WLI

Negotiated cash fed cattle trade developed in the Southern Plains on Thursday, with live sales at $110/cwt. That was $1 higher in Kansas and $2 higher in the Texas Panhandle. Although too few to trend, there were also some early dressed sales in the North at $174-$175, which was $1 higher than the low end of last week’s range.

Cattle futures softened a touch. Part of the pressure might have been defense ahead of Friday’s USDA monthly Cattle on Feed report. 

Except for 22¢ higher in spot Oct, Live Cattle futures closed an average of 33¢ lower.

Except for 20¢ higher in spot Oct, Feeder Cattle futures closed an average of 64¢ lower.

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

Choice boxed beef cutout value was $2.34 higher Thursday afternoon at $225.62/cwt. Select was 15¢ higher at $199.09.

Although increasing seasonally, dressed fed cattle carcass weights continue to be lighter year over year, according to USDA’s weekly Actual Slaughter Under Federal Inspection report. The average dressed steer weight of 901 lbs. for the week ending Oct. 12 was 2 lbs. heavier than the previous week but 2 lbs. lighter than the same week last year. The average dressed heifer weight of 828 lbs. was 4 lbs. heavier than the prior week but 3 lbs. lighter than a year earlier.

Corn futures closed mostly 1¢ lower.

Soybean futures closed fractionally lower to 1¢ lower in the front three contracts and then fractionally higher to 5¢ higher.

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Major U.S. financial indices closed narrowly mixed Thursday. Although corporate quarterly earnings reports continue mostly positive, investors remain uncertain about economic growth.

The Dow Jones Industrial Average closed 28 points lower. The S&P 500 closed 5 points higher. The NASDAQ was up 66 points.

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The closely watched Rural Mainstreet Index (RMI) from Creighton University rose above growth neutral this month, but rural bankers’ economic expectations fell to the lowest level in two years.

Specifically, the RMI increased to 51.4 in October from 50.1 in September. Although still weak, it was the highest level since June and marked the third time in the past four months that the overall index rose above growth neutral.

“Federal agriculture crop support payments and somewhat higher grain prices boosted the Rural Mainstreet Index slightly,” says Ernie Goss, PhD, Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business. Even so, he adds that 73% of bank CEOs reported continuing negative impacts from the trade war.

Bank CEO expectations for the economy six months out, slumped to 36.5 from September’s 42.9, and continues to indicate a very negative economic outlook among bankers, according to the associated confidence index.

“This is the lowest economic confidence we have recorded in two years,” says Goss. “The trade war with China and the lack of passage of the USMCA (NAFTA’s replacement) are driving confidence and growth lower for most areas of the region.”

The RMI is a unique index covering 10 regional states, focusing on approximately 200 rural communities with an average population of 1,300. It represents an early snapshot of the economy of rural agriculturally and energy-dependent portions of the nation.

Negotiated cash fed cattle trade remained undeveloped through Wednesday afternoon, but early trades hinted at steady to higher money.

Although too few to trend, early live sales were reported at $109/cwt. in the Southern Plains and Nebraska. That was $1 higher in the south and steady with the lower end of last week’s range in Nebraska.

Likewise, one lot (131 head) of heifers in Texas sold for a weighted average price of $109, for delivery at 1-9 days, in the weekly Fed Cattle Exchange auction. There was only one other lot in the sale, which was passed on at $105.

Choice 2-4 steers (308 head) and averaging 1,414 lbs. sold for an average of $112.83 at the fat auction in Tama, IA. That was $1 higher than the top of last week’s country trade.

Cattle futures took a step higher Wednesday, supported by the seasonal surge in wholesale beef values and the previous day’s Cold Storage report.

Except for 32¢ higher in spot Oct, Live Cattle futures closed an average of $1.09 higher.

Feeder Cattle futures closed an average of $1.35 higher.

Wholesale beef values were sharply higher 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 $2.35 higher Wednesday afternoon at $223.28/cwt. Select was 86¢ higher at $198.94.

Corn futures closed unchanged to fractionally lower.

Soybean futures closed mostly fractionally lower. 

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Major U.S. financial indices closed higher Wednesday on mostly positive quarterly earnings reports.

The Dow Jones Industrial Average closed 45 points higher. The S&P 500 closed 8 points higher. The NASDAQ was up 15 points.

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Cow-calf profitability may begin turning the corner next year, according to analysts with the Livestock Marketing Information Center, in the latest Livestock Monitor. Currently, LMIC projects typical returns over cash costs, plus pasture rent (basis, the Southern Plains) at $70-$85/cow in 2020 and 2021.

Heading into cyclically higher returns, however, estimated returns continue to represent a loss.

“Overall, this year’s estimated cow-calf returns over cash costs plus pasture rent for the Southern Plains is projected to be negative and the worst since 1996 (unadjusted for inflation),” say LMIC analysts. “Three out of the last four years have been in the red.”

On the cost side of the equation, LMIC projects that Southern Plains cash costs plus pasture rent at more than $850 per cow.

On the revenue side, LMIC projects prices for steer calves (600 lbs.) sold August-November to be 5.5% to 6.0% less than the same time a year earlier; about $9/cwt. less. That’s based on information from USDA’s Agricultural Marketing Service through mid-October.

“That will be the lowest since 2016,” say LMIC analysts. “So far this year, cull cow prices averaged over $10/cwt. below 2018’s, and for the full year, are expected to be the lowest since 2009.”

Keep in mind, LMIC estimates are not survey-based. LMIC analysts emphasize calculations only include cash costs of production and pasture rent; owner management, labor, etc., are not included. The calculations are based on a typical fulltime spring-calving, fall-weaning Southern Plains operation.

“The returns are useful only in a general context,” say LMIC analysts. “The LMIC uses those estimates because producer return is a key factor influencing national herd growth/contraction.”

Cattle futures were mixed on Tuesday, with Lean Hogs helping pressure Live Cattle.

Live Cattle futures closed mixed, from an average of 26¢ lower across most of the board (12¢ lower to $1.07 lower in spot Oct) to an average of 9¢ higher in three contracts.

Feeder Cattle futures closed an average of 45¢ higher.

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

Choice boxed beef cutout value was 80¢ higher Tuesday afternoon at $220.93/cwt. Select was $3.64 higher at $198.08.

Corn futures closed mostly unchanged to fractionally higher.

Soybean futures closed 1¢ to 2¢ higher. 

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Major U.S. financial indices closed lower Tuesday on mixed quarterly earnings reports.

The Dow Jones Industrial Average closed 39 points lower. The S&P 500 closed 10 points lower. The NASDAQ was down 58 points.

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Winter wheat planting and development made strong progress last week, according to the most recent weekly USDA Crop Progress report for the week ending Oct. 20.

77% of winter wheat was planted, which was 6% more than the previous year and 2% more than the average. 53% had emerged, compared to 52% last year and 53% for average.

86% of corn was mature, compared to 99% a year earlier and 97% for the five-year average. 30% was harvested, which was 18% less than last year and 17% less than average. 56% was in Good (45%) or Excellent (11%) condition, which was 1% more than the previous week and 12% less than last year. 14% was in Poor (10%) or Very Poor condition (4%), which was 1% less than a week earlier and 2% more than a year earlier.

94% of soybeans were dropping leaves, which was 4% less than the previous year and 3% less than the average. 46% were harvested, which was 5% less than a year earlier and 18% less than average. 54% were rated in Good (45%) or Excellent (9%) condition, the same as a week earlier and 12% less than a year ago. 14% were in Poor (10%) or Very Poor (4%) condition, which the same as a week earlier and 3% more than a year earlier.

92% of sorghum was mature, which was 4% more than last year and 3% more than average. 49% was harvested, which was 4% more than last year but 4% less than the average. 64% was in Good (50%) or Excellent (14%) condition, which was 11% more than a year earlier. 8% was rated as Poor (7%) or Very Poor (1%), compared to 18% last year.

43% of the nation’s pasture and range was rated in Good (36%) or Excellent (7%) condition, which was the same as a week earlier and 7% less than a year earlier. 27% was rated as Poor (18%) or Very Poor (9%), which was 1% less than the previous week and 7% more than a year earlier.

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Beef in freezers continues to suggest strong demand. As of Sept. 30, total pounds of beef in freezers were 1% less than the previous month and 8% less than the same time last year, according to the monthly USDA Cold Storage report released Tuesday.

Frozen pork supplies were down 1% from the previous month but up 2% from last year.

Total red meat supplies in freezers were down 2% from the previous month and down 4% from last year.

Total frozen poultry supplies were 1% less than the previous month and 5% less than a year ago.

When all was said and done last week, negotiated cash fed cattle trade was mainly higher in the North and steady to lower in the South. Live sales were steady in Nebraska at $109-$111/cwt., steady to $3 higher in the western Corn Belt at $110-$111 and steady to $1 lower in the Southern Plains at $108. Dressed trade was mainly $1-$3 higher at $173-$175.

Cattle futures were narrowly mixed on Monday, with steady to strong cash fed cattle prices supporting Live Cattle and extremely light trade allowing Feeder Cattle to drift.

Live Cattle futures closed an average of 19¢ higher.

Feeder Cattle futures closed unchanged to 35¢ lower, except for an average of 40¢ higher in the back three contracts.

Wholesale beef values were sharply higher 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 $2.09 higher Monday afternoon at $220.13/cwt. Select was $1.40 higher at $194.44.

Corn futures closed 1¢ to 3¢ lower through away Dec and then mostly fractionally lower.

Soybean futures closed fractionally lower in the front months and then mostly 1¢ to 2¢ higher.

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Major U.S. financial indices edged higher Monday, with support from positive quarterly earnings reports and deal-friendly chatter from China.

The Dow Jones Industrial Average closed 57 points higher. The S&P 500 closed 20 points higher. The NASDAQ was up 73 points.

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“Global production of beef, pork and poultry is projected to decline by 1.5% year over year in 2019 and decrease another 2.4% in 2020 as a result of decreased pork production due to African Swine Fever (ASF),” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “At the same time, global meat exports are expected to increase 6.9% in 2019 compared to 2018, and to grow another 6.1% in 2020. As a result, global meat exports are projected to expand from 11.2% of total production to 13.2% in just two years.”

Until ASF, China produced about half of the world’s pork supply.

“Pork production in China is projected to decrease 14.0% in 2019 from 2018 levels with another 25.3% drop year over year in 2020. That implies a 35.7% decrease in Chinese pork production in two years,” Peel says. “This contributes to a 15.7% decrease in global pork production from 2018 to 2020. The losses in China may well exceed these estimates.”

Spun another way, Peel explains pork consumption last year accounted for 74% of total Chinese beef, pork and poultry consumption. Total Chinese consumption of pork, poultry and beef is projected to decrease by 14.9% from 2018 to 2020; with pork dropping to a 59.8% share of total meat consumption. 

“Pork imports (to China) are projected to increase 66.6% in 2019 over 2018 and another 34.6% year over year in 2020,” Peel explains. “Global pork imports are expected to grow 13.5% year over year in 2019 and another 11.0% in 2020 as China’s share of global pork imports grows from 19.7% in 2018 to 35.1% in 2020. Global pork exports are expected to grow 11.3% year over year in 2019 and another 10.4% in 2020. The U.S. began to see direct impacts of this with a 479% jump in pork exports to China in July and August.”

As China works to mitigate lost pork production, Peel says Chinese beef imports to that nation are expected to increase 63.6% year over year in 2019 and another 20.8% next year. Chinese imports of poultry meat are projected to increase 82.7% year over year in 2019 and another 20% in 2020 leading to a two-year increase of 119.3%.