WLI

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.”

Cattle feeders ended up being rewarded for their marketing patience last week. Late-week trade was mostly $1-$2 higher on a live basis at $126/cwt. in Kansas, $126.50 in Nebraska and $124.50-$128.00 in the western Corn Belt. Dressed sales were $2 higher at $202. There was no trend reported for the Texas Panhandle.

Higher cash trade, stronger wholesale beef values and Friday’s friendly Cattle on Feed report offered support to Cattle futures Monday, but that was tempered by more erosion in Lean Hog futures.

Live Cattle futures closed from an average of 9¢ lower to an average of 13¢ higher.

Except for an average of 40¢ lower in spot Mar, Feeder Cattle futures closed an average of 24¢ higher.

Corn futures closed mostly 3¢ to 4¢ lower.

Soybean futures closed mostly fractionally lower to 1¢ higher.

Wholesale beef values were steady 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 16¢ higher Monday afternoon at $219.55/cwt. Select was $2.22 higher at $214.57.

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Major U.S. financial indices closed higher Monday, buoyed by merger and acquisition news, as well as President Trump indicating he would extend the Mar. 1 deadline for imposing more tariffs on Chinese imports, in light of current trade talk progress.

The Dow Jones Industrial Average closed 60 points higher. The S&P 500 closed 3 points higher. The NASDAQ was up 26 points.

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There are no simple answers or strategies to address it, but Robert Johansson, USDA Chief economist, provided insight to the perennial dilemma of producing more than demanded.

“Our general expectation is for continued declines in real agricultural commodity prices over the next 10 years,” Johansson explained, at last week’s USDA Agricultural Outlook Forum. “Falling commodity prices are the result of continued production growth, which continues to outpace global demand. The remarkable increases in food production have resulted in large part from productivity growth, and have resulted in falling prices for agricultural commodities over the past half century.”

For instances, beef production today is 87% more than in 1960, according to Johansson, while the average steer prices is 44% less; 2005 is the economic base year.

During the same time, pork production increased by 143%, while hog prices declined 68%. Milk production increased 77%, while milk price declined 52%. Chicken production increased by 1,050%, while prices declined 56% (since 1964).

Obviously, the same trend applies to crops.

“Since 1960, soybean production has increased nearly 1,200%, while real soybean prices have fallen by 52%,” Johansson explained. “Corn production has grown by more than 400%, and prices have fallen by nearly 60%.” During the same time period, wheat production increased 215% and prices declined by 65%.

Overall, Johansson says the dramatic fall in net farm income in 2015 and 2016 seems to be leveling out, but at a lower level

“The current expectation of farm income at $66 billion in 2018 is a long way from the heights we saw when real net farm income peaked at $134 billion in 2013,” Johansson says. “Relative to the 10-year average, real net farm income is down 28%. Looking forward, net farm income is expected to rise slightly, remaining below $80 billion annually over the next 10 years.”

Negotiated cash fed cattle trade remained mostly undeveloped through Friday afternoon, based on USDA reports, but indications were for steady to higher prices.

For instance, although too few to trend, a few early trades were reported in the Western Corn Belt at $124.50-$128.00/cwt. on a live basis and at $202 in the beef. That’s 50¢ to $2 higher on a live basis and $2-$3 more dressed.

Through Thursday, the 5-area direct price was averaging steady with the previous week at $125.

Live Cattle futures inched higher Friday, while Feeder Cattle were narrowly mixed.

After $1.05 higher in spot Feb, Live Cattle futures closed an average of 20¢ higher.

Except for an average of 26¢ higher in the back three contracts, Feeder Cattle futures closed an average of 17¢ lower.

Corn futures closed unchanged to fractionally mixed.

Soybean futures closed fractionally mixed to 1¢ lower.

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

Choice boxed beef cutout value was $1.32 higher Friday afternoon at $219.39/cwt. Select was 94¢ higher at $212.35.

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Major U.S. financial indices closed higher Friday. More than anything, the driver seemed to be increased optimism regarding trade talks between the U.S. and China.

The Dow Jones Industrial Average closed 181 points higher. The S&P 500 closed 17 points higher. The NASDAQ was up 67 points.

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Feedlot placements (feedlots with 1,000 head or more capacity) were fewer than many expected, in Friday’s Cattle on Feed (COF) report. Keep in mind, this was the delayed January COF, so placements are for December.

Placements in December of 1.77 million head were 1.78% less than a year earlier. Ahead of the report’s original publication date, most analysts expected placements to be about 2% more year to year. In terms of weights, 51.21% went on feed weighing 699 lbs. or less; 38.88% weighing 700-899 lbs.; 9.91% weighing 900 lbs. or more.

Marketings in December of 1.74 million head were 0.63% less than the previous year, in line with pre-report expectations.

Fewer marketings and placements month to month likely speaks to, at least in part, this winter’s challenging pen conditions and decreased performance.

Cattle on feed Jan. 1 of 11.69 million head were 1.75% more than a year earlier (+201,000 head), on the low side of expectations.