WLI

Already bearish Cattle futures received added fuel to the downside from Trump’s weekend tweet that he would increase tariffs on $200 billion worth of Chinese imports from 10% to 25% this Friday, if a trade deal remains unsigned. The president also threatened 25% tariffs on another $325 billion worth of Chinese imports. Lean Hog futures plunged, adding pressure to Cattle futures.

Live Cattle futures closed an average of $1.05 lower.

Feeder Cattle futures closed an average of $1.30 lower.

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

Choice boxed beef cutout value was 36¢ lower Monday afternoon at $227.00/cwt. Select was 69¢ higher at $213.98.

Corn futures closed 4¢ to 7¢ lower through May ’20 and then mostly 1¢ to 2¢ lower.

Soybean futures closed 7¢ to 12¢ lower through Aug ‘20, and then mostly 2¢ lower.

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Major U.S. financial indices closed lower on Monday, but well off of session lows, pressured by President Trump’s aforementioned comments concerning Chinese trade. 

The Dow Jones Industrial Average closed 66 points lower. The S&P 500 closed 13 points lower. The NASDAQ was down 40 points.

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“Beef markets are getting ever more complex, a trend that is likely to continue, if not accelerate,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University (OSU), in is weekly market comments. “When the vast array of horizontal beef product markets is considered, along with the complex set of vertical cattle and beef production sectors, all of which operate in complicated dimensions of time and space, there can be little doubt that the U.S. cattle and beef industry is one of, if not the most complex set of markets on the planet.”

Indeed.

“The total carcass value that drives beef and cattle markets is the net effect of several hundred products that result from slaughter and fabrication and ultimately become thousands of different products that are part of retail grocery; hotel, restaurant and institutional (HRI) markets and exports, along with markets for edible offals and other byproducts of cattle slaughter,” Peel explains.

OSU researchers recently conducted interviews with companies representing a cross-section of the beef product industry, including multiple firms at all beef market levels. The research identified issues and trends associated with the evolution of beef markets. Among them, according to Peel:

• Increasing exports and impacts in specific beef markets.
• Increasing demand for additional fabrication of beef products.
• The impact of increasing carcass size.
• Demand for bone-in versus boneless beef products.
• Fresh versus frozen products and the use of deep chill technology.
• Increased demand for value-added products, including more beef products resulting from additional fabrication, as well as added-ingredient products.
• The blending of beef marketing channels with growing popularity of home food delivery resulting from increased demand for restaurant take-out along with meal kits for home delivery or in-store purchase.

Negotiated cash fed cattle prices were sharply lower last week. Live trade was $3-$4 lower at $122-$123/cwt. in the Southern Plains; mostly $124 in Nebraska and $123-$127 in the western Corn Belt. Dressed trade was mainly $4-$6 lower at mostly $200.

Feeder Cattle futures continued to lead Live Cattle lower on Friday. Declining wholesale values at a time seasonality suggests a boost from grilling demand, as well as the continued unwinding of long-held long positions continue to weigh.

Except for 25¢ and 42¢ lower at either end of the board, Live Cattle futures closed an average of $1.10 lower. From the previous Friday through Thursday, open interest declined by 14,124 contracts.

Feeder Cattle futures closed an average of $1.30 lower.

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

Choice boxed beef cutout value was $1.44 lower Friday afternoon at $227.36/cwt. Select was $1.79 lower at $213.29.

Except for 1¢ higher in spot May, Corn futures closed mainly fractionally mixed.

Soybean futures closed 1¢ lower to 1¢ higher, except for 4¢ higher in the back three contracts.

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Major U.S. financial indices bounced back Friday, fueled by the monthly national employment report.

Total non-farm payroll employment increased 263,000 in April, compared to the previous month, according to the U.S. Department of Labor’s Bureau of Labor Statistics. The unemployment rate declined 0.2% to 3.6%, the lowest rate since 1969.

In April, average hourly earnings for all employees on private non-farm payrolls rose by 6¢ cents to $27.77. Over the year, average hourly earnings have increased by 3.2%.

The Dow Jones Industrial Average closed 197 points higher. The S&P 500 closed 28 points higher. The NASDAQ was up 127 points.

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The clock is ticking, but there’s still time for producers to get corn in the ground without impairing yield.

For instance, Bill Wiebold, agronomist with the University of Missouri (MU) Extension Service explains, “Our data provide some optimism that reasonably high yield can be obtained when corn is planted in mid-to-late May. However, yield potential is very strongly dependent on weather conditions in summer. For this reason, it is difficult to predict in any specific year what will happen to corn yield if planting is delayed.”

According to a 5-year MU study, yield potential in the state declines when corn planting is delayed through the first three weeks of May: -5% by the first week of May; -20% by the end of the month; -40% by the end of June.

Likewise, University of Minnesota studies show that corn yield is typically maximized when planting occurs from late April through mid-May.

“Minnesota corn growers have achieved good yields in the past several years even when the average corn planting date (50% of the corn planted in the state) has been April 29 for the years 2014-2016 and May 7 in 2017,” according to Minnesota Crop News.

“…in central Iowa from 2014-2016, the highest yield potential was attained with early May planting dates. Planting in mid-April resulted in 95% yield potential and planting in early June resulted in 81% yield potential,” according to Iowa State University.

By the way, according to the Iowa Farm Bureau, farmers in that state can plant up to 1.4 million acres in a day; more than 60% of the crop in a week.

USDA’s monthly World Agricultural Supply and Demand Estimates are due out Thursday.

“Lower cash sales of fed cattle combined with the downward trending futures is causing much uncertainty among cattle feeders,” noted the AMS reporter on hand for Thursday’s sale at Mitchell Livestock Auction in South Dakota.

Apparently, technical pressure, borne by recent bearishness was behind the hard drop in Feeder Cattle futures, which pressured Live Cattle in turn. It didn’t help that early support in Lean Hog futures faded through the session.

Net U.S. pork sales for Apr. 19-25 of 16,100 metric tons (mt) were 4% less than the previous week and 59% less than the prior four-week average, according to the Weekly Export Sales report from USDA’s Foreign Agricultural Service.

Beef exports continued softer, as well. Net export sales of U.S. beef (10,600 mt) were down 54% from the previous week and 50% lower than the prior four-week average.

Except for 20¢ lower in spot Jun, Live Cattle futures closed an average of 96¢ lower.

Feeder Cattle futures closed an average of $1.99 lower.

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

Choice boxed beef cutout value was $1.42 lower Thursday afternoon at $228.80/cwt. Select was $2.42 lower at $215.08.

Corn futures closed fractionally higher to 2¢ higher through near Dec and then fractionally lower to 3¢ lower.

Soybean futures closed mostly 7¢-8¢ lower.

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Major U.S. financial indices closed lower again on Thursday, with follow-through pressure from the Fed’s decision to leave the federal funds rate unchanged on Wednesday.

The Dow Jones Industrial Average closed 122 points lower. The S&P 500 closed 6 points lower. The NASDAQ was down 12 points.

Incidentally, Beyond Meat, Inc. (NASDAQ:BYND)—a plant-based fake meat company—went public, launching its IPO Thursday at $25 per share. The price soared to $65.75 by the close of the day.

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Demand for speed and convenience continue to shift consumer eating patterns, according to two recent reports from the NPD Group (NPD).

For instance, consumers are including frozen foods in 2% more at-home meals than a decade ago—9.8 billion at-home eating occasions last year.

“Demographic shifts, like Millennials moving into the busiest times of their lives juggling spouses, kids, and a career, are fueling a greater need for the convenience that frozen foods offer,” says David Portalatin, NPD Food Industry Advisor and author of Eating Patterns in America. “Manufacturers are also doing their part in increasing interest in frozen foods by innovating around contemporary food values and emerging flavor trends to provide convenience.”

Likewise, the fast casual restaurant category continues to grow. The definition of fast casual varies, but tends to include restaurants such as Five Guys, Shake Shack and even Starbucks.

Specifically, the number of fast casual chain restaurants rose by 1% to 25,312 total units, based on NPD’s Fall 2018 ReCount® restaurant census, which includes restaurants open as of September 30, 2018. In the year ending February 2019, compared to a year earlier, fast casual customers increased their visits by 3%, while the total quick service restaurant category, under which the fast casual category falls, were up 1%; total U.S.  foodservice traffic remained flat.

The fast casual category is still a relatively small part of the total foodservice industry, according to NPD. Fast casual restaurants represent 8% of total quick service visits, whereas traditional quick service restaurants, represent 75% of traffic.

Through Wednesday afternoon, negotiated cash fed cattle prices were mostly $1-$4 lower than last week on a live basis at: $124/cwt. in Nebraska; $122 in Kansas; $125-$126 in the western Corn Belt. Dressed trade was $4-$6 lower at mostly $200.

There were 837 head offered in the weekly Fed Cattle Exchange auction; 479 head (four lots) sold for a weighted average price of $122.15/cwt., for delivery at 1-9 days.

A rally in Lean Hog futures helped stem the degree of bleeding in Cattle futures Wednesday.

Except for $1.82 higher in the back contract, Live Cattle futures closed an average of 42¢ lower.

Except for 7¢ higher in Aug, Feeder Cattle futures closed an average of 37¢ lower.

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

Choice boxed beef cutout value was $1.62 lower Wednesday afternoon at $230.22/cwt. Select was 71¢ lower at $217.50.

Corn futures closed 3¢-6¢ higher through May ’20 and then mostly 2¢ higher. Presumably, some of the bounce came from weather-delayed planting.

Soybean futures closed 1¢-3¢ lower, extending losses as traders look for wet conditions to ultimately bring in more corn acres.

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Major U.S. financial indices closed lower on Wednesday. Much of the pressure was attributed to the Fed standing pat on interest rates. Apparently, traders were looking for a rate cut, given ongoing sub-2% inflation.

“Information received since the Federal Open Market Committee met in March indicates that the labor market remains strong and that economic activity rose at a solid rate. Job gains have been solid, on average, in recent months, and the unemployment rate has remained low,” according to an FOMC statement. “Growth of household spending and business fixed investment slowed in the first quarter. On a 12-month basis, overall inflation and inflation for items other than food and energy have declined and are running below 2%. On balance, market-based measures of inflation compensation have remained low in recent months, and survey-based measures of longer-term inflation expectations are little changed.”

Pressure came despite the closely watched ADP Employment Report shattering expectations to the upside. That report indicates non-farm, private sector employment increased by 275,000 in April.

The Dow Jones Industrial Average closed 162 points lower. The S&P 500 closed 22 points lower. The NASDAQ was down 45 points.

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Dairy cattle continue to be a significant contributor to the commercial U.S. beef supply, say Brenda Boetel, Extension economist and Jared Geiser, research assistant from the University of Wisconsin-River Falls.

“Despite growing beef cattle inventories since 2014, dairy animals have been a stable source of beef and continue to play a key role in filling U.S. beef demand,” explain Boetel and Geiser, in the latest issue of In the Cattle Markets. “In 2018 the dairy sector contributed 5.6 billion lbs. (21.0 %) of beef to the U.S.”

For perspective, they point out total U.S. commercial beef production last year was 26.9 billion lbs., the most since 2002. Beef production between 2002 and 2018 ranged from 23.7 billion lbs. in 2014 to 27.0 billion lbs. in 2002, with dairy animals contributing 22% in 2014 and 18% in 2002.

“The contribution from dairy cattle varies based on the size of the native cattle herd and its contribution to the beef supply, as well as the number of cull dairy cows,” Geiser and Boetel explain. “Finished dairy steers are the largest beef contributor from the dairy industry followed by cull cows and finished heifers.”