WLI

Negotiated cash fed cattle trade was $1 higher in the Southern Plains on Friday at $106/cwt. Although there were too few transactions to trend, early sales were higher in Nebraska at $108 on a live basis and $175-$178 in the beef; $176 in the western Corn Belt.

Cattle futures closed sharply lower Friday beneath the weight of a variety of factors that included record-high July U.S. red meat production, the sharp month-to-month increase in frozen beef supplies and sharply lower outside markets tied to increasingly volatile trade relations between the U.S. and China.

Live Cattle futures closed an average of $1.56 lower, except for 35¢ lower in spot Aug.  

Feeder Cattle futures closed an average of $2.50 lower ($1.05 to $3.17 lower).

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

Choice boxed beef cutout value was $1.76 lower Friday afternoon at $237.52/cwt. Select was $3.20 lower at $212.71.

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

Soybean futures closed mostly 9¢ to 12¢ lower through Jul ’20 and then mostly 2¢ to 8¢ lower.

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Major U.S. financial indices plummeted lower Friday with accelerated tariffs and counter-tariffs between the U.S. and China.

The Dow Jones Industrial Average closed 626 points lower. The S&P 500 closed 75 points lower. The NASDAQ was down 239 points.

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If anything, the monthly Cattle on Feed report should likely be viewed as neutral to slightly bullish, with July placements less than expected, while July marketings and the Aug. 1 inventory were in line with pre-report estimates.

Placements in July of 1.70 million head were 2.12% less than the previous year.In terms of placement weight, 36.36% went on feed weighing 699 lbs. or less; 46.62% weighing 700-899 lbs.; 17.00% weighing 900 lbs. or more.

Marketings in July of 2.00 million head were 6.89% more than the prior year.

Cattle on feed Aug. 1 of 11.11 million head were 0.17% more than the same time last year. “This makes the fourth month in a row that the on-feed number is the largest since the data series started in 1996,” according to the Agricultural Marketing Service. 

Negotiated cash fed cattle trade remained largely undeveloped through Thursday afternoon, based on USDA reports. However, although too few to trend, there were some early dressed sales in Nebraska at $170-$178/cwt., which was $2 lower to $6 higher than last week. There were also a few dressed trades in the western Corn Belt at $178, which was $6-$8 higher than the previous week.

Despite more pressure in Lean Hogs, Cattle futures on Thursday took another measured step closer to where they were before the Tyson fire.

Live Cattle futures closed an average of 84¢ higher (40¢ higher at the back to $2.30 higher in spot Aug at $104.975). 

Feeder Cattle futures closed an average of 82¢ higher.

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

Choice boxed beef cutout value was $2.46 lower Thursday afternoon at $239.28/cwt. Select was 21¢ higher at $215.91.

Corn futures closed fractionally higher.

Soybean futures closed mostly 3¢ to 4¢ lower.

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Major U.S. financial indices closed narrowly mixed Thursday, with investors apparently content to wait for the much-anticipated speech from Fed Chairman Jerome Powell on Friday.

The Dow Jones Industrial Average closed 49 points higher. The S&P 500 closed 1 point lower. The NASDAQ was down 28 points.

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Commercial red meat production in July was record high for the month at 4.59 billion lbs., which was 8% more than the same time last year, according to USDA’s monthly Livestock Slaughter report released yesterday. Keep in mind there was an extra weekday in July this year.

The total included beef production for the month of 2.36 billion lbs., which was 6% more than last year. Average steer carcass weight for July was 866 lbs., which was 4 lbs. less than the same time a year earlier. The average carcass weight for heifers was 796 lbs., which was 7 lbs. less than the previous year.

Total cattle slaughter in July was 2.90 million head, which was 120,600 head more than the same month last year.

For January through July, commercial red meat production of 31.4 billion lbs. was 3% more than the same period last year. Accumulated beef production was 1% higher; pork production was up 5%.

Total pounds of beef in freezers as of July 31 were 12% more than the previous month, but 6% less than the previous year, according to the monthly USDA Cold Storage report.

Frozen pork supplies were down 3% from the previous month but were 9% more than last year.

Total red meat supplies in freezers were up 3% from the previous month and up 1% from last year.

Total frozen poultry supplies were 2% more than the previous month but 4% less than a year earlier.

Negotiated cash fed cattle trade remained undeveloped through Wednesday afternoon, based on USDA reports.

Choice steers brought $1.75-$2.00/cwt. higher at the fat auction in Tama, Iowa. Ch 2-4 steers (152 head) at an average of 1,344 lbs. brought an average of $109.27/cwt. Choice heifers were $2.25-$2.50 higher.

Similarly, slaughter steers sold $3-$4 higher at Sioux Falls Regional in South Dakota; $5-$6 higher for slaughter heifers. Ch 2-3 steers (182 head) weighing an average of 1,440 lbs. brought an average of $108.89.

Incrementally, Cattle futures continued to recover some of last week’s steep losses, helped along by wholesale beef strength, as well as notions that Friday’s Cattle on Feed report should be neutral to slightly bullish (see below).

Live Cattle futures closed an average of 53¢ higher (17¢ higher at the back to 95¢ higher).

Feeder Cattle futures closed an average of $1.09 higher (77¢ to $1.57 higher).

Wholesale beef values were steady 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 4¢ higher Wednesday afternoon at $241.74/cwt. Select was $1.43 higher at $215.70.

Corn futures closed mostly 1¢ to 2¢ higher.

Soybean futures closed mostly 3¢ to 4¢ higher.

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Major U.S. financial indices closed higher Wednesday, recovering losses from the previous session. Support included loftier quarterly earnings than expected from consumer giants Lowes and Target.

The Dow Jones Industrial Average closed 240 points higher. The S&P 500 closed 23 points higher. The NASDAQ was up 71 points.

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Positive forage conditions for longer grazing, as well as the bump higher in grain prices earlier this summer are among reasons market analysts seem to be expecting lower year-over-year July feedlot placements when the monthly Cattle on Feed report comes out Friday.

For instance, analysts at Allendale, Inc. estimate July placements to be 1.6% less than last year. Analysts surveyed by Urner Barry expect, on average, placements to be 0.5% less, according to the Daily Livestock Report.

If either are correct, Allendale analysts point out it would be the third consecutive month of placements below year-earlier levels.

“Concerns over feedlot profitability, and more restrained supplies of replacement feeders are two important reasons,” say Allendale analysts. “July placements supply a portion of the January through April finished cattle supply. Kansas State University estimates fed cattle finishing in that period may run losses averaging $106 per head.”

Helped along by an extra marketing day in July this year, both estimate marketings to be 6.6-6.8% more than a year earlier.

Allendale’s estimate puts marketing in July at 1.997 million head. That would be the most for the month in 11 years, according to analysts there.

Likewise, between both sources, cattle on feed Aug. 1 is estimated to be up 0.5-0.6%, compared to the same time last year.

Cattle markets on Tuesday continued to retrace some of last week’s steep losses.

Although negotiated cash fed cattle trade remained undeveloped through Tuesday afternoon, prices for the week were looking higher. Through Monday, though a light test, the 5-area direct steer price average was $109/cwt. on a live basis. Chatter also continued that less negotiated trade the last couple of weeks mean packers need to renew inventory.

Oversold conditions and continued erosion in Corn futures helped Cattle futures close higher.

Live Cattle futures closed an average of $1.49 higher through the front three contracts, and then an average of 42¢ higher.

Feeder Cattle futures closed an average of 64¢ higher, except for 12¢ lower in the back contract.

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

Choice boxed beef cutout value was $2.57 higher Tuesday afternoon at $241.70/cwt. Select was 25¢ lower at $214.27.

Despite softer week-to-week corn condition, Corn futures closed 4¢ to 5¢ lower through Jul ’20 and then fractionally mixed to 2¢ lower.

Soybean futures closed mostly fractionally mixed to 1¢ higher.

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Major U.S. financial indices closed lower Tuesday, with traders apparently taking profits from gains in the previous several sessions, perhaps prompted by lower Treasury yield rates.

The Dow Jones Industrial Average closed 173 points lower. The S&P 500 closed 23 points lower. The NASDAQ was down 54 points.

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As market reaction to the Tyson fire captures a lion’s share of attention, Elliott Dennis, Extension livestock economist at the University of Nebraska-Lincoln suggests it be considered within the context of the macro economy that already enveloped cattle markets.

“Chinese trade issues continued to weigh on the agriculture markets,” Dennis explains, in the latest issue of In the Cattle Markets. “Effects were seen in corn and soybeans, spilling over into the cattle markets. The markets avoided a selloff when President Trump delayed tariffs on Beijing until December. Cattle markets saw a response with Chinese purchases towards the end of this past week. In absence of China, several negotiated trade deals have yet to be ratified by Congress. Combined, this has weighed down the domestic market.”

Next, Dennis points to worries about global economic growth and the impact on beef demand. For instance, faltering manufacturing and company profits in the second quarter, as well as last week’s yield curve inversion heighten concerns about domestic economic recession.

“The beef market will need to find additional homes for the beef on the market,” Dennis says. “More beef on the domestic markets will further depress prices. While beef was doing a decent job at finding international homes, this trend will need to continue and, in some cases, increase. While domestic demand has been strong, there is greater uncertainty whether consumers will continue to have increasing disposable income in the future, due to inflation. If inflation spills into the consumer goods market, then this could further depress derived demand prices.”

Renewed stability defined cattle markets Monday, helped along by news that estimated cattle slaughter last week, following the Tyson fire, was 9,000 head more than the previous week at 651,000 head. That according to USDA’s Estimated Daily Livestock Under Federal Inspection reports.

When all was said and done last week, negotiated cash fed cattle traded mostly $5 lower in the Southern Plains at mostly $105/cwt. They were $6-$7 lower in Nebraska at mostly $107 and $5-$6 lower in the western Corn Belt at $106.50-$110.00. In Nebraska, dressed trade was at $165-$172 in a light test, which was $13-$15 lower. It was $9-$10 lower in the western Corn Belt at $170-$172.

Cattle futures showed signs of life early in Monday’s session but lost steam as the session progressed.

Live Cattle futures closed narrowly mixed, from and average of 12¢ lower to an average of 15¢ higher.

Other than $1.10 higher in spot Aug, Feeder Cattle futures closed narrowly mixed, from and average of 3¢ lower to an average of 29¢ higher.

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

Choice boxed beef cutout value was 44¢ higher Monday afternoon at $239.13/cwt. Select was $1.26 higher at $214.52.

Corn and Soybean futures softened with a more favorable weather outlook and worries about export demand.

Corn futures closed mostly 3¢ to 6¢ lower.

Soybean futures closed mostly 11¢ to 13¢ lower.

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Major U.S. financial indices continued to rally Monday, building on gains from the end of last week. Support included further strengthening of bond yields.

The Dow Jones Industrial Average closed 249 points higher. The S&P 500 closed 34 points higher. The NASDAQ was up 106 points.

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The degree of price movement following the fire at Tyson’s beef packing plant at Holcombe, KS may have been shocking, but the way the market reacted wasn’t, according to Derrell Peel, Extension livestock marketing specialist at Oklahoma State University.

Markets seek to coordinate equilibrium between supply and demand, Peel explains in his weekly market comments. When a severe shock occurs to either, markets seek to reestablish that equilibrium as quickly as possible.

“With fresh beef production suddenly decreased, boxed beef prices rose sharply to ration a suddenly limited supply,” Peel explains. “Choice boxed beef prices increased by over $22/cwt. or 10.3% in one week. This illustrates one of the most important functions of markets (one that is commonly taken for granted): markets make sure that we don’t run out of things. With less supply available, the market uses higher prices to determine how limited beef supplies will be allocated. It is a common market reaction. When a freeze hits Florida, orange juice prices begin to rise immediately, not because there is an immediate shortage of juice but to make sure that the current supply continues to be available over time. Markets will never tell a consumer that they cannot have a product but prices will rise enough to convince some consumers not to consume as much of the product at this time.”

As well, Peel says markets discourage wasting products.

“This is particularly important for perishable products. Thus, watermelon prices drop dramatically when the seasonal supply becomes available to make sure that all watermelons are consumed. Fed cattle ready for slaughter are no less perishable and the current drop in fed prices ensures that all possible adjustments are used to absorb the cattle into remaining industry capacity,” Peel says. “Prices decrease enough initially to provide ample incentive to change existing production plans and cover the additional costs of shifting logistics and timing of production.”

Looking ahead, Peel provides some context, via a similar situation almost 20 years ago, when the ConAgra beef packing plant at Garden City burned and never reopened. 

“Subsequent research confirmed initial reactions generally similar to the current situation.” Peel says. “Most of the negative impacts on fed cattle prices subsided in three to six weeks after the event. Packing capacity, relative to cattle supplies, is somewhat tighter this time, so the impacts may be slightly larger or longer-lived. Nevertheless, boxed beef and cattle markets will likely adjust relatively quickly in the coming weeks with final adjustments depending on the duration of the plant closure.”