WLI

Negotiated cash fed cattle trade ended up mainly steady on a live basis last week at $125/cwt. in the Southern Plains and Nebraska; unevenly steady in the western Corn Belt at $124-$126. Dressed trade was steady in Nebraska at $200 and steady to $1 lower in the western Corn Belt at $199-200.

Futures and equity markets were closed Monday, in observance of President’s Day. As well, many AMS reports were not issued. 

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Estimated net returns for feedlot steer closeouts were slightly negative for January, but increase or remain near breakeven for the next several months, according to the Historical and Projected Kansas Feedlot Net Returns from Kansas State University (KSU).

January closeouts for steers were estimated at -$2.34 per head. Estimated returns are +$74.69 per head this month and +$117.39 in March, with estimated feeding cost of gain (FCOG) of $86.03 and $85.14, respectively. 

Keep in mind, estimates are on a cash-to-cash basis and assume no price risk management.

“The main change in January estimates from last month’s projections is a nearly $5 lower fed cattle basis,” explains Glynn Tonsor, KSU agricultural economist.

For April through August, estimated steer closeouts range from -$41.02 to +$39.09. Estimated FCOG is $83.50 to $86.27/cwt.

Similarly, projected closeouts for heifers in January was -$26.63 per head. Heifer returns are projected at +$47.43 this month and at +$71.49 in March with FCOG of $91.55 and $92.73/cwt. Through August, projected net heifer returns range from -$97.17 in April to +$14.15 in May. Estimated FCOG is $91.36 to $95.33/cwt.

Negotiated cash fed cattle trade remained undeveloped through Friday afternoon. A few live trades were reported in the western Corn Belt at $124-$127/cwt., but too few to trend.

Cattle futures softened, especially front-month Feeder Cattle. According to various chatter, part of the pressure for Feeder Cattle was attributed to thoughts that grain prices will pop, at least in the short term, when the U.S. and China resolve trade issues. 

Except for 50¢ higher in spot Feb, Live Cattle futures closed an average of 21¢ lower. 

Feeder Cattle futures closed an average of $1.28 lower through the front three contracts and then an average of 64¢ lower.

Corn futures closed fractionally mixed. 

Soybean futures closed 3¢ to 4¢ higher, following the steep declines in the previous session.

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

Choice boxed beef cutout value was 78¢ higher Friday afternoon at $216.85/cwt. Select was 58¢ higher at $210.99. 

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Major U.S. financial indices closed sharply higher Friday. Support included Congress passing and President Trump signing legislation to fund the government and avoid another shutdown. There was also growing optimism that the U.S. and China were close to striking a trade deal.

The Dow Jones Industrial Average closed 443 points higher. The S&P 500 closed 29 points higher. The NASDAQ was up 45 points.

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“The big story in cattle markets the past few weeks has been the increase in slaughter cow prices,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “Cow-calf producers have been concerned about low slaughter cow prices since the middle of October when prices in Tennessee dipped into the mid $40s and proceeded to the low $40 level for November and December. In the past four weeks, Tennessee slaughter cow prices have increased $10/cwt. and are now at their highest level since the first week of August. The $10 increase the past month is essentially $120 to $140 more per head. The seasonal tendency would say there is still room for slaughter cow prices to increase, which means they could reach $60/cwt., resulting in $60 to $70 more per head than the current week’s value.”

At the organization’s recent Outlook Seminar, CattleFax projected additional downside price risk to cull cow prices this year.

“Years of expansion and poor operating margins in the dairy sector are generating more cull cows, which weighs on the markets,” explained CattleFax analyst, Kevin Good. “The additional supply and the limited packing capacity for non-fed cattle will result in a market which averages approximately $55/cwt. during 2019, with a spring high near $60/cwt. and a fall low in the lower $40s.”

Negotiated cash fed cattle trade remained undeveloped through Thursday afternoon. A few live trades were reported in the western Corn Belt at $124/cwt., but too few to trend.

Cattle futures leaked mostly slightly higher, apparently tied to expectations of further cash support for fed cattle. Lower grain prices also provided support to Feeder Cattle.

Except for 5¢ and 17¢ lower in Dec and away Feb, respectively, Live Cattle futures closed an average of 29¢ higher. 

Feeder Cattle futures closed an average of 39¢ higher (5¢ to 60¢ higher).

Corn futures closed 2¢ to 4¢ lower through Sep ’20 and then mostly 1¢ lower. 

Soybean futures closed 10¢ to 13¢ lower through Jul ‘20, and then 8¢ to 9¢ lower, amid chatter about fewer year-over-year exports to China and early expectations for the next domestic crop weighing on stocks. 

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

Choice boxed beef cutout value was 37¢ lower Thursday afternoon at $216.07/cwt. Select was $1.60 lower at $210.41. 

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Major U.S. financial indices closed mixed Thursday. Pressure included a month-to-month decline in retail sales of 1.2% in December, according to the U.S. Commerce Department. 

The Dow Jones Industrial Average closed 103 points lower. The S&P 500 closed 7 points lower. The NASDAQ was up 6 points.

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Despite expectations of falling land values over the past few surveys, quality farmland values rose 3.4% in the fourth quarter from a year earlier, according to the latest Agricultural Finance Monitor published by the Federal Reserve Bank of St. Louis.

Ranchland or pastureland values increased by 6.5% in the fourth quarter after increasing 1.5% in the third quarter. Cash rents for quality farmland rose 2.9% in the fourth quarter, following a 2% gain in the third quarter. Cash rents for ranchland or pastureland rose by 1.3%, after increasing by 0.8% in the third quarter.

At the same time, lenders continue to report declines in farm income relative to a year earlier. The current index value marks the 20th consecutive quarter with a value below 100. Results above 100 indicate proportionately more bankers report higher income compared with the same quarter a year ago, while results lower than 100 indicate proportionately more bankers report lower income from a year earlier.

The fourth-quarter index value for farm income was 41. Expectations for farm income in the first quarter of 2019 were slightly more optimistic with an index value of 48. 

The survey was conducted from Dec. 15-31 last year. The results are based on responses from 22 agricultural banks within the boundaries of the Eighth Federal Reserve District, which includes all or parts of: Arkansas, Illinois, Indiana, Kentucky, Mississippi, Missouri and Tennessee.

Negotiated cash fed cattle trade remained undeveloped through Wednesday afternoon, but packer interest seemed to pick up, at least on a token basis. Although too few transactions to trend, a few western Corn Belt trades were reported at $123-$124/cwt. on a live basis and at $199-$200 in the beef.

There were 785 head offered in the weekly Fed Cattle Exchange auction. There were no sales, but three lots passed out at $125/cwt.

Cattle futures closed lower, amid likely overall position squaring and beneath the umbrella of uncertainty regarding if and when a trade deal will be completed with China. Aside from light trade, recently firmer grain prices added drag to Feeder Cattle.

Live Cattle futures closed an average of 47¢ lower. 

Feeder Cattle futures closed an average of 74¢ lower. 

Corn futures closed mostly fractionally mixed. 

Soybean futures closed mostly 1¢ lower, following the previous session’s strong gains. 

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

Choice boxed beef cutout value was 72¢ lower Wednesday afternoon at $216.44/cwt. Select was 99¢ lower at $212.01. 

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Major U.S. financial indices closed higher Wednesday, with optimism over a tentative plan that would avoid another government shutdown, as well as reports that the U.S. may be flexible in its Mar. 1 deadline with China as the two nations toward a trade deal.

The Dow Jones Industrial Average closed 117 points higher. The S&P 500 closed 8 points higher. The NASDAQ was up 5 points.

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Aggressive herd expansion for the past five years—and expectations of continued minimal expansion for another year or two—will continue to provide cyclical price risk, explained Kevin Good, CattleFax analyst, at that organization’s recent Outlook Seminar.

Along the way, Good noted that growing supplies of cattle will shift leverage to the feeding sector from cow-calf producers and stocker operators.

“Cattle producers, on average, will receive a smaller percentage of the retail beef dollar as larger cattle supplies increase price pressure across all segments of the industry,” Good said. “Retail beef prices will likely see some inflation in 2019, but larger beef, pork and poultry production will be price limiting.”

CattleFax projects the all-fresh retail beef price to average $5.73/lb. this year, up 6¢ from last year, with the composite carcass cutout value increasing $4 to average $216/cwt.