WLI

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.

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.”