WLI

Although there was no negotiated cash fed cattle trade reported by USDA through Monday afternoon, other sources reported live trade breaking out in various regions at $96-$97/cwt., another step lower from last week’s slide.

The average 5-area direct price for steers last week was $3.86 lower on a live basis at $101.73/cwt., according to USDA. The average dressed steer price was $5.69 lower at $165.83.

After attempts for stability early in the session, Live Cattle futures lost ground, while Feeder Cattle remained under pressure.

Live Cattle futures closed mixed, from an average of 39¢ lower (six contracts) to an average of 13¢ higher, with heavy trade and expanding open interest.

Except for 52¢ and 20¢ lower on either end of the board, Feeder Cattle futures closed an average of $1.15 lower.

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

Choice boxed beef cutout value was 36¢ lower Monday afternoon at $226.95/cwt. Select was 2¢ lower at $201.92.

Corn futures closed 1¢ lower through Mar ’20 and then mostly fractionally higher. 

Soybean futures closed mostly unchanged to fractionally higher across the front half of the board and then mostly 3¢ higher.

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Major U.S. financial indices closed narrowly mixed Monday.

The Dow Jones Industrial Average closed 38 points higher. The S&P 500 closed fractionally lower. The NASDAQ was down 15 points.

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As consumers seek to save time, convenience stores around the world provide a rapidly growing opportunity for U.S. beef and pork exports, according to the U.S. Meat Export Federation (USMEF).

Specifically, according to a 2019 report by Euromonitor, per capita spending on foodservice products at convenience stores increased 14% worldwide between 2013 and 2018 and is projected to increase another 11% by 2023. South Korea led the way, with a 142% increase in per capita convenience store foodservice spending from 2013 to 2018; another 47% increase is projected by 2023.

Japan, Taiwan, the ASEAN region and Mexico are other fast-growing markets identified by Euromonitor, while a USDA report suggests China’s convenience store chains, which have historically focused on lower-priced processed foods, are beginning to expand premium and imported food offerings. This trend is likely to continue as younger Chinese consumers shift away from traditional retail outlets.

The USMEF uses funding from the USDA Market Access Program (MAP), the Beef Checkoff Program and the National Pork Board to promote U.S. beef and pork—especially processed beef and pork items, but also raw material for further processing—as the centerpiece of convenience store fare in several international markets.

“Just as important as promoting existing products, we are developing brand new ideas for packaged meals and protein snack items featuring U.S. beef and pork that fit well with consumer trends in each individual market,” says Dan Halstrom, USMEF President and CEO. “USMEF recognizes the scope of this opportunity and the enormous demand that is driving it. As the convenience store sector has taken off in various parts of the world, suppliers realize they need products to help meet the demand for these meat snacks and packaged meals. The trend is toward high-quality meat, and that is definitely an advantage for U.S. beef and pork.”

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.”