WLI

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.

Negotiated cash fed cattle trade was $3-$5 lower last week on a live basis at $115-$117/cwt. in the Southern Plains, $117 in Nebraska and $116-$118 in the western Corn Belt. Dressed prices were $2-$5 lower in the western Corn Belt at $185-$190 and $3-$10 lower in Nebraska at $185-$186.

Oversold conditions and follow-through technical support helped Cattle futures close higher Friday, especially Feeder Cattle.

Live Cattle futures close an average of $1.31 higher (80¢ to $1.80 higher).

Except for 30¢ higher in spot May, Feeder Cattle futures close an average of $2.35 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 75¢ higher Friday afternoon at $220.31/cwt. Select was 40¢ higher at $208.28.

Corn futures closed 1¢ to 4¢ higher through May ’20, and then mostly fractionally lower to 1¢ lower.

Soybean futures closed 14¢ to 18¢ lower, mostly 16¢-17¢ lower.

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Major U.S. financial indices closed lower Friday in a late-session sell-off attributed to reports that trade talks between the U.S. and China are at a standstill.

The Dow Jones Industrial Average closed 98 points lower. The S&P 500 closed 16 points lower. The NASDAQ was down 81 points.

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Cattle producers received positive trade news at the end of the week.

U.S. Agriculture Secretary Sonny Perdue announced on Friday that Japan agreed to eliminate longstanding restrictions on U.S. beef exports, including the 30-month cattle age limit.

The U.S. Meat Export Federation (USMEF) estimates removal of the cattle age restriction will increase exports to Japan 7% to 10%, or by $150 million to $200 million per year.

“The ability to use beef from over-30-month cattle will also lower costs for companies exporting processed beef products to Japan,” says Dan Halstrom, USMEF president and CEO. “But for the U.S. industry to fully capitalize on this growth opportunity, U.S. beef needs to be on a level playing field in Japan. So, USMEF is also anxious to see progress in the U.S.-Japan trade negotiations.”

Also on Friday, according to the Office of the United States Trade Representative,

“The United States announced an agreement with Canada and Mexico to remove the Section 232 tariffs for steel and aluminum imports from those countries and for the removal of all retaliatory tariffs imposed on American goods by those countries.”

Those tariffs were a sticking point in completing the U.S.-Mexico-Canada (USMCA) trade agreement.

“Today’s announcement is a big win for American agriculture and the economy as a whole,” says Secretary Perdue. “Canada and Mexico are two of our top three trading partners, and it is my expectation that they will immediately pull back their retaliatory tariffs against our agricultural products. Congress should move swiftly to ratify the USMCA so American farmers can begin to benefit from the agreement.”

Cash fed cattle trade continued Thursday with live sales in Nebraska $3-$4 lower than last week at $117/cwt. A day earlier, live trade in the Southern Plains was $3-$5 lower than last week at $115-$117.

Even so, oversold conditions helped Live Cattle futures close an average of $1.17 higher, except for 7¢ higher in the back contract

Despite early pressure and higher grain prices, firming Live Cattle helped Feeder Cattle futures close an average of $1.03 higher (7¢ to 60¢ higher), except for $1.70 lower in spot May.

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

Choice boxed beef cutout value was 1¢ lower Thursday afternoon at $219.56/cwt. Select was 16¢ lower at $207.88.

Corn futures closed 3¢ to 9¢ higher through Jul ’20, and then mostly 1¢ higher. That’s an average of 25¢ higher week to week through the front three contracts; an average of 21¢ higher through the front six.

Soybean futures closed 4¢ higher through May ’20 and then mostly 1¢ to 3¢ higher. That’s an average of 36¢ higher through the front six contracts since Monday.

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Major U.S. financial indices closed higher again Thursday, buoyed by banks and quarterly earnings from Walmart that beat expectations.

The Dow Jones Industrial Average closed 214 points higher. The S&P 500 closed 25 points higher. The NASDAQ was up 75 points.

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“Based on recent price data and the number of fed cattle that will likely be available for marketing this year, the forecasts for second and third-quarter 2019 fed steers were lowered $3 and $2 to $121/cwt. and $113, respectively,” say analysts with USDA’s Economic Research Service (ERS), in the monthly Livestock, Dairy and Poultry Outlook released Thursday.

Both cattle numbers and carcass weights are increasing.

Average steer dressed weight was 3 lbs. heavier than a year earlier at 852 lbs. for the week ending May 4, according to USDA’s Actual Slaughter Under Federal Inspection report. Average dressed heifer weight was 9 lbs. heavier at 795 lbs. Fed steer and heifer slaughter of 541,532 head was 17,743 head more than the same week a year earlier. Total cattle slaughter of 672,540 head was 20,203 head more. Beef production of 535.9 million lbs. was 16.3 million lbs. more.

“Based on recent price data and expectations of feedlots being less likely to bid up the price, the second-quarter 2019 feeder steer price was lowered by $2 to $145/cwt.,” say ERS analysts. “The fourth-quarter 2019 price was raised $1 to $147 based on expected fall demand. As a result, this month’s annual price forecast for 2019 was $145.50, close to last month’s forecast.”

For year-to-year perspective, 2018 feeder steers pries were $143.05 in the second quarter, $150.46 in the third and $147.90 in the fourth.

USDA’s initial projections for 2020 estimate an annual average feeder steer price of $150/cwt.