WLI

There were a few negotiated cash fed cattle trades in Nebraska and the western Corn Belt on Friday at $127-$128/cwt. on a live basis, and a few in the beef at $205; too few to trend.

For the week, trade was generally steady at $128 in the Southern Plains and Nebraska. Dressed trade was also steady at $205.

A rally in Lean Hogs and expectations for fewer feedlot placements helped underpin Cattle futures on Friday.

Live Cattle futures closed an average of 52¢ higher (15¢ higher in the back contract to 75¢ higher).

Feeder Cattle futures closed an average of $1.03 higher (72¢ to $1.70 higher).

Corn futures closed mostly fractionally lower to 1¢ lower.

Soybean futures closed 5¢ to 7¢ lower through Jan. ’20 and then mostly 3¢ to 4¢ lower.

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

Choice boxed beef cutout value was 9¢ higher Friday afternoon at $226.13/cwt. Select was 24¢ higher at $218.78.

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Major U.S. financial indices closed lower Friday, but well off of session lows. Pressure came early with the monthly jobs report, indicating significantly few new jobs last month than expected. That and the bleaker outlook from the European Central Bank a day earlier bolstered angst about an economic slowdown.

Total non-farm employment grew by only 20,000 in February, according to the Bureau of Labor Statistics.

Average hourly earnings for all employees on private nonfarm payrolls rose by 11¢ in February to $27.66. Hourly earnings increased by 3.4% over the past year.

The Dow Jones Industrial Average closed 22 points lower. The S&P 500 closed 5 points lower. The NASDAQ was down 13 points.

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Feedlot placements continued lower month to month in January, according to Friday’s Cattle on Feed report. Placements of 1.96 million head were 5.27% less (-109,000 head) than a year earlier. Keep in mind the report reflects feedlots with 1,000 head or more capacity. Most analysts expected the decline to be a touch steeper, but the report likely will be gauged as neutral.

As for placement weights: 41.61% went on feed weighing up to 699 lbs.; 49.72% weighed 700-899 lbs.; 8.67% weighed 900 lbs.  

Marketings in January of 1.91 million head were 2.80% more (+52,000 head) than the previous January.

Cattle on feed Feb. 1 were 11.68 million head, which was 0.41% more (+48,000 head) than a year earlier.

Weekly negotiated cash fed cattle got underway Thursday with moderate trade and demand in the Southern Plains. Prices were steady with the previous week at $128/cwt. Though too few transactions to trend, there was also light to moderate trade in Nebraska at $128, which was steady with the bulk of the previous week’s sales in the region.

Steady cash prices helped lift Live Cattle futures.

Live Cattle futures closed an average of 53¢ higher (5¢ higher in spot Apr to 92¢ higher).

Short covering, apparently, and perhaps positioning ahead of Friday’s Cattle on Feed report helped Feeder Cattle futures gain back a fair portion of what was lost in the previous two sessions.

Feeder Cattle futures closed an average of $1.52 higher (45¢ in the back contract to $2.35 higher).

Corn futures closed mostly 3¢ to 6¢ lower.

Soybean futures closed mixed from 3¢ lower to 1¢ higher.

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

Choice boxed beef cutout value was $1.11 higher Thursday afternoon at $226.04/cwt. Select was 17¢ higher at $218.54.

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Major U.S. financial indices sunk lower Thursday, as investors fretted over a bleaker economic outlook for European Union (EU) countries.

In a prepared press statement yesterday, Mario Draghi, president of the European Central Bank (ECB) explained real GDP for the Euro area increased by only 0.2% in the fourth quarter last year, following growth of 0.1% in the third quarter.

“Real GDP growth remained unexpectedly sluggish in the fourth quarter of 2018, and recent indicators point to substantially weaker than previously expected activity also in the first half of 2019,” according to ECB staff macroeconomic projections for the euro area released yesterday. “While some temporary factors are likely to have contributed to the slowdown in activity in late 2018, the broad-based worsening of economic sentiment indicators across countries and sectors in recent months suggests that more persistent adverse factors have also been at play and that the underlying cyclical momentum is somewhat weaker than previously assessed.”

The ECB projects GDP growth at 1.1% this year, down from 1.7% in their previous forecast.

The Dow Jones Industrial Average closed 200 points lower. The S&P 500 closed 22 points lower. The NASDAQ was down 84 points.

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U.S. beef exports blasted through previous records for value last year, according to year-end 2018 statistics released by USDA and compiled by the U.S. Meat Export Federation (USMEF). Exports also achieved a new high for volume.

Beef export value last year was $8.33 billion, which was $1.06 billion more—15% more—than the previous record set a year earlier. The volume of 1.35 million metric tons (mt) was 7% more than the previous year and 5% more than the previous record set in 2011.

Beef export value per head of fed slaughter last year was also record high at $323.14, which was 13% more than the previous year and 8% more than the previous record set in 2014.

South Korea accounted for half of the $1 billion surge in beef exports. Japan, Taiwan and the ASEAN region also fueled demand growth.

Negotiated cash fed cattle trade remained undeveloped through Wednesday afternoon, but a variety of indicators suggested at least steady prices this week.

At Sioux Falls Regional in South Dakota, Ch 2-4 steers brought $125.50 to $129.75/cwt. on Wednesday. The deepest test of Ch 2-4 steers at Tama, IA brought an average price of $130.81.

Through Tuesday, the 5-area direct live steer price was $128.50 on a smattering of trades, about even with the previous week.

There were only 300 head offered in the weekly Fed Cattle Exchange auction, and no takers.

Live Cattle futures puttered in place Wednesday, drifting a touch lower, while Feeder Cattle continued to soften amid light trade.

Other than 7¢ higher in spot Apr, Live Cattle futures closed an average of 26¢ lower.

Feeder Cattle futures closed an average of 79¢ lower (22¢ to $1.02 lower).That’s an average of about $1.50 lower in the last two sessions.

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

Soybean futures closed 10¢ to 11¢ lower through Aug ’20 and then 7¢ to 9¢ lower.

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

Choice boxed beef cutout value was 89¢ higher Wednesday afternoon at $224.93/cwt. Select was 58¢ higher at $218.37.

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Major U.S. financial indices closed lower Wednesday, without much fundamental direction, but apparent rally fatigue as investors wait for a resolution to U.S.-China trade talks.

The Dow Jones Industrial Average closed 133 points lower. The S&P 500 closed 18 points lower. The NASDAQ was down 70 points.

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Despite lighter year-to-year carcass weights, beef production continued to climb in January, according to the most recent USDA Livestock Slaughter report.

Total beef production in January of 2.31 billion lbs. was 30.8 million lbs. more than the previous year (+1.35%).

Fed steer and heifer slaughter under federal inspection of 2.19 million head was 61,200 head more (+2.87%) than the previous year.

Total cattle slaughter of 2.79 million head was 72,100 head (+2.66%) than a year earlier.

Average steer dressed weight in January was 886 lbs., which was 7 lbs. lighter than a year earlier. Average dressed heifer weight was 12 lbs. lighter at 824 lbs.

Total red meat production in January of 4.70 billion lbs. was 114.1 million lbs. more (+2.49%) than the same month a year earlier.

Front-month Live Cattle futures firmed Tuesday, following pressure in the previous session, perhaps suggesting traders took a harder look at currently favorable fundamentals; open interest continues to grow. Feeder Cattle gave back the previous day’s gains amid light trade.

Except for 47¢ higher in spot Apr, Live Cattle futures closed narrowly mixed (20¢ lower to 5¢ higher).

Feeder Cattle futures closed an average of 70¢ lower.

Corn futures closed mostly 1¢ to 2¢ higher.

Soybean futures closed 1¢ to 2¢ lower through Mar ’20 and then mostly fractionally higher.

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

Choice boxed beef cutout value was 49¢ higher Tuesday afternoon at $224.04/cwt. Select was 58¢ higher at $217.79.

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Major U.S. financial indices leaked lower Tuesday. Support included strong quarterly earnings from retailers such as Target and Kohl’s. Drag included the lack of resolution to trade talks between the U.S. and China.

The Dow Jones Industrial Average closed 13 points lower. The S&P 500 closed 3 points lower. The NASDAQ was down 1 point.

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Farmer sentiment weakened last month amid increasing concerns about marketing risk and continued uncertainty around tariffs, according to the latest  Purdue-CME Group Ag Economy Barometer.

The February barometer—based on a survey of 400 U.S. agricultural producers—declined 7 points from the previous month to 136.

“Last month we saw a significant boost in optimism among agricultural producers after the announcement of the second round of MFP payments; however, it appears the positive impact eroded quickly,” says James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture. “Compared to responses from a year ago, fewer farms said they expect their operation to grow in the future, which could be a sign of increasing financial stress. We’re also seeing a growing number of farms concerned about marketing risk, ranking it as the biggest risk facing their operations.”

The monthly survey includes measures of producer sentiment toward current conditions and future expectations. In February, both indexes declined. The Index of Current Conditions saw the biggest drop, down from 132 to 119, whereas the Index of Future Expectations weakened slightly, down from 148 to 145.

When producers were asked whether they have plans to grow or increase the size of their current operation in 2019, 50% of respondents said that they either “have no plans to grow” or “plan to reduce in size,” compared to 39% in 2018. Last month, when 25% of farmers surveyed indicated they expected to take out a larger operating loan in 2018 versus 2019, a follow-up question found that 27% of those farms were taking out larger loans due to unpaid operating debt carryover, suggesting they were experiencing financial stress.

Live Cattle futures softened Monday, perhaps on profit taking, given stronger cash prices and higher wholesale beef values. Feeder Cattle gained, though, with some chatter crediting support to the potential impact of the recent arctic blast.

Other than 30¢ and 2¢ higher in the back two contracts, Live Cattle futures closed an average of 44¢ lower.

Other than 2¢ lower in the front two contracts, Feeder Cattle futures closed an average of 86¢ higher.

Corn futures closed fractionally higher to 1¢ higher.

Soybean futures closed 4¢ to 5¢ higher.

Wholesale beef values were sharply higher on Choice and firm on Select with fairly good demand and light offerings, according to the Agricultural Marketing Service.

Choice boxed beef cutout value was $2.26 higher Monday afternoon at $223.55/cwt. Select was 42¢ higher at $217.21.

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Major U.S. financial indices closed lower Monday, with more data pointing toward slowing domestic economic growth. In this case, it was less construction spending than expected for December, according to the latest report from the U.S. Department of Commerce.

The Dow Jones Industrial Average closed 206 points lower. The S&P 500 closed 10 points lower. The NASDAQ was down 17 points.

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“It appears that herd expansion is nearly over, although the level of beef replacement heifers is large enough to support a minimal level of additional herd expansion in 2019,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments.

Peel is referring to last week’s Cattle report. Although there were more beef cows Jan 1—299,500 more than a year earlier—significantly fewer beef heifers were retained as replacements.

Specifically, there were 5.92 million beef replacement heifers Jan. 1, according to the Cattle report. That was 183,300 head fewer than a year earlier or 3.0% less.

“Beef replacement heifers as a percent of the beef cow herd on Jan. 1 of 2019 was 18.7%. This ratio is down from 19.4% one year ago as heifer retention moves closer to levels consistent with zero herd growth,” Peel explains. “A record heifer retention level occurred in 2016 with beef replacement heifers at 21.0% of the beef cow herd. Over the past 30 years this ratio has averaged 17.8%.”

That doesn’t mean the herd will necessarily shrink much after hitting the cyclical peak.

 “While cyclical expansion may be mostly complete, there is no indication of herd liquidation at this time. Average cattle prices are expected to continue at current levels and seem likely to hold cattle numbers steady in 2019,” Peel says. “Future market conditions, good or bad, could prompt additional expansion or liquidation in 2020 and beyond. Producers should continue to monitor domestic and international market conditions to see what new cattle market direction emerges in the coming months.”