WLI

By way of recap, negotiated cash fed cattle trade ended the week generally $1-$2 lower on a live basis at $114-$115/cwt. in the Southern Plains and $116 in Nebraska. It was steady in the western Corn Belt at $116-$118. Dressed trade was steady to $2 lower in Nebraska at $183-$186; steady to $4 lower in the western Corn Belt at $185-$186.

Limit-down Lean Hog futures, and perhaps defensive positioning ahead of the monthly Cattle on Feed report (see below), helped pressure Cattle futures on Friday. That report ended up more favorable than expected with fewer feedlot placements than anticipated.

Except for 37¢ higher in spot Jun, Live Cattle futures closed an average of 35¢ lower.

Except for 20¢ higher in spot Aug, Feeder Cattle futures closed an average of 45¢ lower.

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

Choice boxed beef cutout value was 85¢ higher Friday afternoon at $221.64/cwt. Select was $1.94 higher at $208.47.

Corn futures closed 7¢ to 14¢ higher through Jul ‘20 and then mostly 2¢ lower to 1¢ higher.

Soybean futures closed 6¢ to 8¢ higher through May ‘20 and then mostly 2¢ to 5¢ higher.

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Major U.S. financial indices stabilized Friday, but remained under pressure from trade worries and related signs of slowing economic growth.

The Dow Jones Industrial Average closed 95 points higher. The S&P 500 closed 3 points higher. The NASDAQ was up 8 points.

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If anything, markets ought to judge Friday’s monthly Cattle on Feed report as neutral to cautiously bullish, with significantly fewer April placements than most analysts expected.

There were 1.84 million head placed in feedlots (capacity of 1,000 head or more) in April, which was 8.67% more (+147,000 head) year over year. Most analyst expectations ahead of the report were for placements to be up 13% or so. In terms of weights, 19.27% weighed less than 600 lbs., 37.84% weighed 600-799 lbs. and 42.88% weighed 800 lbs. or more.

The 1.93 million head marketed in April were 6.93% more (+125,000 head) than the previous year, which was slightly more than pre-report projections.

Likewise, cattle on feed May 1 were slightly less than expected with 11.82 million head, which was 2.25% more (+260,000 head) than a year earlier. Still, that’s the most inventory for the date since the data series began in 1996, according to USDA’s Agricultural Marketing Service.

Negotiated cash fed cattle trade continued in Nebraska through Thursday afternoon at $116/cwt., which was $1 lower than last week, but steady to $1 higher than on Wednesday. Dressed sales were at $183-$186, which was steady to $2 lower than the previous week.

Cattle futures mostly edged higher Thursday, helped along by the previous day’s bullish Cold Storage report, oversold conditions and continued sluggishness.

Except for 2¢ lower in Feb, Live Cattle futures closed an average of 21¢ higher.

Except for 2¢ lower at the back of the board, Feeder Cattle futures closed an average of 21¢ higher.

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

Choice boxed beef cutout value was $1.04 higher Thursday afternoon at $220.79/cwt. Select was 72¢ higher at $206.53.

Corn futures closed 2¢ to 5¢ lower through May ‘20 and then mostly fractionally lower to 1¢ lower.

Soybean futures closed 7¢ lower in the front five contracts and then mostly fractionally lower to 3¢ lower.

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Major U.S. financial indices closed lower again Thursday, under continued pressure from uncertainty about domestic and global economic growth, related to the U.S. trade impasse with China.

Crude Oil futures (WTI-CME) fell an average of $3.47 through the front six contracts, closing at their lowest levels since March.

The Dow Jones Industrial Average closed 286 points lower. The S&P 500 closed 34 points lower. The NASDAQ was down 122 points.

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“The United States holds all the cards here, and if the U.S. is willing to walk away from the game board and kick it over, it won’t be the one feeling the pain,” said Peter Zeihan, a global trade expert and best-selling author, offering his perspective, at the U.S. Meat Export Federation (USMEF) spring conference, on how the current trade environment impacts U.S. agriculture and the red meat industry specifically.

“What you’re seeing right now with the trade deficit is a transitional period,” Zeihan explained. “In this moment, it looks like the United States doesn’t have as much leverage as it actually does. You feel that more than any other sector, because agriculture is the only thing that foreign governments can target. But this moment of transition isn’t going to last long.”

In the meantime, U.S. Secretary of Agriculture Sonny Perdue announced yesterday that President Trump directed him to craft a relief strategy to support American agricultural producers while the Administration continues to work on free, fair, and reciprocal trade deals to open more markets in the long run to help American farmers compete globally.

Specifically, the President authorized USDA to provide up to $16 billion in programs, which is in line with the estimated impacts of unjustified retaliatory tariffs on U.S. agricultural goods and other trade disruptions.

“The plan we are announcing today ensures farmers do not bear the brunt of unfair retaliatory tariffs imposed by China and other trading partners,” says Secretary Perdue. “Our team at USDA reflected on what worked well and gathered feedback on last year’s program to make this one even stronger and more effective for farmers. Our farmers work hard, are the most productive in the world, and we aim to match their enthusiasm and patriotism as we support them.”

At the USMEF meeting, Zeihan pointed out, “The Greater Midwest is the single largest chunk of arable land in a temperate zone in the world, and it out-produces the next two largest agricultural zones put together. The Greater Mississippi, by itself, has more miles of naturally navigable waterway than the combined internal systems of the rest of the world. This chunk of North America is both the richest territory on the planet and the most securable. Decades of bipartisan effort have yet to screw this up, and this will not be the administration that cracks the code.”

Negotiated cash fed cattle trade was steady to $2 lower on a live basis through Wednesday afternoon at $115/cwt. in the Texas Panhandle and at $114-$115 in Kansas. Dressed sales in Nebraska were mainly steady with last week at $185-$186.

Only 309 head (three lots) were offered in the weekly Fed Cattle Exchange auction; none sold.

Cattle futures continued to leak lower amid sluggish trade.

Live Cattle futures closed an average of 36¢ lower.

Except for $1.07 higher in expiring May, Feeder Cattle futures closed an average of 24¢ lower.

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

Choice boxed beef cutout value was 17¢ higher Wednesday afternoon at $219.75/cwt. Select was 77¢ lower at $205.81.

Corn futures closed mostly 1¢ to 2¢ higher toward the front of the board and then mostly fractionally higher.

Soybean futures closed 5¢ to 6¢ higher.

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Major U.S. financial indices closed lower Wednesday, pressured mostly by retail stocks and tech shares.

The Dow Jones Industrial Average closed 100 points lower. The S&P 500 closed 8 points lower. The NASDAQ was down 34 points.

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Total pounds of beef in freezers Apr. 30 totaled 430.35 million lbs. That was 5% less (-40.8 million lbs.) than the previous month and 9% less than the previous year, according to the monthly USDA Cold Storage report published Wednesday. That’s also well below the five-year average of 457 million lbs., according to Allendale, Inc.

Frozen pork supplies of 621.86 million lbs. were 2% more than the previous month but 2% less than a year earlier. 

Total red meat supplies in freezers of 1.099 billion lbs. were up slightly from the previous month but down 5% from last year.

Total frozen poultry supplies were up 2% from the previous month and up slightly from a year ago.

Sluggish trade and rising grain prices helped pressure Cattle futures Tuesday. Arguably, most of the pressure on the grain side comes from the uncertainty about ultimate planting reality and potential production, which makes it tough to project breakevens with much confidence.

Live Cattle futures closed an average of 34¢ lower.

Except for 22¢ higher in spot May, Feeder Cattle futures closed an average of $1.59 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 $1.87 lower Tuesday afternoon at $219.58/cwt. Select was $1.45 lower at $206.58.

Corn futures closed 4¢ to 6¢ higher through Jul ’20, and then mostly 1¢ to 2¢ higher.

Soybean futures closed 8¢ to 10¢ lower through Nov ’20 and then 5¢ to 7¢ lower.

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Major U.S. financial indices closed higher Tuesday, apparently bolstered by reports that the U.S. would ease, temporarily, restrictions imposed a day earlier on China’s tech giant, Huawei. Those restrictions—including prohibiting U.S. chipmakers from selling to the company—stem from an ongoing legal dispute between the company and the U.S. revolving around allegations that the Chinese company stole U.S. trade secrets.

The Dow Jones Industrial Average closed 197 points higher. The S&P 500 closed 24 points higher. The NASDAQ was up 83 points.

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“Going forward, the (African Swine Fever) ASF-related impacts on the Chinese hog inventory are expected to lead to significant increases in demand for imported pork. A probable scenario is for Chinese excess demand for imported pork to progressively drive world pork trade dynamics. High Chinese pork prices can be expected to draw large volumes of imports from pork-exporting countries,” according to analysts with USDA’s Economic Research Service (ERS), in the most recent Livestock, Dairy and Poultry Outlook.

“For the United States, this could mean that significant shares of increased U.S. pork exports may back-fill pork diverted to China by other pork-exporting countries,” ERS analysts say. “However, to the extent that increased demand is reflected in higher prices, U.S. pork may find itself under competitive pressure in a number of price-sensitive markets. In addition, higher pork prices may also affect exports to countries where U.S. pork faces ad-valorum tariffs.”

China, for example, has targeted more than 1,000 agricultural and related products valued at approximately $22.6 billion (2017)—including recent supplementary tariffs—with added tariffs since April of last year, according to the Foreign Agricultural Service.

Moreover, the world can only speculate if and when China will gnaw through its frozen pork stocks and how much Chinese pork demand will remain. As it is, Joel Haggard, senior vice president in charge of the Asia Pacific region for the U.S. Meat Export Federation explained during a media call Tuesday that there is no shortage of pork in Chinese grocery stores and no run-up in prices.

Cattle futures recovered from early pressure to pare losses Monday. Higher grain prices continue to weigh on Feeder Cattle.

Live Cattle futures closed narrowly mixed but mostly lower (from an average of 18¢ higher in three contracts to an average of 41¢ lower).

Feeder Cattle futures close an average of 58¢ lower.

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

Choice boxed beef cutout value was $1.14 higher Monday afternoon at $221.45/cwt. Select was 25¢ lower at $208.03.

Corn futures closed 4¢ to 6¢ higher through Jul ’20, and then mostly 2¢ higher.

Soybean futures closed mostly 8¢ to 10¢ higher.

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Crop planting and development continues to lag the average, due to all of the weather preceding the season.

For instance, 49% of corn was planted as of May 19, according to the most recent USDA Crop Progress report. That’s 29% less than last year and 31% less than the 5-year average. 19% is emerged, which is 28% less than last year and 30% less than average.

Similarly, 19% of soybeans are in the ground, compared to 53% for the previous year and 47% for the average. 5% are emerged, which was 19% less than last year and 12% less than average.

Corn futures closed 4¢ to 6¢ higher through Jul ’20, and then mostly 2¢ higher.

Soybean futures closed mostly 8¢ to 10¢ higher.

The same wet conditions hampering crops continues to improve already-bullish pasture and range conditions.

66% of the nation’s pasture and range is rated in Good or Excellent condition, compared to 46% last year. 6% is rated as Poor or Very Poor, compared to 19% a year earlier.

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Major U.S. financial indices closed lower Monday, led by tech stocks, which were pressured by the trade impasse with China.

The Dow Jones Industrial Average closed 84 points lower. The S&P 500 closed 19 points lower. The NASDAQ was down 113 points.

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Cattle feeding economics continue getting tougher, at least on a cash to cash basis, not counting price risk management.

Consider the latest Historical and Projected Kansas Feedlot Net Returns from Kansas State University.

Net return for steers closed out in May is projected at -$101.23 per head with a feedlot cost of gain (FCOG) of $89.45/cwt. For the remainder of the year, estimates range from -$95.93 per head in December (FCOG of $95.93) to -$233.33 in September (FCOG of $90.91).

That’s with corn prices for the 2018-19 crop year projected at $3.50/bu., according to USDA’s most recent Feed Outlook. Price forecast for the 2019-20 crop year is $3.30.