WLI

When USDA finished tallying last week’s negotiated cash fed cattle trade, live sales ended up $3 lower in the Southern Plains at $103/cwt., $2-$3 lower in Nebraska at $104-$106 and mostly $1-$3 lower in the western Corn Belt at $107-$109. Dressed trade was mainly $3-$5 lower at $170-$175.

The 5-area direct average steer price last week was $105.59/cwt. on a live basis, which was $1.53 lower than the previous week. The average dressed steer price of $171.52 was down $3.82.

Lower Corn futures helped Feeder Cattle bounce higher to start the week, recovering about half the losses from the previous session. That, along with oversold conditions and surging Lean Hogs helped Live Cattle edge higher.

Except for unchanged in Apr and 2¢ lower in the back contract, Live Cattle futures closed an average of 25¢ higher.

Feeder Cattle futures closed an average of 86¢ higher (35¢ higher to $1.75 higher in spot Sep).

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

Choice boxed beef cutout value was $1.11 lower Tuesday afternoon at $230.66/cwt. Select was 65¢ lower at $211.62.

Corn futures closed 7¢ to 8¢ lower through Jul ‘20 and then mostly 3¢ to 4¢ lower.

Soybean futures closed fractionally mixed to mostly 1¢ to 2¢ higher.

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Major U.S. financial indices closed sharply lower Monday, on weak manufacturing data and the beginning of new tariffs between the U.S. and China.

Economic activity in the manufacturing sector contracted in August, for the first time in three years, according to the latest Manufacturing ISM® Report On Business®. Specifically, the August Purchasing Managers Index (PMI) of 49.1% was 2.1% lower month to month.

“Comments from the panel reflect a notable decrease in business confidence. August saw the end of the PMI expansion that spanned 35 months, with steady expansion softening over the last four months,” says Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® Manufacturing Business Survey Committee. “Respondents expressed slightly more concern about U.S.-China trade turbulence, but trade remains the most significant issue, indicated by the strong contraction in new export orders. Respondents continued to note supply chain adjustments as a result of moving manufacturing from China. Overall, sentiment this month declined and reached its lowest level in 2019.” 

The Dow Jones Industrial Average closed 285 points lower. The S&P 500 closed 20 points lower. The NASDAQ was down 88 points.

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Agricultural producer sentiment weakened significantly in August, according to the most recent Purdue University/CME Group Ag Economy Barometer. The August reading of 124 was down 29 points from the previous month.

Farmers’ expectations for both current and future economic conditions also tumbled. Compared to a month earlier, the Index of Current Conditions dropped 19 points and the Index of Future Expectations dropped 34 points.

“Sharp declines in most commodity prices during July and early August weighed heavily on farmer sentiment,” says James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture. “While USDA’s announcement of the Market Facilitation Program (MFP) payment rates did help alleviate concerns about 2019 income for many farmers, the big decline in the Index of Future Expectations indicates farmers are becoming more concerned about the future for U.S. agriculture and their farms.”

In late July, USDA announced per-planted-acre payment rates by county for the 2019 MFP. The Ag Economy Barometer survey asked participants to what degree the $16 billion in MFP payments to U.S. farmers relieves their concerns about the impact of tariffs on their 2019 farm income.

More than two-thirds (71%) of respondents feel the 2019 MFP program will, “completely or somewhat relieve,” their concerns about tariffs’ impact on 2019 farm income. However, nearly three out of 10 respondents (29%) said the payments did nothing to relieve their concerns, indicating that a significant minority of farmers think the MFP payments fall short of making up for income losses stemming from ongoing tariff battles.

The barometer is based on a mid-month survey of 400 agricultural producers across the U.S. It was conducted Aug. 12-20, with nearly all of the responses collected following USDA’s release of the Aug. 12 Crop Production report.

Negotiated cash fed cattle trade ended up $3/cwt. lower in the Southern Plains last week at $103/cwt. Live trades were $2-$3 lower in Nebraska at $104-$106 and steady to $5 lower in the western Corn Belt at $105-$110. Dressed sales in Nebraska were $6-$10 lower at $165-$172; $3-$7 lower in the western Corn Belt at mostly $171.

The weaker cash outlook, stronger U.S. dollar and continued uncertainty from the Tyson fire helped pressure Cattle futures to end the week.

Live Cattle futures closed an average of 90¢ lower.

Not counting newly hatched away-Aug, Feeder Cattle futures closed an average of $1.76 lower.

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

Choice boxed beef cutout value was 42¢ lower Friday afternoon at $231.77/cwt. Select was 51¢ lower at $212.27.

Corn futures closed mixed, from 1¢ lower to 1¢ higher.

Soybean futures closed mostly fractionally mixed.

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Major U.S. financial indices closed mixed and little changed Friday, as investors closed out the month.

The Dow Jones Industrial Average closed 41 points higher. The S&P 500 closed 1 point higher. The NASDAQ was down 10 points.

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“The U.S. labor market—with 3.7% unemployment in August—and continued consumer confidence are providing a floor to an otherwise cooling economy,” say analysts with USDA’s Economic Research Service and Foreign Agricultural Service, in the quarterly Outlook for U.S. Agricultural Trade, released Friday.

Compared to the previous quarter, the report revised U.S. per capita Gross Domestic Product (GDP) down to 1.6% for this year and down to 1.3% next year.

“Per capita world GDP is expected to grow 1.6% in 2020, up slightly from 1.5% in 2019, according to the report. “This quarter’s projected per capita GDP growth for 2019 is down 25% from last quarter’s projection, and this quarter’s projection for 2020 is 15% lower. The U.S.-China trade conflict, Brexit, and the developing trade dispute between Japan and South Korea are some of the key uncertainties slowing global trade and investment and pushing forecasts for economic growth lower.”

Even so, U.S. agricultural exports are projected to reach $137.0 billion next year, up $2.5 billion from the revised forecast for fiscal year (FY) 2019; driven primarily by higher exports of pork, beef, soybeans, and horticultural products.

“Beef and veal exports are forecast at $7.8 billion (up $300 million from FY 2019) on higher volumes and unit values,” say analysts.

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.”