WLI

Negotiated cash fed cattle prices sank in the North on Thursday.

In Nebraska, dressed sales were at $165-$172/cwt., which was $6-$10 lower than the bulk of last week’s light test. Early live sales for the week are at $106, which is $1-$2 lower.

Dressed sales in the western Corn Belt were at $171, which was $3-$7 lower than last week. For the week so far, live sales are at $109, which is $1 less than last week.

Surging Lean Hog futures—perhaps tied in part, to hopeful rhetoric surrounding trade talks with China—helped lift Cattle futures Thursday, although they closed off of session highs.

Except for 20¢ lower in the back contract, Live Cattle futures closed an average of 31¢ higher.

Other than unchanged in expiring Aug and 2¢ lower in March, Feeder Cattle futures closed an average of 22¢ 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 77¢ lower Thursday afternoon at $232.19/cwt. Select was 97¢ higher at $212.78.

After 3¢ lower in spot Sep, Corn futures closed mostly 1¢ higher.

Soybean futures closed mostly 1¢ to 2¢ higher.

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Major U.S. financial indices closed sharply higher Thursday, with renewed optimism surrounding trade talks between the U.S. and China. That was based on reports suggesting China would prefer to avoid escalating trade tensions.

The Dow Jones Industrial Average closed 326 points higher. The S&P 500 closed 36 points higher. The NASDAQ was up 116 points.

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“While the impacts of the Tyson plant fire will likely diminish relatively quickly in the next few weeks, feeder cattle markets are still nervous and defensive about the corn market situation, increasingly shaky macroeconomic conditions and continued global economic turmoil,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “Expectations about the 2019 corn crop vary widely, as do the emotions about the crop situation. The latest private crop tour estimates suggest a significantly lower corn yield than current USDA estimates and acres harvested remains an unknown. One thing that seems clear is that much of the corn crop is sharply delayed in maturity. The risk associated with an early or even normal frost in the Corn Belt is high.”

Peel made those comments relative to running several winter stocker budgets, which yielded a wide range of results from decent profit to little or no return.

“The uncertainty and volatility impacting feeder cattle markets is likely to continue this fall and winter. This increases the risks of winter stocker production but may also present short term opportunities for either buying or selling cattle or both,” Peel says. “The best advice at this point is to evaluate and reevaluate possibilities frequently and remain as nimble as possible both offensively and defensively.”

Although still largely undeveloped through Wednesday afternoon, negotiated cash fed cattle trade appears steady to weaker than last week.

For instance, slaughter steers and heifers sold fully $1 lower at Sioux Falls Regional in South Dakota on Wednesday. There were 337 Choice 2-3 steers weighing an average of 1,433 lbs. that brought an average of $108.01/cwt.

A day earlier, negotiated trade in the western Corn Belt was at $109 on a live basis, which was $1 less than the previous week. Although too few to trend, there were some dressed sales in the region on Wednesday at $173. Dressed prices last week were $174-$178.

Also, there were 734 head offered in the weekly Fed Cattle Exchange auction—432 head (two lots of Nebraska heifers) sold for $106/cwt. for delivery at 1-17 days. Negotiated live prices in Nebraska last week were at $107-$108.

Despite early support from higher outside markets, Cattle futures continued mostly lower Wednesday amid light trade; extremely light trade in Feeder Cattle. Pressure included the early tone of the cash fed cattle market, as well as the overall decline in wholesale beef values that continue to adjust toward pre-fire levels.

Except for 20¢ higher in the back contract, 32¢ higher in almost spent Aug and unchanged in away Oct, Live Cattle futures closed an average of 50¢ lower.

Other than 20¢ higher in soon to expire Aug, Feeder Cattle futures closed an average of 87¢ lower.

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

Choice boxed beef cutout value was $3.80 lower Wednesday afternoon at $232.96/cwt. Select was $1.10 higher at $211.81.

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

Soybean futures closed 4¢ to 6¢ higher.

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Major U.S. financial indices closed higher Wednesday, recovering ground lost in the previous session. Support included the increase in crude oil prices, tied to a significantly steeper decline in U.S. crude oil inventories than expected.

The Dow Jones Industrial Average closed 258 points higher. The S&P 500 closed 18 points higher. The NASDAQ was up 29 points.

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“As part of our continued efforts to monitor the impact of the fire at the beef processing facility in Holcomb, KS, I have directed USDA’s Packers and Stockyards Division to launch an investigation into recent beef pricing margins to determine if there is any evidence of price manipulation, collusion, restrictions of competition or other unfair practices,” said U.S. Secretary of Agriculture Sonny Perdue, in a statement yesterday. If any unfair practices are detected, we will take quick enforcement action. USDA remains in close communication with plant management and other stakeholders to understand the fire’s impact to industry.”

Jennifer Houston, president of the National Cattlemen’s Beef Association says the announcement demonstrates the government’s understanding that the fire placed extreme strain on the cattle industry. 

“We encourage USDA to look at all aspects of the beef supply chain and to utilize internal and external expertise in this investigation,” Houston adds. “We believe it adds transparency that will help build confidence in the markets among cattlemen and women.”

“Cattle producers have sound reason to question market events that transpired after the Holcomb fire,” says Bobby Simpson, president of the Missouri Cattlemen’s Association (MCA). “While a sharp decrease in slaughter capacity was anticipated, slaughter actually increased some 9,000 head from the week prior to the fire. Further, most expected this market disruption to cause uncertainty, but few could believe in one week fed cattle prices would drop 5% and Choice boxes would spike 9% while total slaughter increased. All the while, prices for feeder calves plummeted. The financial woes do not reside within one segment of the industry. It impacts the entire chain and causes lending institutions a high level of uncertainty as equity dwindles across the board.

“There is no harm in conducting an investigation to ensure integrity of the markets and to respond to the justified concerns of thousands of U.S. cattle producers. In fact, it’s simply the right thing to do. No matter the result of the investigation, good can come from better understanding what took place and how to best mitigate future disruptions.”

Certainly, punishment is due to anyone found guilty of the actions Perdue mentioned. If no wrongdoing is found, however, then hopefully the investigation will appease those who believe something other than market forces were at work, propelling wholesale beef value so high, while fed cattle prices took a step back.

Other than a few live sales in the western Corn Belt at $109/cwt.—too few to trend—negotiated cash fed cattle trade remained undeveloped through Tuesday afternoon, according to USDA’s Afternoon National Slaughter Cattle Review.

Cattle futures continued recent yo-yo movement, to the downside this time, with sluggish trade and traders apparently waiting for further direction.

Except for 7¢ lower in the back contract, Live Cattle futures closed an average of 83¢ lower.

Other than 10¢ lower in soon to expire Aug, Feeder Cattle futures closed an average of $1.21 lower, (92¢ to $2.25 lower).

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

Choice boxed beef cutout value was $1.30 lower Tuesday afternoon at $236.76/cwt. Select was 95¢ lower at $210.71.

Corn futures closed mostly 1¢ to 2¢ lower.

Soybean futures closed mostly 4¢ to 7¢ lower.

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Major U.S. financial indices closed lower Tuesday, amid fretting over trade issues and possibilities of a coming recession, as indicated by the yield curve inversion.

The Dow Jones Industrial Average closed 120 points lower. The S&P 500 closed 9 points lower. The NASDAQ was down 26 points.

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Although feedlot marketing remained aggressive last month, the estimated supply of cattle on feed more than 120 days was 0.7% more than the previous year, according to Brenda Boetel, a livestock economist at the University of Wisconsin-River Falls.

“Total cattle on feed inventory saw the largest July-to-August decline since 2008,” Boetel explains in the most recent In the Cattle Markets. “Although cattle are currently being marketed in a timely manner, there is danger that this pace will slow and currentness will slip. Given the decrease in slaughter capacity due to the Tyson fire, Saturday slaughter will need to continue to keep the market current. Keeping up with the increased supply in the fourth quarter will be a challenge.”

Further, Boetel says current placement weights may suggest placement rates accelerating at a faster clip later.

“Placements of cattle weighing less than 800 lbs. were down 7.6%, while cattle weighing over 800 lbs. saw placements increase 7.7%. Placements as a percentage of marketings were down 8% year-over-year from July 2018. Seasonally, net feedlot placements as a percentage of marketings typically increase between June and October,” Boetel says. “Given that we have seen a decrease in this number, while the number of feeder cattle remains high indicates placements will be increasing at a faster rate later this fall.”

Negotiated cash fed cattle trade ended up $1 higher in the Southern Plains last week at $106/cwt. Live prices were also $1 higher in Nebraska at $107-$108 and steady to $3.50 higher in the western Corn Belt at mostly $110. Dressed trade was $6-$10 higher in Nebraska at $175-$178, in a light test. In the western Corn Belt, dressed prices were $4-$6 higher at $174-$178.

Week to week (ending Aug. 25), the average 5-area direct steer price was 44¢ more on a live basis at $107.12, according to USDA. The average dressed steer price was $4.39 more at $175.34.

That was with 55,786 head of fed cattle slaughter, which were 10,874 more than the previous week. Estimated total cattle slaughter for the week was 654,000 head, according to USDA’s Weekly Livestock, Poultry and Grain Highlights. That was 3,000 head more than the previous week’s estimated slaughter. Total estimated cattle slaughter the week of the Tyson fire was 645,000 head.

Cattle futures made strong gains to start the week, buoyed by Friday’s friendlier than expected Cattle on Feed report, the weekend announcement of a new trade pact with Japan (see below), as well as reports that China is willing to renew trade talks with the U.S.

Live Cattle futures closed an average of $1.29 higher, recapturing most of Friday’s decline.

Feeder Cattle futures closed an average of $1.80 higher, recovering about three-quarters of what was lost in the previous session.

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

Choice boxed beef cutout value was 54¢ higher Monday afternoon at $238.06/cwt. Select was $1.05 lower at $211.66.

Corn futures closed mostly fractionally higher.

Soybean futures closed 6¢ to 10¢ higher.

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Major U.S. financial indices closed higher Monday with the aforementioned reports that China wants to return to the trade negotiation table with the U.S.

The Dow Jones Industrial Average closed 269 points higher. The S&P 500 closed 31 points higher. The NASDAQ was up 101 points.

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Positive news for U.S. beef exports came over the weekend with the announcement that the U.S. and Japan reached agreement, in principal, on a bilateral trade pact. In terms of value, Japan continues to be the leading customer for U.S. beef.

According to U.S. Trade Representative Robert Lighthizer, the agreement focuses on agriculture, industrial tariffs and digital trade.

“In the agriculture area, it will be a major benefit for beef, pork, wheat, dairy products, wine, ethanol, and a variety of other products,” Lighthizer explained during a Sunday press conference. “It will lead to substantial reductions in tariffs and non-tariff barriers across the board…this will allow us to compete more effectively with people across the board, particularly the TPP countries and Europe.”

The U.S. tariff disadvantage in Japan increased when the U.S. withdrew from the Trans Pacific Partnership (TPP), while the other 11 nations involved in TPP ultimately agreed to the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP). With it, key U.S. beef export competitors, including Australia and Canada, gained tariff advantage over the U.S. on beef exports to Japan.

“This announcement is tremendous news for U.S. farmers and ranchers, and for everyone in the red meat supply chain, because it will level the playing field for U.S. pork and beef in the world’s most competitive red meat import market,” says Dan Halstrom, president and CEO of the U.S. Meat Export Federation (USMEF). “It is also a very positive development for our customer base in Japan, which USMEF and our industry partners have spent decades building. These customers have been very loyal to U.S. pork and beef, but our exports to Japan could not reach their full potential under Japan’s current tariff structure.”

According to Lighthizer, Japan currently imports about $14 billion worth of U.S. agricultural products.

“The Meat Institute applauds the Trump Administration for negotiating better access to a critical and growing market for American beef and pork,” says Julie Anna Potts, CEO of the North American Meat Institute. “The U.S. will be better able to compete with the Comprehensive and Progressive Trans-Pacific Partnership nations and the European Union for valuable market share.”

“Removing the massive 38.5% tariff on U.S. beef will level the playing field in Japan, and we are very thankful to President Trump and his trade team for continuing to fight on behalf of America’s ranching families,” says Jennifer Houston, president of the National Cattlemen’s Beef Association. “Last year, Japanese consumers purchased over $2 billion of U.S. beef, accounting for roughly one-quarter of overall U.S. beef exports.”