WLI

Negotiated cash fed cattle trade remained undeveloped through Thursday afternoon. Current indications continue to suggest steady to higher prices when it does occur.  Wet, muddy condition in major cattle feeding areas continue to hinder cattle performance and add support to the market.

Cattle futures traded mainly sideways.

Except for 25¢ lower in the back contract, Live Cattle futures closed an average of 11¢ higher. 

Feeder Cattle futures closed 10¢ lower to 20¢ higher.

Grains closed lower on the day, presumably on a less bearish outlook than traders expected to see for soybeans in South America. Chatter also picked up a notch regarding the growing dearth of publicly available market data, due to the ongoing partial government shutdown.

Corn futures closed 4¢ to 5¢ lower through Jul ’20 and then mostly 2¢ lower.

Soybean futures closed 11¢ to 17¢ lower.

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

Choice boxed beef cutout value was 12¢ higher Thursday afternoon at $213.96/cwt. Select was $1.30 higher at $207.77.

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Major U.S. financial indices edged higher again on Thursday, with follow-through support regarding the potential pause for interest rate increases, along with lingering hopes of a trade resolution with China. Pressure on retail stocks helped cap gains.

The Dow Jones Industrial Average closed 122 points higher. The S&P 500 closed 11 points higher. The NASDAQ was up 28 points.

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Despite the fact that there are fewer farms and ranches today, and a growing generational gap between the general population and agriculture, the children of Baby Boomers are more likely than their parents to know much about agriculture. That’s according to the latest Feed4Thought survey from Cargill.

Specifically, Cargill found that twice as many Generation Y respondents (ages 18–34) in the U.S. and China reported knowing a livestock or seafood farmer, compared to those over 55 years old. Trends were similar in Mexico and France. While 81% of 18-to-34-year-old Chinese participants said they have visited a livestock or seafood farm during their lifetime, only 50% of their older compatriots had. Young respondents in every country surveyed were more likely to have visited a farm than those over 55.

Generation Y (born between the early 1980s and about 2000) is also acting on what they learn about farming practices, according to the survey. Almost three times as many Gen Y participants (52%) said they had changed their eating habits for sustainability reasons in the past year versus older U.S. respondents (19%). Mexico, France and China showed a similar age correlation, with 80% of young Chinese reporting changes. Having kids at home made participants in all four sample countries more likely to make values-based changes.

“We know people increasingly care about animal welfare, the healthfulness of foods and sustainability,” says Marina Crocker, head of Cargill Animal Nutrition market insights. “By pairing Cargill’s understanding of what our customers need with state-of-the-art analytics about what people want, we can anticipate and serve emerging consumer expectations in the solutions we provide our customers.”

More than 80% of survey respondents said the way an animal is raised is important, and almost half of them were willing to pay more as a result. Chinese survey participants (59%) were the most open to paying a premium based on factors such as animal feed and housing; Americans (31%) the least.

Negotiated cash fed cattle trade remained undeveloped through Wednesday afternoon. There were only 571 head offered in the weekly Fed Cattle Exchange auction, with none sold.

Cattle futures softened some, likely on profit taking and awaiting the week’s cash direction.

Live Cattle futures closed an average of 26¢ lower through the front six contracts and then an average of 27¢ higher.

Except for 10¢ higher in the back contract, Feeder Cattle futures closed an average of 58¢ lower.

Corn futures closed mostly unchanged to 1¢ higher.

Soybean futures closed 5¢ higher across the board. 

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 14¢ lower Wednesday afternoon at $213.84/cwt. Select was 79¢ lower at $206.47.

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Major U.S. financial indices closed higher for the fourth session in a row, buoyed by confirmation the FOMC plans to be patient with future interest rate increases.

According to the FOMC minutes, “… many participants expressed the view that, especially in an environment of muted inflation pressures, the Committee could afford to be patient about further policy firming. A number of participants noted that, before making further changes to the stance of policy, it was important for the Committee to assess factors such as how the risks that had become more pronounced in recent months might unfold and to what extent they would affect economic activity, and the effects of past actions to remove policy accommodation, which were likely still working their way through the economy.”

Crude oil prices continued to climb as well, with West Texas Intermediate Crude on the CME closing $2.36 to $2.58 higher for the next 12 months.

The Dow Jones Industrial Average closed 91 points higher. The S&P 500 closed 10 points higher. The NASDAQ was up 60 points.

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Lots went right and little went wrong for cattle markets last year or the year before, according to Stephen Koontz, agricultural economist at Colorado State University. He notes strong wholesale margins, efficient movement of increased production through the supply chain and exceptional U.S. beef export levels, particularly to Japan and Korea.

“But forecasts for 2019 suggest a further 1.8% increase in beef production, a further 2.4% increase in pork production, a 1.3% increase in broiler production, and 0.5% increase in milk production,” Koontz explains, in the most recent issue of In the Cattle Markets.  “There will be plenty of protein and fats. While the stock market has been volatile, the underlying indicators of the macro economy have largely remained strong. That is not the case for the rest of the world. There are clear weaknesses in the world economy. There is plenty of protein. And, there appears to be plenty of downside price risk.”

Negotiated fed cattle trade was undeveloped through Tuesday afternoon, but Cattle futures suggest steady to higher prices for the week. They closed sharply higher, especially Feeder Cattle, buoyed by increasing open interest and trade activity.

Live Cattle futures closed an average of 84¢ higher (40¢ higher to $2.10 higher in spot Feb), with the most active trade since September.

Feeder Cattle futures closed an average of $1.30 higher, with the most active trade since October.

Corn futures closed mostly 1¢ lower.

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

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

Choice boxed beef cutout value was 30¢ lower Tuesday afternoon at $213.98/cwt. Select was 95¢ lower at $207.26.

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Major U.S. financial indices close higher for the third consecutive day as investors seemed to grow more optimistic that ongoing trade talks with China may bear fruit. Resurgent tech stocks added support, as did the recent rebound in oil prices. Crude Oil futures (CME-WTI) are about $3 higher since last Wednesday.

The Dow Jones Industrial Average closed 256 points higher. The S&P 500 closed 24 points higher. The NASDAQ was up 73 points.

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Agricultural producer sentiment declined in December as farmers’ perception of both current and future economic conditions weakened, according to results from the Purdue University-CME Group Ag Economy Barometer. The December barometer reading of 127 was 7 points lower than November. The barometer is based on 400 survey responses from agricultural producers across the country.

Both of the barometer’s two sub-indices declined in December. The Index of Current Conditions fell 6 points to 109, which was 30 points less than a year earlier. The Index of Future Expectations fell 8 points in December to 135, but was 15 points higher than a year earlier.

“Over the course of the last year, producers’ impression of current economic conditions on their farms has declined markedly,” says James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture. “But at the same time, their expectations for future economic conditions have held steady. As a result of this mixed view, farmers appear to be cautious about making large investments in their farming operations.”

Mintert points to December’s Large Farm Investment Index as an example. That index measures whether producers feel this is a good time to make large farm investments. It dropped 5 points month to month at 51 and was 29 points lower than a year earlier.

Similarly, 42% said now was a good time to bring a new generation of family into the business, versus about 50% during the past two years. Looking ahead five years, 65% expect conditions to be more favorable for bringing in a new generation.

There were a few early negotiated fed cattle sales in Nebraska Monday at $122.50/cwt., but too few to trend. Live sales there last week were at mostly $123.

Cattle futures closed higher, buoyed by firmer outside markets and oversold conditions. There’s also the most open interest in Live Cattle for at least nine months.

Live Cattle futures closed an average of 76¢ higher (37¢ higher at the back to $1.27 higher in spot Feb).

Feeder Cattle futures closed an average of 98¢ higher.

Corn futures closed fractionally mixed.

Soybean futures closed mostly 1¢ to 2¢ higher.

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

Choice boxed beef cutout value was 23¢ lower Monday afternoon at $214.28/cwt. Select was 55¢ higher at $208.21.

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Follow-through support helped major U.S. financial indices close higher Monday, maintaining robust gains from the previous session. Optimism included Friday’s employment report and hopes concerning trade talks with China.

The Dow Jones Industrial Average closed 98 points higher. The S&P 500 closed 17 points higher. The NASDAQ was up 84 points.

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“Evolving market dynamics make it easy to underestimate how the impacts and costs of trade issues will continue to grow in 2019,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. 

Direct impacts from tariffs are the most visible. In particular, Peel mentions the impact on U.S. pork and soybeans, resulting from reciprocal tariffs with China. There’s also the impact on U.S. pork and dairy products from tariffs imposed by some countries in retaliation for U.S. tariffs on steel and aluminum imports.

“Economic impacts of tariffs may be initially limited mostly to changes in margins if the disruptions are perceived to be short-lived,” Peel explains. “Later, the impacts will evolve from the initial market shock to larger and more permanent adjustments. With more time and ongoing uncertainty about trade issues, more and more of the cost of tariffs are passed on to buyers; alternative product flows develop; lost market shares become much more difficult to undo. The direct costs of tariffs are difficult to measure but certainly grow over time.”

Less visible is lost opportunity.

For instance Peel says, “The U.S. withdrew from the Trans-Pacific Partnership (TPP) two years ago. The remaining 11 countries continued and launched the revised TPP (CPTPP) in January 2019. Not only does the U.S. not have the benefit of tariff adjustments and increased market access with TPP; going forward the U.S. will be increasingly less competitive and likely lose ground relative to TPP participants. The stated U.S. intention to negotiate bilateral trade deals with Japan and others has so far not resulted in new agreements or even serious discussions.”

All of that is before considering the toll tariffs levy on the overall U.S. economy.

“It is nearly impossible to know how much trade and investment has been postponed or abandoned as a result of trade uncertainty the past two years,” Peel says. “The combined direct impacts, lost trade opportunities and ongoing uncertainty are reducing growth potential for U.S. and global economies, and those impacts are likely to grow in 2019, barring improvement in trade issues.”