WLI

Major U.S. stock exchanges were closed Wednesday, saluting the life of patriot and former president George Herbert Walker Bush.

Negotiated cash fed cattle trade was undeveloped through Wednesday afternoon, but early signs pointed to at least steady money.

For instance, there were only two lots of steers from Kansas (219 head) offered in the weekly Fed Cattle Exchange auction. Both sold at a weighted average price of $117.83/cwt. for delivery at 1-9 days. That price was right at last week’s average country trade for the region.

Likewise, prices for Ch 2-4 steers ($115.58-$116.63) at the Tama fat cattle auction in Iowa were at the upper end of country prices in the western Corn Belt last week.

Cattle futures closed higher Wednesday—led by Feeder Cattle—building on gains from the previous session, although trade and overall direction were limited.

Live Cattle futures closed an average of 71¢ higher. 

Feeder Cattle futures closed an average of $1.02 higher. 

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

Choice boxed beef cutout value was 60¢ lower Wednesday afternoon at $213.26/cwt. Select was 65¢ lower at $196.86.

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“Restaurant operators are somewhat more optimistic about sales growth in the coming months, with their outlook rising to a six-month high,” according to the National Restaurant Association (NRA), in that organization’s most recent Restaurant Performance Index (RPI) report. “However, restaurant operators remain generally less bullish about the direction of the overall economy.”

Stronger same-store sales and customer traffic pushed the RPI to a slight gain in October at 101.2; it was 101.1 a month earlier. Index values above 100 indicate key industry indicators are in a period of expansion.

The RPI is comprised of the Current Situation Index (CSI) and the Expectations Index (EI). Month to month, the CSI increased from 100.6 to 100.9. The EI was stable at 101.6.

Negotiated cash fed cattle trade was undeveloped through Tuesday afternoon.

Cattle futures gained some traction, in the face of sharply lower outside markets. Feb Live Cattle led the way. Ultimately, Feeder Cattle tagged along to a lesser degree.

Except for 15¢ lower in the back contract, Live Cattle futures closed an average of 95¢ higher (30¢ to $1.47 higher).

Except for 10¢ lower in spot Jan, Feeder Cattle futures closed an average of 59¢ higher. 

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

Choice boxed beef cutout value was 78¢ higher Tuesday afternoon at $213.86/cwt. Select was $1.67 lower at $197.51.

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Major U.S. financial indices dove lower Tuesday, reportedly pressured by a flattening yield curve, which investors fear portend an economic slowdown.

The Dow Jones Industrial Average closed 799 points lower. The S&P 500 closed 90 points lower. The NASDAQ was down 283 points.

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Agricultural producer sentiment held steady in November with producers remaining optimistic about the state of the agricultural economy, according to results from the Purdue University-CME Group Ag Economy Barometer.

The barometer reading of 134 was 1% lower than in October, but remains similar to levels last spring before trade disruptions began. The barometer utilizes a survey of 400 agricultural producers from across the country.

“Although there was a modest decline in the barometer this month, there was some evidence that producers are becoming more confident regarding the U.S. agricultural economy’s future,” says James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture.

The barometer’s two sub-indices remained mostly unchanged from October. The Index of Current Conditions held at 115, and the Index of Future Expectations dropped 3 points to a reading of 143.

Other Barometer Survey Highlights

50% expect higher farmland values over the next five years, significantly more than a month earlier when 21% said they expected farmland values to increase.

13% expect farm profitability to improve in the next 12 months.

44% expect to see equity diminish in the coming year.

75% said they were either ‘somewhat or very concerned’ that Congress had not passed new farm bill legislation.

Negotiated cash fed cattle trade ended up mostly $1-$2 higher on a live basis last week at $118/cwt. in the Southern Plains, $114-$116 in the western Corn Belt and $116-$118.50 in Nebraska. Dressed trade was $3-$6 higher in the western Corn Belt at $183-$186. In Nebraska, it was steady to $2 less than the bulk of the previous week’s trade at $183-$185.

Despite stronger cash prices, firmer wholesale beef values and positive news regarding U.S.-China trade (see below), Cattle futures softened to start the week. Pressure included the decline in Lean Hog futures, as well as recently strengthening grain prices, where Feeder Cattle are concerned.

Live Cattle futures closed an average of 49¢ lower (5¢ to 72¢ lower).

Feeder Cattle futures closed an average of $1.40 lower, (72¢ lower in spot Jan to $1.72 lower at the back).

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

Choice boxed beef cutout value was 47¢ higher Monday afternoon at $213.08/cwt. Select was 77¢ higher at $199.18.

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Major U.S. financial indices closed higher Monday, boosted by comments following the weekend meeting between President Trump and President Xi Jinping of China, during the G20 Summit in Argentina.

Included in a statement from President Trump’s press secretary:

“On Trade, President Trump has agreed that on Jan. 1, 2019, he will leave the tariffs on $200 billion worth of product at the 10% rate, and not raise it to 25% at this time. China will agree to purchase a not-yet-agreed-upon, but very substantial, amount of agricultural, energy, industrial, and other product from the United States to reduce the trade imbalance between our two countries. China has agreed to start purchasing agricultural product from our farmers immediately.

“President Trump and President Xi have agreed to immediately begin negotiations on structural changes with respect to forced technology transfer, intellectual property protection, non-tariff barriers, cyber intrusions and cyber theft, services and agriculture. Both parties agree that they will endeavor to have this transaction completed within the next 90 days. If at the end of this period of time, the parties are unable to reach an agreement, the 10% tariffs will be raised to 25%.”

The Dow Jones Industrial Average closed 287 points higher. The S&P 500 closed 30 points higher. The NASDAQ was up 110 points.

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Cull cow prices likely reached their seasonal low in November, according to Derrell Peel, Extension livestock marketing specialist at Oklahoma State University. However, he emphasizes making sense of the cull market has been challenging this year.

From May through October this year, Peel says cull cow prices averaged 13-15% less than the previous year. In his weekly market comments, he explains, Cull cow prices typically begin a slight recovery in December following the November seasonal low.

From current levels, he says seasonal trends suggest breaking cow prices of $53.47/cwt. in January; $58.26 in February; $59.53 in March; $59.94 by April; and $60.85 by May.

“One of the big factors contributing to weak cull cow prices has been weak cow boxed beef prices in the second half of 2018,” Peel says. “In the last week of November, cow boxed beef prices were 7.8% lower than year-earlier levels and have averaged 8.3% lower year over year since mid-year.”

Although overall beef demand remains strong, Peel explains cow beef demand is more uncertain, with most going into ground beef. So, along with total cow slaughter being 7.2% more than last year, he says it’s possible that large supplies of pork and poultry are applying more pressure to ground beef demand.

Even so, Peel expects a relative tightening of cow beef supplies to support a near-normal increase in cull cow prices heading into the new year.

Negotiated cash fed cattle trade remained largely undeveloped through USDA’s late-afternoon report Friday. There were some live sales in the western Corn Belt at $115/cwt., unevenly steady with Wednesday’s $114-$116, which was $1-$2 higher than the previous week. There was some early dressed trade in Nebraska at $183, but too few transactions to trend; prices the previous week were at $180-$185, mostly $185.

Live Cattle futures firmed on Friday (17¢ lower to 32¢ higher), supported by the steady to higher feel in the cash market.

Feeder Cattle futures softened amid continued lackluster trade and perhaps some month-end position squaring. Except for 7¢ lower in the back two contracts, Feeder Cattle futures closed an average of 60¢ lower.

Though futures prices remain channel-bound, there continue to be expectations for a secondary boost, if and when China and the U.S. settle their trade differences. The notion is that China’s ongoing problems with African Swine Fever mean that nation needs to import lots more pork, potentially significantly more from the U.S. President Trump and China’s President Xi Jingping were scheduled to meet over the weekend during the G20 Summit.

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

Choice boxed beef cutout value was even with the previous day Thursday afternoon at $212.61/cwt. Select was 12¢ lower at $198.41.

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Major U.S. financial indices closed higher Friday, apparently boosted by optimism that the U.S. and China would make headway in solving their trade issues when leaders meet during the G20 Summit in Argentina over the weekend.

The Dow Jones Industrial Average closed 199 points higher. The S&P 500 closed 22 points higher. The NASDAQ was up 57 points.

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Leaders of the United States, Mexico, and Canada signed the U.S.-Mexico-Canada Agreement (USMCA) on Friday, during the G-20 meeting in Argentina. The USMCA maintains unrestricted, duty-free trade for beef and cattle in North America. It also maintains science-based trade standards.

All three countries must complete their own domestic processes before the USMCA comes into force. In the U.S., Congress will need to pass legislation to implement the deal. The U.S. International Trade Commission is currently conducting an investigation into the likely impacts of USMCA.

“With the signing of the, U.S. beef producers are one step closer to knowing that unrestricted, science-based trade will continue in North America,” says Kevin Kester, president of the National Cattlemen’s Beef Association. “The agreement brings the trading relationship with our neighbors into the 21st century – and clearly rejects the failed beef and cattle trade policies of the past. Open markets have helped U.S. producers flourish and created billion-dollar markets for U.S. beef. We look forward to working with Congress to get USMCA passed into law as quickly as possible.”

Other than early live sales in the western Corn Belt Wednesday, which were $1-$2 higher than last week at $114-$116/cwt., negotiated cash fed cattle trade remained undeveloped through Thursday afternoon.

Cattle futures dipped, recovering some from the strongest early pressure. Other than, arguably, more interest flowing to Lean Hogs, there seemed no apparent fundamental reason for the decline. Given the current support of fed cattle prices, it was one of those sessions that left you wondering exactly what components comprise electronic-trading algorithms, and perhaps more important, how far ahead.

After 17¢ lower in spot Dec and 27¢ lower in near Feb, Live Cattle futures closed an average of 97¢ lower (52¢ to $1.30 lower).

Feeder Cattle futures closed an average of $1.46 lower.

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

Choice boxed beef cutout value was 67¢ lower Thursday afternoon at $212.61/cwt. Select was 3¢ higher at $198.53.

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Major U.S. financial indices trickled lower Thursday, as investors digested the interest rate news and trade hopes that boosted markets the previous day.

Battered nearby Crude Oil futures (WTI-CME) bounced about $1 higher.

The Dow Jones Industrial Average closed 27 points lower. The S&P 500 closed 6 points lower. The NASDAQ was down 18 points.

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Judging by projections in the latest Outlook for U.S. Agricultural Trade, beef exports will continue to lead the way next year.

Projected beef exports for fiscal year 2019 (October-September) were projected $500 million higher than the August forecast at $7.6 billion. That would be about $278 million more than this year. According to analysts with USDA’s Economic Research Service (ERS), the increase is driven mostly by higher unit values.

Overall, the projection for total livestock, dairy, and poultry exports are forecast $200 million less than the August projection at $30.1 billion, pressured by weaker demand for dairy, poultry and products, hides and skins, as well as rendered products.

For context, according to ERS analysts, “Per capita world GDP growth is expected to be robust at 2.1% in 2018 and to remain healthy at 2.0% percent in 2019, led by a thriving U.S. economy…Per capita GDP growth in the United States of 2.2% in 2018 is expected to be sustained in 2019. In 2018, the U.S. economy is bolstered by strong consumer spending and favorable business investment. Income growth is expected to slow during 2019, due to diminishing effects of fiscal stimulus, rising inflation and slower economic growth outside the United States.”