WLI

Negotiated cash fed cattle trade remained largely undeveloped through Thursday afternoon, based on USDA reports. There was some early dressed trade in Nebraska at $181-$182/cwt., which was $1-$2 higher than last week. Although too few to trend, there were also some dressed sales in the western Corn Belt at $181-$182 and some live at $114.

Continued higher wholesale beef values, the positive outlook for cash prices and higher outside markets helped lift Cattle futures Thursday.

Except for unchanged in spot Dec, Live Cattle futures closed an average of 42¢ higher.

Except for 2¢ lower in spot Nov, Feeder Cattle futures closed an average of 96¢ higher (40¢ to $1.52 higher).

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

Choice boxed beef cutout value was $1.15 higher Thursday afternoon at $238.29/cwt. Select was $1.49 higher at $213.02.

Grain futures were mixed as traders positioned themselves ahead of Friday’s monthly World Agricultural Supply and Demand Estimates.

Corn futures closed 2¢ to 4¢ lower through Sep ’20 and then mostly 1¢ lower.

Soybean futures closed 7¢ to 10¢ higher through Aug ’20 and then mostly 2¢ to 5¢ higher.

*******************************

Major U.S. financial indices climbed on Thursday, with reports that the U.S. and China are making progress on a trade deal, including agreement to roll back some existing tariffs if and when a deal is struck.

The Dow Jones Industrial Average closed 182 points higher. The S&P 500 closed 8 points higher. The NASDAQ was up 23 points.

*******************************

“Fed cattle, feeder cattle, and calf cash prices have all been stronger than expected through this fall. Live Cattle and Feeder Cattle futures contract prices have also shaken off the pessimism of abundant supplies, compounded by the unexpected closure of the Tyson beef plant in southwest Kansas,” says Stephen Koontz, agricultural economist at Colorado State University, in the latest issue of In the Cattle Markets.

He explains part of the support comes from the supply side, including the lighter year-over-year carcass weights for much of the year, as well as packers running substantial Saturday kills for a long while.

“What is being discussed less is the strong retailer and, by definition, consumer effects,” Koontz says. “Packers margins have been very strong in August and September, and likely October, approaching $500 per head. These are the live-to-wholesale beef price spreads. This value is much higher than other months and much higher than prior year highs. This is, of course, due in part to the plant closure. But it is interesting that the live-to-retail price spread has moved little in these same two months. The live-to-retail spread is up less than 2-3%. The retailer margin or the wholesale-to-retail spread has declined sharply. Again, the live-to-wholesale spread is up, the live-to-retail spread is even, so it is the retailer that has taken a chunk out of their margin.”

Koontz also points to the current Choice-Select spread of more than $25/cwt. compared to what’s typically about $10 this time of year.

“It is clear the retailer has helped the cattle market turn the corner on any pessimism from summer supplies and slaughter disruption. And, there does not appear to be any pushback from the consumer,” Koontz says.

Negotiated cash fed cattle trade remained undeveloped through Wednesday afternoon, but early indications were positive.

Choice steers and heifers sold $1.75-$2.00 higher at the fat auction in Tama, IA. There were 192 head of Ch 2-4 steers weighing an average of 1,455 lbs. that brought an average price of $116.28/cwt. That was $2-$3 higher than last week’s country trade in the region.

Likewise, slaughter steers and heifers traded $1-$2 higher at Sioux Falls Regional in South Dakota. There were 348 head of Ch 2-3 steers weighing an average of 1,468 lbs. and bringing an average price of $113.03.

Only 547 head were offered in Wednesday’s weekly Fed Cattle Exchange auction, and no takers. There were two heifer lots from the Southern Plains passed on with bids of $114/cwt. and $113.

Cattle futures softened, though, likely with some defensiveness ahead of the Goldman Roll, when the Goldman Sachs Commodity Index rolls its futures holdings forward from the expiring month.

Live Cattle futures closed an average of 57¢ lower, except for 2¢ higher in near Feb.

Feeder Cattle futures closed an average of $1.03 lower (67¢ to $1.35 lower).

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

Choice boxed beef cutout value was $1.09 higher Wednesday afternoon at $237.14/cwt. Select was $1.71 higher at $211.53.

Corn futures closed 2¢ to 4¢ lower through Sep ’20 and then mostly unchanged to fractionally lower.

Soybean futures closed 3¢ to 6¢ lower across most of the board.

*******************************

Major U.S. financial indices basically hovered in place on Wednesday, with continued strong quarterly corporate earnings tempered by lingering uncertainty about a U.S.-China trade deal.

The Dow Jones Industrial Average closed fractionally lower. The S&P 500 closed 2 points higher. The NASDAQ was down 24 points.

*******************************

U.S. beef exports in September were steady with last year in volume at 109,799 metric tons (mt), but value was 4% less at $661.3 million, according to data released by USDA and compiled by the U.S. Meat Export Federation (USMEF).

Through the first three quarters of the year, beef exports were 2% below last year’s record pace in both volume (991,325 mt) and value ($6.1 billion).

“While red meat exports face obstacles in some key markets, global demand dynamics are strong and we see opportunities for significant growth in the fourth quarter and into 2020,” says USMEF President and CEO Dan Halstrom. “Progress is being made on market access improvements and this makes for a very positive outlook going forward.”

With that said, lingering trade issues continue to constrain potential. For instance the recently signed U.S.-Japan trade agreement awaits approval, and tariff relief, from the Japanese Parliament. In the meantime, September beef exports to that leading market were 14% below last year in both volume (24,041 mt) and value ($148.3 million).

“Japan is still delivering excellent value for U.S. beef producers, but tariff relief cannot come soon enough,” Halstrom says. “With a level playing field, the U.S. beef industry will move a wider range of products to our loyal customers in Japan and will definitely capitalize on emerging growth opportunities.”

Beef export value per head of fed slaughter averaged $318.54 in September, up significantly from the previous month but 5% below last year. The January-September average was down 3% at $310.77.

U.S. Pork Exports Churn Higher

U.S. pork exports in September increased 13% from a year ago in both volume (202,248 mt) and value ($532.2 million). For January-September, pork export volume was 5% ahead of last year’s pace at 1.9 million mt, while value increased 2% to $4.89 billion.

“Although the U.S. industry has made rebuilding pork demand in Mexico a top priority, there is definitely a lingering effect from the retaliatory duties, which were in place for nearly a full year,” Halstrom explains. “While it is a great relief to once again move pork to Mexico duty-free, ratification of the U.S.-Mexico-Canada Agreement would certainly help the psychology of the market and bolster our major customers’ confidence in the U.S. supply chain.”

Cattle futures faded early pressure to close mainly narrowly mixed on Tuesday, supported by the continued surge in beef cutout values and the outlook for steady to higher cash fed cattle prices this week.

Except for 62¢ lower in spot Dec and 52¢ higher at the back of the board, Live Cattle futures closed marginally mixed (10¢ lower to 25¢ higher).

Other than $1.22 lower in spot Nov and 10¢ higher at the back of the board, Feeder Cattle futures closed an average of 11¢ lower.

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

Choice boxed beef cutout value was $1.24 higher Tuesday afternoon at $236.05/cwt. Select was 56¢ lower at $209.82.

Corn futures closed mostly 1¢ lower.

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

*******************************

Major U.S. financial indices closed narrowly mixed Tuesday, amid continued strong quarterly corporate earnings reports.

The Dow Jones Industrial Average closed 30 points higher. The S&P 500 closed 3 points lower. The NASDAQ was up 1 point.

*******************************

Agricultural producer sentiment rose in October, according to the Purdue University/CME Group Ag Economy Barometer. It increased 15 points from September to a reading of 136. Sub-indices also increased, with an increase of 15 points in both the Index of Current Conditions (155) and the Index of Future Expectations (146).

The barometer is based on a mid-month survey of 400 U.S. crop and livestock producers.

“Almost across the board, farmers were more optimistic about the agricultural economy in October,” says James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture. “While the level of optimism among farmers is higher than earlier this year, the survey uncovered additional uncertainty related to trade agreements that are still being negotiated.”

For instance, 96% of producers indicated the U.S.-Mexico-Canada Trade Agreement—waiting for approval by Congress—was either important or very important. However, only 55% expect it to be approved by Congress soon. At the same time, 97% of producers felt the recently announced trade deal with Japan was also important or very important to U.S. agriculture.

As for the ongoing trade war between the U.S. and China, 51% of respondents believed an imminent resolution was unlikely. But, that was 8% fewer than in September and 20% less than when the same question was posed in August. At the same time, 75% in the October survey said they expect the final outcome will ultimately prove beneficial to U.S. agriculture. October was the fourth consecutive month that more than 70% expected a beneficial outcome to the trade dispute.

When all was said and done last week, negotiated cash fed cattle sales ended up $2 higher on a live basis in the Southern Plains at $112/cwt., mostly $5 higher in Nebraska at mostly $115 and $3-$4 higher in the western Corn Belt at $113-$114. Dressed sales were mostly $5 higher at mostly $180.

Cattle futures edged mostly higher to start the week, maintaining gains from Friday’s rally, borne by higher cash fed cattle prices and increasing wholesale beef values.

Live Cattle futures closed an average of 39¢ higher.

Other than 5¢ lower and unchanged in the front two contracts, Feeder Cattle futures closed an average of 63¢ higher (17¢ to $1.07 higher).

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

Choice boxed beef cutout value was $1.61 higher Monday afternoon at $234.81/cwt. Select was $2.87 higher at $210.38.

Corn futures closed 3¢ to 6¢ lower in the front four contracts and then mostly 1¢ to 2¢ lower.

Soybean futures closed mostly 2¢ higher through Jan. ’21 and then mostly fractionally lower.

*******************************

Major U.S. financial indices closed higher Monday, with follow-through buying from Friday’s rally, sparked by a strong monthly employment report and continued strong quarterly corporate earnings.

The Dow Jones Industrial Average closed 114 points higher. The S&P 500 closed 11 points higher. The NASDAQ was up 46 points.

*******************************

Cyclical price support could be nearer than previously supposed, based on recent estimates from the Livestock Marketing Information Center (LMIC).

First, LMIC projects the Jan. 1 cattle inventory will be slightly less year over year.

“Regional cow slaughter suggests beef cows are being slaughtered at a much higher rate in most of the regions except the Southern Plains,” say LMIC analysts, in the latest Livestock Monitor. “Total beef cow slaughter through 42 weeks of the year is up 2.9%. Heifer slaughter continues to post large gains compared to a year ago. Weekly heifer slaughter year to date is up 7.3%.”

Further, LMIC analysts explain heifer slaughter is on pace for about 500,000 head more than was in the Jan. 1 ‘other heifer’ category.

“That would indicate more heifers that were considered for replacement were pulled from the herd,” they say. “The latest Cattle on Feed report showed 39% of the on-feed mix were heifers. This suggests that the number of heifers held for replacement for beef-type animals will also likely be below a year ago. LMIC is penciling in beef heifer replacements down more than 2%.”

As for dairy, LMIC analysts say the cow inventory edged lower since last year, with the latest milk production report indicating 30,000 fewer cows than when the year began.

Finally, LMIC analysts point out steer slaughter for the first 42 weeks of this year is more than 2% less than the same period last year.

“Reconciling the steer slaughter deficit against 2018’s large 1.8% increase in the calf-crop year from the previous year has been difficult,” they say. “The calf crop and the number reported for steers 500 lbs. and heavier both appear to be too high in last year’s report (Cattle).”

Negotiated cash fed cattle trade remained undeveloped in the North through Friday afternoon, based on USDA reports. Although there were too few transactions to trend, a few live sales in the western Corn Belt were at $112-$114/cwt. and a few dressed sales in Nebraska were at $180. Compared to the previous week, that was $2-$4 higher on a live basis and $5 higher in the beef.

Furthermore, USDA’s Direct Slaughter Cattle Reporting Dashboard tallied 12,560 head of steers and heifers Friday (live and dressed), with the average steer price at $113.70 on a live basis and $177.04 in the beef.

For the week, live sales in the Southern Plains were $2 higher at $112/cwt.

Stronger cash prices and the recent surge in wholesale beef values helped Cattle futures rally on Friday.

Not counting 40¢ lower in newly minted away April, Live Cattle futures closed an average of $1.55 higher ($1.07 higher to $2.30 higher in spot Dec).

Feeder Cattle futures closed an average of $1.94 higher ($1.32 to $2.72 higher).

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

Choice boxed beef cutout value was $1.02 higher Friday afternoon at $233.20/cwt. Select was also $1.02 higher at $207.51.

Corn futures closed mostly fractionally lower.

Soybean futures closed 3¢ to 7¢ higher through Aug. ’20 and then mostly 1¢ lower.

*******************************

Major U.S. financial indices closed higher Friday, buoyed by a strong monthly employment report.

Total non-farm payroll employment increased by 128,000 in October, according to the U.S. Bureau of Labor Statistics. That was significantly more than expectations. The unemployment rate was little changed at 3.6%. The average hourly earnings of all employees on non-farm payrolls increased 6¢ to $28.12. Average hourly earnings are 3.0% higher over the last 12 months.

Crude oil rallied with West Texas Intermediate (CME) up $1.80 to $2.02 higher through the front 12 contracts.

The Dow Jones Industrial Average closed 301 points higher. The S&P 500 closed 29 points higher. The NASDAQ was up 94 points.

*******************************

Choice boxed beef cutout value was $233.20/cwt. Friday, the highest since August—about a week after the Tyson fire. That was $14.65 more (+6.7%) than a year earlier. At $207.52 on Friday, Select was $3.27 more (+1.6%) more. The Choice-Select spread was 79.6% higher (+$11.39) at $25.69.

“Most of the strength in cutout prices right now is coming from the rib and brisket primal, with slight support from the chuck and round,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “The chuck and round will bear more of the burden of supporting the cutout value moving through the winter months.”

Griffith also notes 90%-lean beef prices remain strong, despite seasonal fourth-quarter pressure.

“Current prices are about 16% above where they were this time one year ago, but they are slightly lower than the five-year average price for the beginning of November,” Griffith says.