fact that Corn futures were an average of 17¢ higher week to week through the front four contracts.

Except for 5¢ and 7¢ higher on either end of the board, Live Cattle futures closed an average of 35¢ lower.

Feeder Cattle futures closed an average of $1.21 lower (75¢ to $1.75 lower).

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

Choice boxed beef cutout value was $1.03 higher Tuesday afternoon at $213.47/cwt. Select was $1.06 lower at $186.05.

Corn and soybean futures continued higher Tuesday, with follow-through support from the previous day’s Grain Stocks report and on likely short covering.

Corn futures closed 3¢ to 5¢ higher through Jul ’20 and then mostly unchanged to 1¢ lower.

Soybean futures closed 10¢ to 13¢ higher through May ’20 and then 3¢ lower to 9¢ higher. 

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Major U.S. financial indices closed solidly lower on Tuesday, pressured by weak manufacturing data.

Economic activity in the manufacturing sector contracted in September, as the overall economy grew for the 125th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.

The September Purchasing Managers Index PMI® was 47.8% in September, which was 1.3% less than the previous month.

“Global trade remains the most significant issue, as demonstrated by the contraction in new export orders that began in July 2019. Overall, sentiment this month remains cautious regarding near-term growth,” says Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® Manufacturing Business Survey Committee. “September was the second consecutive month of PMI contraction, at a faster rate compared to August. Demand contracted, with the New Orders Index contracting at August levels, the Customers’ Inventories Index moving toward ‘about right’ territory and the Backlog of Orders Index contracting for the fifth straight month (and at a faster rate). The New Export Orders Index continued to contract strongly, a negative impact on the New Orders Index.”

The Dow Jones Industrial Average closed 343 points lower. The S&P 500 closed 36 points lower. The NASDAQ was down 90 points.

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Agricultural producers grew more pessimistic about current ag-economic conditions in late summer, according to the September Purdue University/CME Group Ag Economy Barometer.

The overall Ag Economy Barometer reading dipped three points from August to a reading of 121 in September, but the Index of Current Conditions, a sub-index of the barometer, dropped 22 points to a reading of 100. The barometer is based on a mid-month survey of 400 agricultural producers across the U.S.

“Even though farmers are concerned about the near term, both on their own farms and for the ag economy, improved crop growing conditions during the last half of the summer appeared to boost optimism regarding the future,” says James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture.

The Index of Future Expectations, another sub-index of the Ag Economy Barometer, rose six points compared to August.

One in five producers polled for the September survey said they expect profitability to decline over the next year, compared to 41% that expected declining profits when the same question was posed in May.

“Considered jointly with this month’s decline in the Index of Current Conditions, this could be a signal that growers expect better times in 2020 compared to 2019, possibly because they are looking forward to a return to more normal growing conditions and crop production in 2020,” Mintert says.

Cattle futures were mixed on Monday, with Live Cattle mostly higher, but Feeder Cattle mostly lower, pressured by surging Corn futures.

Except for 45¢ and 27¢ lower in the front two contracts, Live Cattle futures closed an average of 40¢ higher.

Except for 45¢ and 30¢ higher in the back two contracts, Feeder Cattle futures closed an average of 77¢ lower (37¢ lower to $1.92 lower in spot Oct).

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

Choice boxed beef cutout value was 14¢ lower Monday afternoon at $212.44/cwt. Select was $2.75 lower at $187.11.

Corn and soybean futures rallied Monday, in the wake of a bullish USDA grain stocks report (see below), as well as positive export news for corn.

Corn futures closed 12¢ to 16¢ higher through Jul ’20 and then mostly 4¢ higher.

Soybean futures closed 13¢ to 20¢ higher through Nov ’20 and then 5¢ to 11¢ higher. 

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Major U.S. financial indices closed out the third quarter on a higher note Monday, with support from more optimism surrounding U.S.-China trade talks later this month. Nothing specific on trade talks; more of the he-said, she-said stuff.

The Dow Jones Industrial Average closed 96 points higher. The S&P 500 closed 14 points higher. The NASDAQ was up 59 points.

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USDA surprised plenty of folks with its quarterly Grain Stocks report issued Monday.

Old crop corn stocks in all positions Sept. 1 totaled 2.11 billion bu., which was 1% less than a year earlier. That was a more significant decline than the trade was expecting. Of the total stocks, 753 million bu. were stored on farms, up 22% from a year earlier. Off-farm stocks of 1.36 billion bu. were 10% less than a year ago.

Likewise, old-crop soybeans stored in all positions totaled 913 million bu. at the beginning of the month, up 108% from the previous year, but significantly less than pre-report expectations. Soybean stocks stored on farms totaled 265 million bu., up 162% percent from a year ago. Off-farm stocks, at 648 million bushels were up 92% from last September.

As well, the weekly Crop Progress report continues to underscore late crop development.

For the week ending Sept. 29, 88% of the corn crop was dented, which was 12% less than last year and 10% less than the average. 43% of corn was mature, compared to 84% a year earlier and 73% for the five-year average. 11% was harvested, which was 14% less than last year and 8% less than average. 57% was in Good (46%) or Excellent (11%) condition, the same as the previous week but 12% less than last year. 14% was in Poor (10%) or Very Poor condition (4%), which was 1% more than a week earlier and 2% more than a year earlier.

55% of soybeans were dropping leaves, which was 26% less than the previous year and 21% less than the average. 7% were harvested, which was 15% less than a year earlier and 13% less than average. 55% were rated in Good (46%) or Excellent (9%) condition, 1% more than a week earlier, but 13% less than a year ago. 13% were in Poor (10%) or Very Poor (3%) condition, which was 3% more than a year earlier.

90% of spring wheat was harvested, which was 10% less than last year and 9% less than average.

95% of sorghum was coloring, which was 2% less than the previous year but on par with the average. 54% was mature, which was 6% less than last year and 9% less than average. 30% was harvested, which was 3% less than last year and 5% less than the average. 65% was in Good (50%) or Excellent (15%) condition, which was 11% more than a year earlier. 8% was rated as Poor (6%) or Very Poor (2%), compared to 17% last year.

39% of winter wheat was planted, which was 2% less than the previous year but 1% more than the average. 11% had emerged, compared to 12% last year and 13% for average.

45% of the nation’s pasture and range was rated in Good (37%) or Excellent (8%) condition, the same as a week earlier and 2% less than a year earlier. 25% was rated as Poor (17%) or Very Poor (8%), which was 1% more than the previous week but 2% more than a year earlier.

Negotiated cash fed cattle prices made solid gains for the week, with live prices $2 higher in the Southern Plains at $103/cwt., $4-$5 higher in the Northern Plains at $106-$107 and $1-$5 higher in the western Corn Belt at $104-$105. Dressed trade was steady to $5 higher at mostly $165.

Cattle futures continued higher on Friday, supported by stronger fed cattle prices and apparent commercial interest.

Except for 10¢ lower in the back contract, Live Cattle futures closed an average of $1.09 higher, (27¢ to $2.07 higher).

Except for $2.00 lower in newly minted away Sep, Feeder Cattle futures closed an average of $1.21 higher.

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

Choice boxed beef cutout value was 93¢ lower Friday afternoon at $212.58/cwt. Select was 53¢ lower at $189.86.

Corn futures closed 1¢ lower.

Soybean futures closed fractionally mostly 3¢ to 5¢ lower. 

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Major U.S. financial indices closed lower on Friday, with reports that the White House was considering ways to limit U.S. investment in Chinese companies.

The Dow Jones Industrial Average closed 70 points lower. The S&P 500 closed 15 points lower. The NASDAQ was down 91 points.

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When the weather finally permits Australia to begin rebuilding its drought-decimated cowherd, the U.S. may have more beef export opportunity, according to the Livestock Marketing Information Center (LMIC).

“Through July, Australia is reporting 4.9 million head slaughtered, an increase of 8% over the same time period in 2018,” say LMIC analysts, in the most recent Livestock Monitor. “Since April 2018, each month (except November 2018) over 50% of Australia’s total slaughter has consisted of cows and heifers. Typically, when a majority of total slaughter is comprised of females this is an indication that the herd is contracting. Increased cow and heifer slaughter has led to a 4% growth in beef production through the first seven months of 2019. Much of the growth has been absorbed by expanding foreign demand, especially in China as they are looking to fill a meat protein supply gap left behind by a declining hog herd due to the spread of African Swine Fever (ASF).”

For perspective, the most recent peak in Australian cattle inventory was 29.3 million head in 2014, according to LMIC. The USDA Global Agricultural Information Network (GAIN) pegs the 2019 inventory at 25.73 million head and forecasts next year’s inventory at 24.48 million head, which would be 16.4% less than the recent peak and the fewest in three decades.

“As China’s demand for beef is rising, especially for grain-fed beef, Australia has been well positioned to fill demand,” LMIC analysts explain. “This is expected to change in 2020 as USDA’s GAIN report is forecasting Australia’s cattle sector to start herd rebuilding efforts if weather conditions improve. Rebuilding efforts will require more females causing lower slaughter levels and reduced available beef supplies for export in 2020.”

LMIC currently forecasts U.S. beef exports to grow 6% in 2020 with ample supplies and competitive prices spurring shipments.