WLI

Live sales ended up $3 lower in the Southern Plains last week at $100/cwt., $4-$6 lower in Nebraska at mostly $100 and $2-$5 lower in the western Corn Belt at $102-$107. Dressed sales were $9-$10 lower in Nebraska at $160-$166; $7-$9 lower in the western Corn Belt at $163-$166.

Cattle futures, especially Live Cattle closed sharply lower Friday, with pressure including the softer fed cattle prices, declining wholesale beef values and mounting technical pressure.

Live Cattle futures closed an average of $2.12 lower in the front four contracts (including limit down in spot Oct) and then an average of 68¢ lower.

Feeder Cattle futures closed an average of 94¢ lower.

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

Choice boxed beef cutout value was $2.11 lower Friday afternoon at $227.31/cwt. Select was $2.53 lower at $201.94.

Corn futures closed 2¢ to 3¢ lower through Dec ’20 and then mostly 1¢ lower. 

Soybean futures closed 2¢ to 4¢ lower through May ’20 and then mostly 1¢ lower.

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Major U.S. financial indices closed little changed Friday, fading a weaker than expected outlook for national employment.

Total nonfarm payroll employment increased by 130,000 in August, according to the Employment Situation Summary from the U.S. Bureau of Labor Statistics. The unemployment rate remained unchanged at 3.7%.

Average hourly earnings for all employees on private nonfarm payrolls increased 11¢ to $28.11. Average hourly earnings are up 3.2% over the last 12 months.

The Dow Jones Industrial Average closed 69 points higher. The S&P 500 closed 2 points higher. The NASDAQ was down 13 points.

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All else being equal, cattle producers face more price pressure for at least another year before cyclical transition offers support, according to the U.S. Baseline Outlook Report Update issued by the Food and Agricultural Policy Institute (FAPRI) at the University of Missouri (MU).

For price perspective between FAPRI’s annual U.S. Baseline Outlook released in the spring and the recent update, see the tables below.

“Though pasture and range conditions have been much improved this spring and summer relative to previous years, cow-calf returns have reached the lowest level in a decade as feeder steer prices decline with cattle on feed numbers continuing to exceed year-ago levels,” say MU agricultural economists, Scott Brown and Daniel Madison, in the companion update for livestock and dairy markets. “Fed steer prices had been steady for most of the first half of the year, with recent weakness noted, due to the Aug. 9 fire at a Tyson cattle processing plant in Kansas. This has strained already tight beef packing capacity, resulting in higher beef prices along with depressed demand for cattle. Cattle and beef prices will remain under pressure as beef production grows through 2020. Good domestic demand for beef, particularly higher-quality product, continues to prevent even larger price declines.”

In the FAPRI Update, the projected 5-area direct average fed steer price for this year is $116.58/cwt. It drops to $113.64 next year, then begins to gain traction in 2022.

As for feeder prices, basis OKC and 600-650 lbs. FAPRI projects this year’s average price at $153.61 this year, $145.28 next year and $149.66 in 2021.

Negotiated cash fed cattle trade remained largely undeveloped through Wednesday afternoon. The early tone was bearish, though, with AMS reporting early dressed sales in Nebraska $3-$8 lower at $167, on light trade and moderate demand.

Fat cattle auctions were mixed.

For instance, there was no trend, but demand was good and trade active at Tama, IA, where Choice 2-4 steers weighing an average of 1,371 lbs. brought $110.21/cwt.

On the other hand, the AMS reporter at Sioux Falls Regional said demand was light and activity slow—few packer buyers present—for the high quality grading steers and heifers, offered in a fair weighing condition. All told, 434 head of Ch 2-3 steers weighing an average of 1,431 brought $101.34.

Lower Corn futures continued to support Feeder Cattle futures Wednesday, while apparently continued queasiness over demand and supply-side logistics helped apply some pressure to front-month Live Cattle.

Live Cattle futures closed mixed but mostly higher, from 2¢ to 75¢ lower in three contracts to an average of 47¢ higher.

Feeder Cattle futures closed an average of $1.16 higher.

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

Choice boxed beef cutout value was 1¢ lower Wednesday afternoon at $230.65/cwt. Select was $2.67 lower at $208.95.

Corn futures closed 2¢ to 3¢ lower through May ‘20 and then mostly fractionally mixed.

Soybean futures closed 6¢ to 7¢ higher through Aug ’20 and then mostly 3¢ to 4¢ higher.

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Major U.S. financial indices closed sharply higher Wednesday, basically erasing losses from the previous session. Primary support, according to many analysts, was the easing of political tensions in Hong Kong, which is thought to be favorable for U.S.-China trade talks.

The Dow Jones Industrial Average closed 237 points higher. The S&P 500 closed 31 points higher. The NASDAQ was up 102 points.

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Less cow slaughter and lighter dressed cow weights continue to boost cull cow prices, says David Anderson, Extension livestock economist at Texas A&M University, in the latest issue of In the Cattle Markets.

“Prices in the Southern Plains reached their high of the year, so far, at $54.36/cwt. at the end of August,” Anderson says. “That was 12.5% higher than a year ago. There is some good reason to think that prices may continue to be above a year ago.”

After increased dairy slaughter drove total cattle slaughter to multi-decade highs during the first few months of the year, Anderson explains it moderated and was 1% less year-to-year over the last month.

Likewise, he points out beef cow slaughter was 1% less year over year for the last two months.

“Beef cow culling typically hits its seasonal peak for the year in the Fall. It’s likely some earlier culling this year may have pulled some cows ahead into slaughter,” Anderson says. “Growing dry conditions in the Southern Plains have likely not added to culling numbers, yet.”

Total cow slaughter was 0.5% less over the last two months, compared to the same time last year, according to Anderson.

At the same time, he explains cow dressed weights averaged 7.6 lbs. less so far in 2019, compared to a year earlier.

“So, not only have fewer gone to market, but they have weighed less, as well,” Anderson says. “The overall effect has been less cow beef production in recent weeks, supporting the 90% lean fresh beef price, the wholesale cutout value, and the cull cow price.”

When USDA finished tallying last week’s negotiated cash fed cattle trade, live sales ended up $3 lower in the Southern Plains at $103/cwt., $2-$3 lower in Nebraska at $104-$106 and mostly $1-$3 lower in the western Corn Belt at $107-$109. Dressed trade was mainly $3-$5 lower at $170-$175.

The 5-area direct average steer price last week was $105.59/cwt. on a live basis, which was $1.53 lower than the previous week. The average dressed steer price of $171.52 was down $3.82.

Lower Corn futures helped Feeder Cattle bounce higher to start the week, recovering about half the losses from the previous session. That, along with oversold conditions and surging Lean Hogs helped Live Cattle edge higher.

Except for unchanged in Apr and 2¢ lower in the back contract, Live Cattle futures closed an average of 25¢ higher.

Feeder Cattle futures closed an average of 86¢ higher (35¢ higher to $1.75 higher in spot Sep).

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

Choice boxed beef cutout value was $1.11 lower Tuesday afternoon at $230.66/cwt. Select was 65¢ lower at $211.62.

Corn futures closed 7¢ to 8¢ lower through Jul ‘20 and then mostly 3¢ to 4¢ lower.

Soybean futures closed fractionally mixed to mostly 1¢ to 2¢ higher.

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Major U.S. financial indices closed sharply lower Monday, on weak manufacturing data and the beginning of new tariffs between the U.S. and China.

Economic activity in the manufacturing sector contracted in August, for the first time in three years, according to the latest Manufacturing ISM® Report On Business®. Specifically, the August Purchasing Managers Index (PMI) of 49.1% was 2.1% lower month to month.

“Comments from the panel reflect a notable decrease in business confidence. August saw the end of the PMI expansion that spanned 35 months, with steady expansion softening over the last four months,” says Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® Manufacturing Business Survey Committee. “Respondents expressed slightly more concern about U.S.-China trade turbulence, but trade remains the most significant issue, indicated by the strong contraction in new export orders. Respondents continued to note supply chain adjustments as a result of moving manufacturing from China. Overall, sentiment this month declined and reached its lowest level in 2019.” 

The Dow Jones Industrial Average closed 285 points lower. The S&P 500 closed 20 points lower. The NASDAQ was down 88 points.

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Agricultural producer sentiment weakened significantly in August, according to the most recent Purdue University/CME Group Ag Economy Barometer. The August reading of 124 was down 29 points from the previous month.

Farmers’ expectations for both current and future economic conditions also tumbled. Compared to a month earlier, the Index of Current Conditions dropped 19 points and the Index of Future Expectations dropped 34 points.

“Sharp declines in most commodity prices during July and early August weighed heavily on farmer sentiment,” says James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture. “While USDA’s announcement of the Market Facilitation Program (MFP) payment rates did help alleviate concerns about 2019 income for many farmers, the big decline in the Index of Future Expectations indicates farmers are becoming more concerned about the future for U.S. agriculture and their farms.”

In late July, USDA announced per-planted-acre payment rates by county for the 2019 MFP. The Ag Economy Barometer survey asked participants to what degree the $16 billion in MFP payments to U.S. farmers relieves their concerns about the impact of tariffs on their 2019 farm income.

More than two-thirds (71%) of respondents feel the 2019 MFP program will, “completely or somewhat relieve,” their concerns about tariffs’ impact on 2019 farm income. However, nearly three out of 10 respondents (29%) said the payments did nothing to relieve their concerns, indicating that a significant minority of farmers think the MFP payments fall short of making up for income losses stemming from ongoing tariff battles.

The barometer is based on a mid-month survey of 400 agricultural producers across the U.S. It was conducted Aug. 12-20, with nearly all of the responses collected following USDA’s release of the Aug. 12 Crop Production report.

Negotiated cash fed cattle trade ended up $3/cwt. lower in the Southern Plains last week at $103/cwt. Live trades were $2-$3 lower in Nebraska at $104-$106 and steady to $5 lower in the western Corn Belt at $105-$110. Dressed sales in Nebraska were $6-$10 lower at $165-$172; $3-$7 lower in the western Corn Belt at mostly $171.

The weaker cash outlook, stronger U.S. dollar and continued uncertainty from the Tyson fire helped pressure Cattle futures to end the week.

Live Cattle futures closed an average of 90¢ lower.

Not counting newly hatched away-Aug, Feeder Cattle futures closed an average of $1.76 lower.

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

Choice boxed beef cutout value was 42¢ lower Friday afternoon at $231.77/cwt. Select was 51¢ lower at $212.27.

Corn futures closed mixed, from 1¢ lower to 1¢ higher.

Soybean futures closed mostly fractionally mixed.

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Major U.S. financial indices closed mixed and little changed Friday, as investors closed out the month.

The Dow Jones Industrial Average closed 41 points higher. The S&P 500 closed 1 point higher. The NASDAQ was down 10 points.

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“The U.S. labor market—with 3.7% unemployment in August—and continued consumer confidence are providing a floor to an otherwise cooling economy,” say analysts with USDA’s Economic Research Service and Foreign Agricultural Service, in the quarterly Outlook for U.S. Agricultural Trade, released Friday.

Compared to the previous quarter, the report revised U.S. per capita Gross Domestic Product (GDP) down to 1.6% for this year and down to 1.3% next year.

“Per capita world GDP is expected to grow 1.6% in 2020, up slightly from 1.5% in 2019, according to the report. “This quarter’s projected per capita GDP growth for 2019 is down 25% from last quarter’s projection, and this quarter’s projection for 2020 is 15% lower. The U.S.-China trade conflict, Brexit, and the developing trade dispute between Japan and South Korea are some of the key uncertainties slowing global trade and investment and pushing forecasts for economic growth lower.”

Even so, U.S. agricultural exports are projected to reach $137.0 billion next year, up $2.5 billion from the revised forecast for fiscal year (FY) 2019; driven primarily by higher exports of pork, beef, soybeans, and horticultural products.

“Beef and veal exports are forecast at $7.8 billion (up $300 million from FY 2019) on higher volumes and unit values,” say analysts.