WLI

Negotiated cash fed cattle trade remained undeveloped through Thursday afternoon.

Cattle futures closed mainly narrowly mixed with pressure in the front months,

likely on positioning and perhaps some defensiveness ahead of tomorrow’s Cattle on Feed (COF) report. That will be the Jan. 25 report, due to the government shutdown. The COF originally slotted for Feb. 22 is scheduled to be released Mar. 8. In between, the Cattle inventory report, which should have been published Jan. 31 is scheduled for release Feb. 28.

Amid growing open interest, Live Cattle futures closed an average of 46¢ lower through the front three contracts (7¢ to 70¢ lower) and then an average of 11¢ higher.

Feeder Cattle futures closed an average of 44¢ lower through the front three contracts (12¢ to 65¢ lower) and then an average of 17¢ higher.

Corn futures closed 3¢ to 4¢ higher across the front half of the board, and then mostly 1¢ to 2¢ higher, amid chatter that China is poised to buy more U.S. corn and soybeans than previously thought. 

Soybean futures closed 4¢ to 8¢ higher across the front half, and then mostly 3¢ higher. 

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

Choice boxed beef cutout value was $1.58 higher Thursday afternoon at $218.07/cwt. Select was 9¢ lower at $211.41. 

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Major U.S. financial indices closed lower Thursday, pressured by various closely watched economic indicators pointing to slower economic growth, building on caution expressed in the Federal Reserve minutes released Wednesday.

For instance, the IHS Markit Flash U.S. Manufacturing Purchasing Manager Index dropped to a 17-month low for February at 53.7. It was 54.9 in January.

Likewise, the Conference Board Leading Economic Index® (LEI) for the U.S. declined 0.1% in January to 111.3

“In January, the strengths in the financial components were offset by the weaknesses in the labor market components,” says Ataman Ozyildirim, Director of Economic Research at The Conference Board. “The US LEI has now been flat essentially since October 2018. The Conference Board forecasts that U.S. GDP growth will likely decelerate to about 2% by the end of 2019.”

The Dow Jones Industrial Average closed 103 points lower. The S&P 500 closed 9 points lower. The NASDAQ was down 29 points.

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Expectations for U.S. beef imports this year increased by $100 million to $7.7 billion, in the latest Outlook for U.S. Agricultural Trade from USDA’s Economic Research Service (ERS).

“Livestock, dairy, and poultry export forecasts are raised $300 million to $30.4 billion, largely as gains in beef, pork, poultry, dairy, and other products offset declines for hides, skins, and furs,” ERS analysts say. “The beef forecast is raised on sustained demand despite stronger prices.”

On the other side of the ledger, forecast beef import value was also increased by $100 million, based on stronger than expected prices.

For context, ERS analysts explain, per capita world GDP growth of 1.9% last year was the heftiest since the post-financial crisis rebound in 2010-11. 

“World GDP growth is expected to slow slightly to 1.6% in 2019, due in part to global trade tensions, but there is some optimism regarding future dialogue between China and the United States,” say ERS analysts. “There is more uncertainty than normal regarding U.S. economic conditions due to a lag in the release of economic indicators after the Government shutdown, such as U.S. Gross Domestic Product for the fourth quarter and U.S. International Trade in Goods and Services for December 2018. However, U.S. per capita GDP was estimated to have grown at above trend at 2.2% in 2018 and is forecast to remain the same in 2019, with continued optimism regarding the current economic landscape, especially given the strong labor market and low inflation.”

Negotiated cash fed cattle trade remained undeveloped through Wednesday afternoon, but there were several suggestions for steady to higher trade. 

For instance, Ch 2-4 steers traded at mostly $125-$128/cwt. at Sioux Falls in South Dakota.

As well, there were no takers, but three Kansas lots passed out at $125—steady with last week’s country trade—in the weekly Fed Cattle Exchange auction (785 head). 

Cattle futures edged higher, too, especially Live Cattle, which closed an average of 46¢ higher, except for unchanged in the back two contracts.

Except for an average of 17¢ lower in the back two contracts, Feeder Cattle futures closed an average of 11¢ higher. 

Corn futures closed mostly 1¢ to 2¢ higher. 

Soybean futures closed 1¢ to mostly 2¢ higher.

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

Choice boxed beef cutout value was 78¢ lower Wednesday afternoon at $216.49/cwt. Select was $2.04 lower at $211.50. 

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Major U.S. financial indices continued to leak higher Wednesday, supported by release of last month’s minutes from the Federal Open Market Committee, which underscored patience relative to future increases in interest rates.

“Participants noted that some risks to the downside had increased, including the possibilities of a sharper-than-expected slowdown in global economic growth, particularly in China and Europe, a rapid waning of fiscal policy stimulus, or a further tightening of financial market conditions,” according to the minutes. “…a few participants expressed concern that longer-run inflation expectations may be lower than levels consistent with the Committee’s 2% inflation objective… Participants pointed to a variety of considerations that supported a patient approach to monetary policy at this juncture…”

The Dow Jones Industrial Average closed 63 points higher. The S&P 500 closed 4 points higher. The NASDAQ was up 2 points.

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U.S. consumers paid higher year-to-year prices for beef last year, but less for pork and poultry, underscoring consumer demand.

According to USDA’s Economic Research Service (ERS), the retail Choice beef value last year was 0.25% more than the previous year at $5.92/lb. Pork retail value was 1% less than a year earlier at $3.74/lb. Composite broiler retail value was 0.15% less at an average of $1.87.

Between less cattle slaughter and lighter carcass weights, ERS’s latest projection for beef production last year is 26.9 billion lbs. For this year, it’s projected at 27.6 billion lbs.

Steady cash prices last week, and declining carcass weights pointing to the potential for higher fed cattle prices this week, helped lift Cattle futures Tuesday. Some also attributed part of the support to traders fleeing the meltdown in Lean Hog futures.

Live Cattle futures closed an average of $1.26 higher in the front two contracts and then an average of 33¢ higher.

Feeder Cattle futures closed an average of 58¢ higher (42¢ higher to $1.15 higher in spot Mar).

Corn futures closed 1¢ to 5¢ lower through Sep ’20 and then fractionally lower. 

Soybean futures closed 6¢ to 7¢ lower through Jan ‘20, then 3¢ to 5¢ lower.

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

Choice boxed beef cutout value was 12¢ lower Tuesday afternoon at $217.27/cwt. Select was 54¢ higher at $213.54. 

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Major U.S. financial indices recovered from early pressure to close slightly higher Tuesday. Support included strong quarterly earnings from Walmart, as well as further indications that trade talks with China continue to be positive.

The Dow Jones Industrial Average closed 8 points higher. The S&P 500 closed 4 points higher. The NASDAQ was up 14 points.

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“With continued large supplies of cattle in feedlots and a slower expected pace of placements in early 2019, feeder steer prices in first-half 2019 were lowered, bringing the annual price forecast down to $140-$149/cwt, with a midpoint price of $144.50/cwt.,” say analysts with USDA’s Economic Research Service (ERS), in the February Livestock, Dairy and Poultry Outlook (LDPO)—the first since December, due to the government shutdown.

At least part of the pressure stems from unrealized expectations for improved Southern Plains winter wheat pasture last fall to absorb increased seasonal supplies of cattle. Instead, wet weather since last fall delayed and restricted planting. Winter wheat planted area for harvest this year is 4% less than last year and second lowest on record (31.3 million acres), according to the Winter Wheat and Canola Seedings report. 

“Based on weekly data from the National Feeder and Stocker Cattle Summary, there were about 1% more calves sold in 2018 than in 2017. This was particularly true in fourth-quarter 2018, where about 7% more calves were sold than for the same period in 2017,” ERS analysts say. “However, in late 2018, feedlots’ pace of marketings slowed more than expected. The large numbers of cattle in feedlots may have stymied feeder calf prices.”

The fourth-quarter 2018 feeder steer price was $147.90/cwt. for an annual price of $146.93. 

For this year, the recent LDPO pegs feeder steers prices (basis Oklahoma City) at $140-$144/cwt. in the first quarter; $141-$149 in the second; $144-$154 in the third quarter; $138-$148 in the fourth.