WLI

Negotiated cash fed cattle trade was $1.50-$3.50 higher on a live basis Friday at $128-$130/cwt. in the western Corn Belt, $128-$129 in Nebraska and, according to the Texas Cattle Feeders Association, at $128 in the Texas Panhandle. In the beef, prices were $3 more than the previous week at $205 with a few up to $206 in the western Corn Belt.

Live Cattle futures mostly edged higher on fundamental strength Friday, while nearby Feeder Cattle dropped, perhaps with queasiness about increased numbers waiting to go on feed, plus the slower pace of fed cattle marketing.

Other than 30¢ and 7¢ lower at either end of the board, Live Cattle futures closed an average of 16¢ higher.

Feeder Cattle futures closed an average of 92¢ lower across the front half of the board (20¢ lower to $1.65 lower in spot Mar) and then an average of 38¢ higher (5¢ higher to $1.30 higher in the back contract).

Corn futures closed 1¢ to 2¢ higher.

Soybean futures closed mostly 1¢ to 2¢ higher.

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

Choice boxed beef cutout value was $1.34 higher Friday afternoon at $221.29/cwt. Select was $1.52 higher at $216.79.

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Major U.S. financial indices closed higher Friday, with growing optimism regarding a U.S.-China trade deal. That was tempered by economic news, such as that from the Institute for Supply Management (ISM)—Manufacturing Report on Business—pointing to slowing domestic economic growth.

“Comments from the panel reflect continued expanding business strength, supported by notable demand and output, although both were softer than the prior month,” said Timothy R. Fiore, CPSM, C.P.M., Chair of ISM’s Manufacturing Business Survey Committee. “Demand expansion continued, with the New Orders Index reaching the mid-50s, the Customers’ Inventories Index scoring lower and remaining too low, and the Backlog of Orders returning to a low-50s expansion level. Consumption (production and employment) continued to expand but fell a combined 8.9 points from the previous month’s levels. Inputs — expressed as supplier deliveries, inventories and imports — stabilized at a mid-50s level and had a slight negative impact on the PMI®. Inputs continue to reflect an easing business environment, confirmed by Prices Index contraction.”

The Dow Jones Industrial Average closed 110 points higher. The S&P 500 closed 19 points higher. The NASDAQ was up 62 points.

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“The April live cattle contract is running more than a $9 premium to the June contract and more than a $13 premium to the August contract. At the same time, the finished cattle market is trading between a negative $1 to negative $2 basis compared to the April contract,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “Considering this scenario, there is a large price gap to fill between now and the June contract. As likely or as unlikely as it may seem that finished cattle prices will decline $9 between April and June, the market could actually have more swing than what is being represented by futures. Steer slaughter the first couple of months of 2019 has been below previous year levels, which likely means there are more animals waiting in the balance the next few months.”

Fed cattle slaughter in December of 2.01 million head was 0.67% less (-13,500 head) than the previous December, according to the latest USDA Livestock Slaughter report. December beef production of 2.12 billion lbs. was 1.52% less (-32.6 million lbs.) than the same month in 2017.

Negotiated cash fed cattle trade, undeveloped through Thursday afternoon, is setting up to be another late or after-hour affair again this week.

Live Cattle futures mostly tread water, while continued anemic trade, likely month-end position squaring and pessimism about growing fed cattle supplies later in the year helped pressure Feeder Cattle.

Other than 55¢ higher in spot Feb and unchanged in Jun, Live Cattle futures closed an average of 19¢ lower.

Feeder Cattle futures closed an average of $1.03 lower through the front three contracts and then an average of 27¢ lower, except for 12¢ higher in Nov.

Corn futures closed mostly 2¢ to 3¢ lower.

Soybean futures closed mostly 3¢ to 6¢ lower.

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

Choice boxed beef cutout value was 49¢ higher Thursday afternoon at $219.95/cwt. Select was $2.48 higher at $215.27.

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Major U.S. financial indices closed lower Thursday, presumably on failed talks between the U.S. and North Korea, regarding the latter’s nuclear weapons.

Pessimism came despite stronger domestic economic growth in the fourth quarter than many expected. Real gross domestic product (GDP) increased at an annual rate of 2.6% in the fourth quarter of 2018, according to the initial estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 3.4%.

The Dow Jones Industrial Average closed 69 points lower. The S&P 500 closed 7 points lower. The NASDAQ was down 22 points.

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Cow-Calf producers continued to expand the nation’s beef cowherd last year by close to 1%, according to the delayed Cattle report issued by USDA on Thursday.

Specifically, 31.77 million beef cows Jan. 1 were 299,500 more than a year earlier or 0.95% more.

Of the eight states with more than 1 million beef cows, five began this year with more numbers: 135,000 head more in Texas (+2.99%); 67,000 head more in South Dakota (+3.83%); 62,000 head more in Oklahoma (+2.97%); 31,000 head more in Nebraska (+1.62%); 25,000 head more in Kansas (+1.67%).

As expected at this stage of the cattle cycle—expansion nearing the plateau—producers are retaining fewer replacements: 5.92 million beef replacement heifers Jan. 1 were 183,300 head fewer than a year earlier or 3.0% less.

States with the most year-to-year growth in beef replacement retention included: Florida, Michigan, North Dakota, Oregon, South Carolina, Tennessee and Washington.

The total inventory of all cattle and calves Jan. 1 of 94.76 million head were 461,700 more than a year earlier or 0.49% more

Estimated feeder cattle supply (cattle outside feedlots) of 26.38 million head was 0.98% more (+255,400 head) than Jan. 1 a year earlier.

By and large, estimates ahead of the report were in line with USDA estimates or a touch more conservative.

One more thing, despite tough, wet conditions for planting winter wheat, the 1.9 million head grazing small grain pastures in Kansas, Oklahoma and Texas is 400,000 head more (+26.67%) than a year earlier.

Negotiated cash fed cattle trade remained undeveloped through Wednesday afternoon.

Trends at fat cattle auctions were mixed. For instance, Choice 2-4 steers brought $129.23 to $129.83/cwt. at Tama, IA. On the other hand, significantly more Ch 2-4 steers (higher dressing) at Sioux Falls, SD brought $125.50-$126.75.

Only three lots of heifers (287 head) were offered in the weekly Fed Cattle Exchange auction on Wednesday, and no takers.

Even so, overall chatter continued to suggest higher prices when trade finally breaks loose this week, supported by strong beef fundamentals and the notion that packers appear to be even mort short-bought than last week.

Cattle futures basically paddled in place Wednesday, scooting forward a touch as traders awaited further cash direction.

Other than 17¢ lower in almost spent spot Feb, Live Cattle futures closed an average of 11¢ higher.

Feeder Cattle futures closed an average of 26¢ higher.

Corn futures closed 1¢ to 2¢ lower through Jul ‘20 and then mostly fractionally lower. 

Soybean futures closed fractionally mixed. 

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

Choice boxed beef cutout value was 21¢ lower Wednesday afternoon at $219.46/cwt. Select was 94¢ lower at $212.79.

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Major U.S. financial indices continued to soften Wednesday, with many analysts attributing the decline to comments made by U.S. Trade Representative, Robert Lighthizer, which highlighted the distance left between the U.S. and China in trade talks.

Testifying before the House Ways and Means Committee, Lighthizer explained, “…we have engaged in a very intense, extremely serious, and very specific negotiation with China on crucial structural issues for several months now. We are making real progress. If we can complete this effort–and again I say ‘if’–and can reach a satisfactory solution to the all-important outstanding issue of enforceability, as well as some other concerns, we might be able to have an agreement that helps us turn the corner in our economic relationship with China. Let me be clear: much still needs to be done both before an agreement is reached and, more importantly, after it is reached, if one is reached.”

Support for the day included higher crude oil prices, supported by a decline in U.S. crude oil stockpiles last week, as well as indications OPEC is standing pat against President Trump’s request for that organization to loosen its restrictions on production.

The Dow Jones Industrial Average closed 72 points lower. The S&P 500 closed 1 point lower. The NASDAQ was up 5 points.

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USDA’s latest Livestock Slaughter report offers some perspective on the beef and red meat production growth last year, as well as underscoring the impact winter weather had on beef production in December.

Fed cattle slaughter in December of 2.01 million head was 0.67% less (-13,500 head) than the previous December. December beef production of 2.12 billion lbs. was 1.52% less (-32.6 million lbs.) than the same month in 2017.

For all of 2018, fed cattle slaughter of 25.8 million head was 1.66% more (+421,800 head) than the previous year.

Year to year, fed heifer slaughter was 6.45% more at 9.12 million head, while fed steer slaughter was 0.80% less at 16.64 million head.

Dressed steer weights in December of 894 lbs. were 9 lbs. less than the same time a year earlier. Dressed heifer weights of 843 lbs. were 11 pounds less. For all of 2018, however, dressed steer weights were 3 lbs. more than the previous year at 880 lbs. Dressed heifer weights were 5 lbs. more at 817 lbs.

Total cattle slaughter last year of 32.52 million head was 2.57% more (+813,800 head) than the previous year.

Total beef production of 26.87 billion lbs. last year was 2.59% more (+679.6 million lbs.) than in 2017.

Total red meat production last year of 53.41 billion lbs. was 2.73% (+1.42 billion lbs.) more than the previous year.

Cash trade was undeveloped through Tuesday afternoon, but expectations grew for higher prices based on the paltry volume of trade last week and the continued decline in carcass weights. Dressed steer weights for the week ending Feb. 9 were 4 lbs. lighter year over year at 885 lbs., according to USDA’s Actual Slaughter Under Federal Inspection report. Dressed heifer weights were 11 lbs. lighter at 822 lbs.

Cattle futures continued higher Tuesday, led by Live Cattle, which received support from the notion of higher cash prices, as well as continued strength in wholesale beef values. Lower grain prices also helped underpin Feeder Cattle support.

Live Cattle futures closed an average of 45¢ higher (25¢ higher to $1.02 higher in spot Feb).

Feeder Cattle futures closed an average of 70¢ higher.

Corn futures closed mostly 2¢ to 4¢ lower through near Dec and then mostly 1¢ lower. 

Soybean futures closed 5¢ to 8¢ lower through Mar ‘20 and then mostly 3¢ lower. 

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

Choice boxed beef cutout value was 12¢ higher Tuesday afternoon at $219.67/cwt. Select was 84¢ lower at $213.73.

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Major U.S. financial indices edged lower in choppy trade Tuesday, amid mixed economic news.

For instance, in a report delayed due to the government shutdown, privately owned housing starts in December were 11.2% less than in November and 10.9% less year to year, according to the U.S. Commerce Department.

On the other hand, in testimony to Congress yesterday, FOMC Chairman, Jerome Powell described strong domestic economic growth with estimated GDP last year of just less than 3%; strong employment numbers; inflation near the target of 2%.

“While we view current economic conditions as healthy and the economic outlook as favorable, over the past few months we have seen some crosscurrents and conflicting signals,” Powell explained. “Financial markets became more volatile toward year-end, and financial conditions are now less supportive of growth than they were earlier last year. Growth has slowed in some major foreign economies, particularly China and Europe. And uncertainty is elevated around several unresolved government policy issues, including Brexit and ongoing trade negotiations.”

The Dow Jones Industrial Average closed 33 points lower. The S&P 500 closed 2 points lower. The NASDAQ was down 5 points.

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When the Cattle inventory report finally comes out—scheduled for this Thursday—David Anderson, Extension livestock economist at Texas A&M University expects to see a slight increase in beef cow numbers.

“We are likely about to the end of the growth part of the cattle cycle, as heifers on feed in the Cattle on Feed report, and cow and heifer slaughter data indicate,” says Anderson, in the latest issue of In the Cattle Markets. 

In his weekly market comments, Derrell Peel, Extension livestock marketing specialist at Oklahoma State University explains the estimated 7.28 million head of steers on feed at the beginning of the year were 0.7% less than a year earlier.

“This is the first year-over-year decrease in quarterly steer feedlot inventories since April 2017,” Peel says. “Heifer feedlot inventory was 4.41 million head, up 6.2% from last year. This is the 12th consecutive quarter of year-over-year increases in heifers on feed since January, 2016.”

Likewise, Anderson explains through early February heifer slaughter was up 8.5% and steer slaughter was down about 0.6%.

“There are several other numbers in the report (Cattle) worth looking at beyond the headline all cattle and calves number,” Anderson says. “Watch for the number of heifers held back for replacement. That should show another decline as the cycle peaks. Also watch for the calf crop estimate, in particular for revisions to past years’ data based on placement patterns. The number of cattle on small grains pasture will be interesting, gauging supplies of feeder cattle to come from wheat pasture country.”