WLI

Negotiated cash fed cattle trade got underway in the Southern Plains Wednesday, with early live sales $3-$5 lower than last week at $115-$117/cwt.

Similarly, slaughter steers and heifers sold $2-$4 lower at Sioux Falls Regional in South Dakota: $117.95/cwt. for Ch 2-3 steers.

Of the 376 head offered in the weekly Fed Cattle exchange Auction, 280 head sold for a weighted average price of $117/cwt. for delivery at 1-9 days.

Stronger Lean Hog futures helped lift Live Cattle futures Wednesday, while Feeder Cattle futures continued to be pressured by higher grain prices.

Except for 2¢ lower in the back contract, Live Cattle futures closed an average of 19¢ higher.

Feeder Cattle futures closed an average of 44¢ lower (7¢ to 60¢ lower).

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

Choice boxed beef cutout value was 55¢ lower Wednesday afternoon at $219.57/cwt. Select was 93¢ lower at $208.04.

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

Soybean futures closed 2¢ to 4¢ higher through Mar ’20 and then mostly fractionally mixed.

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Major U.S. financial indices closed higher Wednesday, on reports that President Trump will delay imposing higher tariffs on Chinese auto imports. Until that chatter began, markets were pressured by weaker economic data, which included a 0.2% decline in April U.S. retail sales, according to the U.S. Commerce Department.

The Dow Jones Industrial Average closed 115 points higher. The S&P 500 closed 16 points higher. The NASDAQ was up 87 points.

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“High prices rationed hay disappearance between Dec. 1 to May 1 to the lowest level since 2013-14 at 64 million tons. However, that still was not enough to prevent a year-over-year drop in the year-ending hay inventory,” say analysts with the Livestock Marketing Information Center (LMIC), in the most recent Livestock Monitor.

There were 14.91 million tons of hay on farms May 1, according to the most recent USDA Crop Production report. That was 442,000 fewer (-2.88%) than a year earlier, the second lowest inventory on record, according to LMIC.

There were 79.06 million tons of hay on farms Dec. 1 last winter, which was 5.37 million fewer tons (-6.36%)  than the year before.

“Several states are experiencing the cumulative effects of two consecutive years of tighter inventories, with a handful reaching the lowest levels in the past decade,” LMIC analysts say. “Using the 10-year yield average of 2.4 tons per acre, the total U.S. supply this marketing year (May 2019 – April 2020) is expected to increase 3% to 4%. All hay prices, even with that increase, are still expected to be above a year ago.”

All told, year-to-year hay stocks May 1 declined by more than 25% in 17 states.

“Texas and Oklahoma inventories are down more than 50% from two years ago,” explain LMIC analysts. “Surrounding states such as Louisiana, Arkansas, Kansas, and Missouri are also in tight inventory situations. Hay stocks are down more than 50% from 2017 in those states as well.”

LMIC is currently forecasting other hay national prices to be 5% higher this marketing year.

Stronger outside markets and a sharp reversal higher in Lean Hog futures provided support to Cattle futures early Tuesday, but surging grain prices took away gains by the close.

Live Cattle futures closed an average of 46¢ lower.

Other than 95¢ higher in spot May, Feeder Cattle futures closed an average of 93¢ lower.

Wholesale beef values were lower 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 $1.46 lower Tuesday afternoon at $220.12/cwt. Select was 8¢ higher at $208.97.

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Grain futures bounced higher on Tuesday, getting a boost from the most recent USDA Crop Progress report confirming the degree of late planting.

For instance, just 30% of corn was planted, which was 36% less than the 5-year average. Only 9% of soybeans are in the ground, compared to 29% for the average.

Corn futures closed 11¢ to 13¢ higher through Dec ’20, 6¢ to 9¢ higher in the next three contracts and then mostly 2¢ to 3¢ higher.

Soybean futures closed mostly 23¢ to 29¢ higher.

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Major U.S. financial indices rebounded Tuesday, gaining back about a third of the sizable losses from the previous session, which was tied to China’s retaliation to additional tariffs levied by the U.S. late last week. Nothing changed on that front.

The Dow Jones Industrial Average closed 207 points higher. The S&P 500 closed 22 points higher. The NASDAQ was up 87 points.

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“Calf and stocker prices have dropped significantly after peaking in April. While good moisture conditions imply good forage prospects this summer, cooler than normal weather has delayed pasture growth,” says Derrell Peel, extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “Calf prices generally decline from first-quarter peaks to seasonal lows in the fall. Heavy feeder cattle prices, which seasonally grind higher from now until late summer, have also dropped recently. I suspect this is largely due to delayed feedlot marketings resulting from earlier winter weather combined with continuing wet, sloppy feedlot conditions. Heavy feeder prices will likely get back on seasonal track as feedlots catch up from earlier delays and feedlot pen conditions improve in the next few weeks.”

Likewise, Peel suggests fed cattle prices are likely past the seasonal peak of $128/cwt. in March and April. He notes last week’s price of about $120 is the lowest since last December, with delayed support from summer grilling demand, due to the protracted cold, damp weather.

“Boxed beef cutout values will likely strengthen again with July 4 buying commencing in middle to late May. Warmer summer weather should also boost beef demand seasonally in the coming weeks,” Peel says. “While end meat prices are typically weaker in the summer, current weakness, especially for chuck products may additionally reflect weaker export demand so far in 2019.” 

So much for Friday’s reprieve in the futures market, Cattle futures sank on Monday, along with other commodities and equities as traders digested news that China was increasing tariffs on U.S. products in retaliation for the added levies imposed by the U.S. last week.

Live Cattle futures closed an average of $1.81 lower (85¢ lower at the back to $2.70 lower in spot Jun).

Feeder Cattle futures closed an average of $3.11 lower.

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

Choice boxed beef cutout value was 47¢ higher Monday afternoon at $221.58/cwt. Select was $1.43 higher at $208.89.

Corn futures closed mostly 2¢ to 5¢ higher through Jul ’20 and then mostly fractionally mixed.

Soybean futures closed 3¢ to 6¢ lower through Sep ’20 and then mostly 1¢ lower.

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Major U.S. financial indices closed sharply lower Monday on China’s retaliation to additional tariffs levied by the U.S. late last week.

The Dow Jones Industrial Average closed 617 points lower. The S&P 500 closed 69 points lower. The NASDAQ was down 269 points.

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Although U.S. pork exports continue to bear the brunt of ongoing trade issues between the U.S. and other countries, those issues are impacting U.S. beef exports, too.

Beef exports in March of 107,655 metric tons (mt) were 4% less year-over-year, according to data released by USDA and compiled by the U.S. Meat Export Federation (USMEF). Value was 2% less at $678 million.

For the first quarter, exports were down 3% at 307,306 mt valued at $1.9 billion (down 0.8%).

For perspective, U.S. pork exports of 211,688 mt were 7% less year over year in March and export value was 15% less at $520.7 million. For the first quarter, pork exports were 6% less than last year for volume and 14% less in value at $1.47 billion.

U.S. beef export value per head of fed slaughter for the first quarter was $309.32, which was 2% less than the same quarter last year.

South Korea continues to be the growth leader for U.S. beef exports, according to USMEF. First-quarter exports to South Korea were 8% more year over year at 56,173 mt. Export value of $414.2 million was 13% above last year’s record-shattering pace.

First-quarter exports to Japan were higher year over year for both tonnage and value, but were less in March.

“U.S. beef cuts are still subject to a 38.5% tariff in Japan while our competitors’ rate is nearly one-third lower at 26.6%,” explained Dan Halstrom, USMEF president and CEO. “This really underscores the urgency of the U.S.-Japan trade negotiations, which must progress quickly if we are going to continue to have success in the leading value market for U.S. beef and pork.”

Japan’s tariffs on beef variety meat are lower, but U.S. shipments are subject to a duty of 12.8% while competitors pay less than half that rate.

Maybe Cattle futures finally found a bottom to the recent selloff as short covering and positioning helped spur a rally late Friday.

Other than 50¢ higher in spot Jun, Live Cattle futures closed an average of $1.87 higher.

Feeder Cattle futures closed an average of $2.45 higher.

Wholesale beef values were lower 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 $1.36 lower Friday afternoon at $221.11/cwt. Select was 38¢ higher at $207.46.

Apparently, much of the bearish news in the monthly World Agricultural Supply and Demand Estimates (see below) was already priced into the market, given the muted reaction in futures markets.

Other than 1¢ to 2¢ lower in the front three contracts, Corn futures closed mostly 1¢ to 2¢ higher.

Soybean futures closed 1¢ to 3¢ lower through May ’20 and then mostly 1¢ higher.

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So much for fundamentals; chatter about on-again, off-again trade talks with China continued to whipsaw equity markets Friday, to the upside this time. Major U.S. financial indices closed higher on reports that talks with China were constructive.

The Dow Jones Industrial Average closed 114 points higher. The S&P 500 closed 10 points higher. The NASDAQ was up 6 points.

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Although cash fed cattle prices continue to soften, analysts with USDA’s Economic Research Service project slightly higher prices year over year— $118.50/cwt.—compared to $117.12 last year. In the latest World Agricultural Supply and Demand Estimates (WASDE), prices are forecast at $121 in the second quarter, $113 in the third quarter and $114 in the fourth quarter.

That’s with an estimated 27.27 billion lbs. of beef production, which would be 397 million lbs. more than last year.

Estimates for grain prices were significantly less bullish.

Corn

ERS projects the 2019-20 season-average farm price for corn 20¢ lower at $3.30/bu., the lowest since 2006-07.

Even with current planting wonderments, ERS forecasts this year’s corn crop at 15.0 billion bu. (yield of 176.0 bu./acre), which would be the second largest on record. Ending corn stocks for 2019-20 are projected to be 390 million bu. more than last year, with a stocks-to-use ratio of 16.9%, which would be the highest since 2005-06.

Soybeans

WASDE projects the 2019-20 U.S. season-average soybean price at $8.10/bu., down 45¢ from the previous year. Soybean meal prices are projected $15 less than the previous year at $290/short ton. Soybean oil prices are projected 1.5¢ higher at 29.5¢/lb.

“With sharply higher beginning stocks, soybean supplies are projected at 5,165 million bu., up 3% from 2018-19,” say ERS analysts.

Wheat

“The projected season-average farm price for wheat is $4.70/bu., down from last year’s estimated $5.20 on the expectation of greater export competition and lower U.S. corn prices.”

The growing likelihood that the U.S. would impose increased and expanded tariffs on Chinese imports Friday morning cast a pall over equity and futures markets Thursday. However, late session buying capped losses in Cattle futures.

Other than 87¢ and 20¢ higher in the front two contracts, Live Cattle futures closed an average of 15¢ lower.

Feeder Cattle futures closed an average of 37¢ higher.

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

Choice boxed beef cutout value was 54¢ lower Thursday afternoon at $222.47/cwt. Select was 41¢ lower at $207.08.

Grain futures fell hard, presumably pressured by the aforementioned trade news, as well as defensiveness ahead of Friday’s monthly World Agricultural Supply and Demand Estimates.

Corn futures closed mostly 8¢ to 11¢ lower through the front five contracts and then mostly 4¢ to 5¢ lower.

Soybean futures closed 11¢ to 14¢ lower through Aug ’20 and then mostly 6¢ to 9¢ lower.

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Major U.S. financial indices closed lower Thursday, with the White House apparently ready to increase tariffs on Chinese imports Friday morning. 

The Dow Jones Industrial Average closed 138 points lower. The S&P 500 closed 8 points lower. The NASDAQ was down 32 points.

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It’s no secret that the average age of agricultural producers continues to increase.

For instance, the average age of all U.S. farm producers in 2017 was 57.5 years, according to the 2017 Census of Agriculture. That was up 1.2 years from 2012. Only 8% of producers were younger than 35 years old; 34% were more than 65 years old.

Often missed in the conversation, though, is the fact that the average age of farm laborers is increasing, too, according to USDA’s Economic Research Service (ERS).

“Over the past decade, the average age of hired farm laborers (excluding managers, supervisors, and other supporting occupations) has risen steadily, from age 35.8 years in 2006 to 38.8 years in 2017, an increase of 8%,” according to a recent Amber Waves article by ERS economist, Thomas Hertz. “This increase has been entirely driven by the aging of foreign-born farm laborers, who comprised between 54% and 58% of the workforce over this period. Their average age rose from 35.7 in 2006 to 41.6 in 2017, an increase of 16%. In contrast, the average age of farm laborers born in the United States (including Puerto Rico) has remained roughly constant.”

Hertz explains the reduced flow of new immigrants since 2008 is the main reason age is increasing for the foreign-born farm laborer population.

“This diminishing flow is reflected in an increase in the average number of years since these workers’ original immigration, from 12.4 years in 2007 to 18.6 years in 2017,” Hertz says. “It is also reflected in a decline in the estimated numbers of unauthorized immigrants from Mexico who are in the country (counting all such people, not just farmworkers), which fell by about 22% between 2007 and 2016, according to the latest estimates from the Pew Research Center.

Incidentally, between 2006 and 2017, the share of female farm laborers increased  from 19.5% to 25.0%, according to Hertz.