WLI

Follow through pressure in Lean Hogs, higher Corn futures and Friday’s Cattle on Feed report helped pressure Feeder Cattle futures sharply lower on Monday, while Live Cattle were narrowly mixed but mostly lower.

Except for an average of 29¢ higher in the front two contracts, Live Cattle futures closed an average of 28¢ lower.

Feeder Cattle futures closed an average of $2.05 lower ($1.70 to $2.45 lower).

After a profit-taking breather on Friday, grain futures continued higher on Monday with the latest Crop Progress report (see below) documenting the significant delay in development compared to the average.

Corn futures closed 3¢ to 4¢ higher through Jul ‘20 and then mostly 1¢ to 2¢ higher.

Soybean futures closed 5¢ to 6¢ higher through Jan ’21 and then 2¢ to 3¢ higher.

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

Choice boxed beef cutout value was 8¢ lower Monday afternoon at $219.74/cwt. Select was 26¢ higher at $199.81.

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Major U.S. financial indices closed narrowly mixed Monday, with traders apparently waiting for more direction from trade talks. President Trump and the Chinese leader are scheduled to meet at the G20 Summit that begins later this week. 

The Dow Jones Industrial Average closed 8 points higher. The S&P 500 closed 5 points lower. The NASDAQ was down 26 points.

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“The lack of summer thus far has limited seasonal beef demand,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “After early beef buying in April for Memorial Day, boxed beef cutout values have weakened, averaging 3.8% lower year over year for the last six weeks. The daily boxed beef price last Friday was down 6.2% from the peak price in late April. The weakness has been most pronounced in the high value middle meats, with loin primals averaging 7.9% lower year over year for the last six weeks and rib primals averaging 5.5% lower year over year for the same period. Chuck and round primals have fared somewhat better with round primals down only 1.8% year over year and chuck primals up an average of 1.3% over the last six weeks, compared to the same period last year. Both chuck and round values have showed more strength in the latest weekly data. Encouragingly, the ground beef market is showing a little life with both lean trimmings and 50% trimmings currently priced a bit higher compared to last year.”

Although there will likely be pent up demand for the 4th of July, Peel notes current weather forecasts indicate large swaths of the nation will still be experiencing below normal temperatures.

“Moreover, continued flooding and swollen rivers and lakes in some regions will limit recreational activities for some time yet,” Peel says.

Negotiated cash fed cattle prices last week ended up $2-$4 lower on a live basis at $108-$110/cwt. in the Southern Plains, mostly $110 in Nebraska and at $113-$114 in the western Corn Belt. Dressed trade was $3-$4 lower in Nebraska at $180-$183 and $6 lower in the western Corn Belt at $178-$180.

Limit-down moves in Lean Hog futures, lower cash fed cattle prices, the outlook for higher feed prices and perhaps some positioning ahead of the monthly Cattle on Feed report (see below) contributed to further erosion in Cattle futures on Friday.

Live Cattle futures closed an average of 88¢ lower (40¢ to $1.72 lower).

Feeder Cattle futures closed an average of $1.22 lower.

Grain futures ended the week lower on apparent profit taking.

Corn futures closed 6¢ to 7¢ lower through Jul ‘20 and then fractionally higher to 1¢ higher.

Soybean futures closed mostly 10¢ to 13¢ lower. 

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

Choice boxed beef cutout value was 90¢ lower Friday afternoon at $219.82/cwt. Select was $1.93 lower at $199.55.

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Major U.S. financial indices edged lower Friday. 

The Dow Jones Industrial Average closed 34 points lower. The S&P 500 closed 3 points lower. The NASDAQ was down 19 points.

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Markets will likely view Friday’s monthly Cattle on Feed report—feedlots with 1,000 head or more capacity—as neutral to slightly bearish.

Placements in May of 2.06 million head were 2.82% less (-60,000 head) than the previous year, whereas expectations ahead of the report were for a decline of about 4%. In terms of placement weight, 32.71% went on feed weighing less than 699 lbs.; 50.33% weighing 700-899 lbs.; 16.95% weighing 900 lbs. or more.

Marketings in May of 2.07 million head were 0.68% more (+14,000 head) than the previous year. Expectations ahead of the report were for an increase of 0.80%.

Cattle on feed June 1 of 11.74 million head were 1.62% more (+187,000 head) more than last year, the most for the month since the data series began in 1996. Heading into the report, expectations were for an increase of 1.30%.

More positive, the monthly Cold Storage report indicates beef in freezers as of May 31 was 6% less than the previous month and 13% less than the previous year. That follows the steep decline of the previous month when supplies were 5% less month to month and 9% less year over year.

Frozen pork supplies were 1% more than the previous month and year.

Total frozen red meat supplies were 2% less than the previous month and 6% less than the prior year.

Total frozen poultry supplies were 2% less than the previous month and 6% less than the previous year.

Negotiated cash fed cattle trade developed Thursday at mostly decidedly lower money. Except for mostly steady in Kansas at $110/cwt., live trade was $2-$4 lower at $110 in Nebraska and the Texas Panhandle; $110-$114 in the western Corn Belt. Dressed trade was $3-$4 lower at $180-$183.

Resurgent corn prices—after a couple of days of repositioning—weighed heavy on Cattle futures Thursday.

Live Cattle futures closed an average of 69¢ lower.

Feeder Cattle futures closed an average of $1.47 lower.

Corn futures closed 7¢ to 10¢ higher through Jul ‘20 and then mostly fractionally higher to 1¢ lower.

Soybean futures closed 10¢ to 13¢ higher through Jan ‘21 and then mostly 9¢ higher.

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

Choice boxed beef cutout value was 87¢ lower Thursday afternoon at $220.72/cwt. Select was 76¢ lower at $201.48.

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Major U.S. financial indices closed sharply higher Thursday. Support included follow through optimism that the Fed will cut interest rates, as well as a bounce in energy.

Crude oil prices (WTI-CME) jumped $2.87 to $3.10 on 2019 contracts with reports that Iran shot down a U.S. surveillance drone flying over international waters. Along with recent tanker bombings in the Gulf of Oman, the move could escalate tensions between the U.S. and Iran. By some calculations, about 20% of global oil consumption must move from the Persian Gulf through the Strait of Hormuz to get to open water. Iranian territorial waters lie within the Strait.

The Dow Jones Industrial Average closed 249 points higher. The S&P 500 closed 27 points higher. The NASDAQ was up 64 points.

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Commercial red meat production of 4.57 billion lbs. in May was 1% more than the previous year and record-large, according to USDA’s monthly Livestock Slaughter report issued yesterday.

Beef production of 2.33 billion lbs. was up 1% year over year, as was total cattle slaughter of 2.94 million head.

For January through May of this year, commercial red meat production of 22.4 billion lbs. was 2% more than the same period last year.

At 847 lbs., the average dressed steer weight in May was 12 lbs. less than the previous month and 1 lb. less than the previous year. Average dressed heifer weight was 788 lbs., which was 11 lbs. less than the previous month and 2 lbs. lighter than the previous year.

Lower year-over-year carcass weights continued through the first week of June, according to USDA’s Actual Slaughter Under Federal Inspection report. Average dressed weights for both steers (846 lbs.) and heifers (782 lbs.) were 5 lbs. lighter year over year (week ending June 8).

Early indications for negotiated cash fed cattle trade this week appeared to be steady to lower on Wednesday.

Although too few transactions to trend, there were some early sales in the western Corn Belt $1-$2 lower than last week at $112-$115/cwt. Dressed sales were steady to $4 lower $180-$184.

Likewise, Choice 2-4 steers traded $2.00-$2.50 lower at the fat auction in Tama, IA: an average of $118.11/cwt. for steers weighing an average of 1,329 lbs.

On the other hand, slaughter steers sold steady to firm at Sioux Falls Regional in South Dakota: $113.98/cwt. for Ch 2-3 at an average of 1,373 lbs.

There were only three lots (315 head) offered in the weekly Fed Cattle Exchange auction, and no sales.

Perhaps cash uncertainty was one reason behind sputtering Cattle futures, despite stronger Lean Hogs and softer Corn. Along with continued fretting over demand and sluggish trade, erosion might also be linked to position squaring.

Live Cattle futures closed an average of 77¢ lower (15¢ lower at the back to $1.07 lower).

Except for 13¢ higher in three away contracts, Feeder Cattle futures closed an average of 37¢ lower, amid extremely light trade.

Corn futures closed 8¢ to 9¢ lower through Jul ‘20 and then mostly 1¢ to 3¢ lower.

Soybean futures closed 8¢ to 11¢ lower through Mar ‘20 and then 5¢ to 6¢ lower.

Incidentally, heading into Friday’s monthly Cattle on Feed report, analysts surveyed for Bloomberg expect May placements to be about 4% less year over year, May marketings to be nearly 1% more and the on-feed inventory June 1 to be a little over 1% more.

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

Choice boxed beef cutout value was $1.06 higher Wednesday afternoon at $221.59/cwt. Select was 44¢ higher at $202.24.

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Major U.S. financial indices edged higher Wednesday. Although the Federal Open Market Committee (FOMC) left interest rates unchanged, markets seemed buoyed by indications that the Fed was leaving the door open to rate cuts.

“The Committee continues to view sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2% objective as the most likely outcomes, but uncertainties about this outlook have increased,” according to an FOMC statement. “In light of these uncertainties and muted inflation pressures, the Committee will closely monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion…”

The Dow Jones Industrial Average closed 38 points higher. The S&P 500 closed 8 points higher. The NASDAQ was up 33 points.

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As many folks trying to lease or buy pasture in recent years can attest, the value continues to rise. USDA’s Agricultural Land Values-Final Estimates released yesterday provide some perspective. The average value of pasture increased every year, from $1,290 per acre in 2014 to $1,370 in 2018.

Conversely, average Cropland value in 2018 was $4,050 per acre, $20 less than a year earlier and $40 less than in 2014.

Some examples of average pasture value for the states with the most beef cows: Texas ($1,570); Oklahoma ($1,380); Missouri ($1,920); Nebraska ($975); South Dakota ($1,040); Kansas ($1,320); Montana ($667); Kentucky ($3,000).  

Cattle futures mostly maintained and extended gains from the previous session on Tuesday, buoyed by a breather in the Corn rally and higher outside markets.

Except for unchanged and 7¢ lower in the front two contracts, Live Cattle futures closed an average of 71¢ higher.

Feeder Cattle futures closed an average of 75¢ higher (32¢ up front to $1.27 higher at the back).

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 $1.29 lower Tuesday afternoon at $220.53/cwt. Select was 71¢ lower at $201.80.

Corn futures closed mostly 4¢ to 6¢ lower through Sep ‘20 and then mostly fractionally mixed.

Soybean futures closed fractionally higher to 1¢ higher through Mar ‘20 and then fractionally lower to 1¢ lower.

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Major U.S. financial indices closed sharply higher Tuesday, apparently based on speculation, more than anything. First, speculating that a China trade deal is within grasp as reports indicate President Trump is scheduled to meet with China’s leader ahead of the G20 Summit scheduled June 28-29. Next, speculation that the Fed will conclude its meeting Wednesday with either a rate cut or language signaling that they will ease rates sooner rather than later. Markets were also buoyed by reports that the European Central Bank stood ready to provide more economic stimulus in an effort to stimulate economic growth.

West Texas Intermediate Crude Oil futures on the CME also bounced higher on hopes of increased demand. Contracts for the remainder of this year closed $1.64-$1.97 higher.

The Dow Jones Industrial Average closed 353 points higher. The S&P 500 closed 28 points higher. The NASDAQ was up 108 points.

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“It is a rare year in that corn prices are significantly higher while pasture conditions are in better shape than is usually expected this time of year,” says Josh Maples, Extension agricultural economist at Mississippi State University, in the latest issue of In the Cattle Markets. “This is likely to lead to shifts in how gain is added to feeders this year. Producers may glance at the lower prices offered and decide to push them a little longer on pasture. This could potentially lead to slower feedlot placements and temper 2019 beef production slightly.”

After year-to-year strength in April, Maples points out cash feeder cattle prices followed Feeder Cattle futures lower, due to a number of factors

“The usual peak in March or April is generally followed by a decline into the summer. Add in a bearish April Cattle on Feed report, weaker export totals, and the corn market rally, and there was not much good news for cattle markets in late April and May,” Maples explains. “Large supplies are still a major piece of the market puzzle, also. U.S. cattle slaughter for the first quarter of 2019 was about 1% above a year ago. However, lower cattle dressed weights have helped to moderate beef supplies.”