WLI

Cattle futures edged higher Monday, after early follow-through pressure from end of the week profit taking and positioning. Firm wholesale beef prices provided some of the support.

There’s plenty of market uncertainty for the week ahead.

Another massive winter-like storm is forecast to hit the North Central Plains and upper Midwest this week, with some forecasts suggesting a bomb cyclone similar to the one just a few weeks ago, and impacting some of the same areas.

“A potentially dangerous storm will unfold across the nation’s mid-section April 10-11,” according to USDA Agricultural Weather Highlights. “The storm, which bears a resemblance to the mid-March ‘bomb cyclone,’ will undergo rapid intensification across the central Plains on Wednesday and cross the Great Lakes region on Friday. Heavy snow will fall across the northern Rockies on Tuesday, followed by a major precipitation event (1 to 3 inches or more) on Wednesday and Thursday from Nebraska and South Dakota eastward into Michigan. Flooding is already occurring in parts of the upper Midwest, and this week’s storm will likely aggravate the situation, especially from South Dakota to Wisconsin. In addition, wind-driven snow will fall along an axis from Wyoming to upper Michigan. Farther south, locally severe thunderstorms may sweep across the southeastern Plains, mid-South, and lower Midwest. In the storm’s wake, late-week freezes may occur as far south as northern Texas. The NWS 6-10-day outlook for April 13-17 calls for below-normal temperatures and above-normal precipitation across most of the country.”

Other than 25¢ lower in spot Apr, Live Cattle futures closed an average of 59¢ higher (22¢ to 90¢ higher).

Feeder Cattle futures closed an average of 79¢ higher (35¢ to $1.82 higher).

Grain markets on Monday may have reflected some defensive positioning ahead of Tuesday’s monthly World Agricultural Supply and Demand Estimates.

Corn futures closed mostly fractionally lower to 2¢ lower.

Soybean futures closed fractionally lower to 1¢ lower.

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

Choice boxed beef cutout value was $1.74 higher Monday afternoon at $228.67/cwt. Select was 60¢ higher at $220.88.

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Major U.S. financial indices closed mixed Monday. The Dow was down on mid-term queasiness over blue chip stocks like Boeing and General Electric.

The Dow Jones Industrial Average closed 83 points lower. The S&P 500 closed 3 points higher. The NASDAQ was up 15 points.

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Although total cattle slaughter so far this year is 0.7% more than in 2018, beef production is about 1% less as weather and herd dynamics slow cattle finishing, according to Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments.

As for herd dynamics, Peel notes steer slaughter is 3.9% less year over year, while heifer slaughter is up 7.6%. Beef cow slaughter is 1.1% more, while dairy cow slaughter is up 5.0%.

Then, there’s the long winter. Feedlot performance is worse year over year and carcass weights are lighter. So far this year, Peel says steer carcass weights averaged 866 lbs., which is 7.3 lbs. lighter. Heifer carcasses are 11.7 lbs. lighter at 804 lbs.

“Reduced beef production appears to have supported boxed beef prices, reducing supplies somewhat so far this year compared to earlier expectations,” Peel explains. “Fed cattle prices have likely been supported as well, though the weather impacts have not been as obvious as some had expected. Fed cattle prices may have peaked seasonally but continued weather impacts and the onset of summer beef demand should provide continued support for a few more weeks and possibly another chance for a spring price peak.”

For the week, through Friday afternoon, negotiated cash fed cattle prices were steady to a touch softer in the Northern Plains at $126/cwt. in Nebraska and at $127-$128 in the western Corn Belt. Dressed trade was reported at $204-$206, compared to $206 the previous week. Prices in the Southern Plains were $1-$2 lower at $124.

Despite early pressure stemming from volatile Lean Hog futures, Cattle futures ended the day mostly narrowly mixed, with most of the pressure ascribed to week-end positioning.

Live Cattle futures closed an average of $1.19 lower in the front three contracts, and then 37¢ lower to 50¢ higher.

Feeder Cattle futures closed narrowly mixed (47¢ lower to 32¢ higher).

Corn futures closed 2¢ to 3¢ lower through Jul ’20 and then mostly 1¢ lower.

Soybean futures closed 5¢ to 7¢ lower through May ’20 and then mostly 4¢ lower.

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

Choice boxed beef cutout value was 19¢ higher Friday afternoon at $226.93/cwt. Select was $1.92 higher at $220.28.

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Major U.S. financial indices closed higher Friday, buoyed by a strong employment report and continued optimism about a U.S.-China trade deal sooner rather than later.

Non-farm payroll employment increased 196,000 in March, according to the U.S. Bureau of Labor Statistics. The unemployment rate remained unchanged at 3.8%.

Average hourly earning for all employees on private non-farm payrolls increased 4¢ in March to $27.70.

The Dow Jones Industrial Average closed 40 points higher. The S&P 500 closed 13 points higher. The NASDAQ was up 46 points.

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Demand for turnout cattle continued to boost calf prices. Overall, steers and heifers traded steady to $3/cwt. higher, according to the Agricultural Marketing Service (AMS).

“Buyers were very critical of excessive flesh, especially on heifers as market activity slowed substantially if they were over-conditioned,” AMS analysts explained. “After the previous week’s downward trend in the futures contracts, early-week sales had cattle buyers more cautious when procuring heavier cattle.”

Feeder Cattle futures closed an average of 81¢ higher week to week on Friday, thanks in large part to a bounce higher Thursday, as traders continue to push Lean Hog futures.

Negotiated cash fed cattle trade remained undeveloped in the Northern Plains and western Corn Belt through Thursday afternoon. So far in the Southern Plains this week, live sales are $1-$2 lower at $124/cwt.

Even so, Cattle futures rallied sharply higher. Along with presumed technical support, the most plausible explanation is chatter about the U.S. and China nearing a trade deal and the notion that once-done, domestic commodities will reap significant benefit. There are lots of assumptions throughout the scenario, and plenty betting on them.

Except for 50¢ higher in the back contract, Live Cattle futures closed an average of $1.94 higher.

Feeder Cattle futures closed an average of $1.85 higher (85¢ to $2.85 higher).

Corn futures closed mostly 1¢ to 2¢ higher.

Soybean futures closed 6¢ to 7¢ higher.

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

Choice boxed beef cutout value was 60¢ higher Thursday afternoon at $226.74/cwt. Select was 61¢ lower at $218.36.

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Other than higher for the Dow, major U.S. financial indices closed narrowly mixed Thursday. Primary support seemed to be the aforementioned chatter that the U.S. and China are getting close to announcing a trade deal.

The Dow Jones Industrial Average closed 166 points higher. The S&P 500 closed 5 points higher. The NASDAQ was down 3 points.

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“While restaurant operators continued to report positive same-store sales in February, customer traffic turned negative for the first time in five months,” according to the latest Restaurant Performance Index (RPI) report from the National Restaurant Association (NRA). “Although 50% of operators expect their sales to be higher in six months–the highest level in over a year–their outlook for the overall economy remains uncertain.”

Specifically, 37% of restaurant operators reported year-over-year increased customer traffic in February; 44% reported a decline.

The RPI declined slightly month to month in February to 101.1. The index measures the health of the restaurant industry relative to a neutral level of 100. According to NRA, “Index values above 100 indicate that key industry indicators are in a period of expansion, while index values below 100 represent a period of contraction for key industry indicators.”

The RPI consists of the Current Situation Index and the Expectations Index. The former was lower for the third consecutive month.