WLI

Between late Tuesday and yesterday, negotiated cash fed cattle trade kicked off at higher money. Live trade was $2.50 higher in the Texas Panhandle at $116.50/cwt. and $1-$2 higher in the western Corn Belt at $113-$114. Dressed trade in the North was $2-$4 higher at $180.

Incidentally, there were 459 head offered in the weekly Fed Cattle Exchange auction and no takers.

Cattle futures closed higher on Wednesday, buoyed by stronger cash fed cattle and a much friendlier Cattle on Feed report than many expected (see below).

Live Cattle futures closed an average of 76¢ higher. 

Feeder Cattle futures closed an average of $1.21 higher.

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

Choice boxed beef cutout value was 40¢ lower Wednesday afternoon at $213.69/cwt. Select was 17¢ lower at $198.26.

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Although closing even to a little higher Wednesday, Major U.S. financial indices were unable to sustain early positive momentum, amid light holiday trade.

The Dow Jones Industrial Average closed fractionally lower. The S&P 500 closed 8 points higher. The NASDAQ was up 63 points.

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Cattle Markets got a boost from Wednesday’s monthly Cattle on Feed report with fewer cattle placed in October than most expected (feedlots with 1,000 head or more capacity). There were 2.25 million head placed in October, which was 6.06% less than last year. Analyst estimates ahead of the report were for an increase of 1% more.

As for placement weights: 51.82% went on feed weighing less than 700 lbs.; 36.17% weighing 700-899 lbs.; 12.00% weighing 900 lbs. or more.

Cattle marketings in October were a touch more than expected at 1.89 million head, which was 4.78% more than last year.

Cattle on feed Nov. 1 of 11.69 million head were 3.18% more than last year, about 1% less than many expected.

As suspected, negotiated cash fed cattle trade remained undeveloped through Tuesday afternoon.

Cattle futures closed mixed (Live Cattle) to a touch lower (Feeder Cattle) on Tuesday, pressured by sharply lower outside markets and light trade volume, as much as anything. There was also wait-and-see for Wednesday’s monthly Cattle on Feed report (see below).

Live Cattle futures closed 45¢ lower to 20¢ higher.

Feeder Cattle futures closed an average of 18¢ lower.

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

Choice boxed beef cutout value was 70¢ higher Tuesday afternoon at $214.09/cwt. Select was 14¢ lower at $198.43.

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Major U.S. financial indices fell hard on Tuesday, pressured by everything from tech stocks, to retail, to another plunge in crude oil prices. The underlying concern appears to be notions of slower global economic growth, tied to both trade issues and higher interest rates.

Futures prices for West Texas Intermediate Crude (CME) declined $3.72 to $3.85 over the next 12 months. Spot Jan closed at $53.43, which was $10 lower than where it started the month.

The Dow Jones Industrial Average closed 551 points lower. The S&P 500 closed 48 points lower. The NASDAQ was down 119 points.

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Judging by various estimates and surveys, most analysts expect the monthly Cattle on Feed report on Wednesday (12 p.m. EST) to show higher October placements and marketings, as well as more cattle on feed Nov. 1 than a year ago.

For instance, analysts at Allendale, Inc. expect placements to be 4.3% higher at 2.496 million head, the most for the month in eight years. They estimate marketings 3.4% more at 1.862 million head, the most for the month in 11 years. Finally, they project cattle on feed Nov. 1 to be 11.961 million head, which would be 5.6% more than last year, the most for the month in 12 years, and the second largest since the data series began in 1996.

You can also find other pre-report estimates that are a few points less bearish on placements.

Negotiated cash fed cattle sales were mainly steady last week on a live basis at $114/cwt. ($112 in the western Corn Belt). Dressed trade was $1-$2 lower at $176-$178.

Except for the back half of Live Cattle, futures prices on Monday eked out minimal gains following pressure early in the session.

Live Cattle futures closed an average of 40¢ higher through the front five contracts, and then unchanged to 35¢ lower.

Feeder Cattle futures closed an average of 38¢ higher, amid extremely thin trade. 

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

Choice boxed beef cutout value was 48¢ higher Monday afternoon at $213.39/cwt. Select was $1 higher at $198.57.

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Major U.S. financial indices closed sharply lower Monday with tech stocks leading the sell-off.

Pressure also came from declining builder confidence, as measured by the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). The index was 8 points lower month to month in November, pressured by concerns about affordability—home prices and interest rates.

The Dow Jones Industrial Average closed 395 points lower. The S&P 500 closed 45 points lower. The NASDAQ was down 219 points.

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“Beef markets have largely been a case of ‘so far, so good’ in 2018. I’m cautiously optimistic that this will continue in 2019 but the risks to beef demand will be higher in the coming year,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. 

Although slowing, Peel explains beef production next year is forecast to be 1.5-2.0% higher at a record 27.5 billion lbs., following the estimated 3.3% increase this year to 27.0 billion lbs.

“Through 2018, total beef production has increased 14.2% (3.4 billion lbs.) since the recent 2015 low,” Peel says. “Strong beef demand has supported prices and margins at all levels of the beef and cattle industry as beef production expanded. Continued strong beef demand will be critical in 2019 as beef production pushes to new record levels.”

Among the challenges to beef demand, Peel cites:

Record poultry and pork production

“Thus far, beef has maintained good demand relative to pork and poultry, as indicated by the fact that beef retail prices are at near record ratios compared to retail pork and poultry prices,” Peel says.

Likewise, Peel explains beef imports are about steady with last year, while U.S. beef exports are 13.3% higher.

Domestic and global economic conditions

“The U.S. economy has supported beef demand thus far, but recent stock market volatility highlights fragile macroeconomic conditions going forward,” Peel says.  “Rising interest rates and growing budget deficits will add to inflationary pressures and contribute to a stronger dollar. A rising dollar could add to export headwinds in the coming months.”

Trade issues

“The uncertain global trade situation continues to hang over beef and other agricultural markets,” Peel explains. “There is general agreement that trade disruptions will likely reduce U.S. and global macroeconomic growth in 2019.  While the beef industry has avoided most of the direct tariff impacts thus far, indirect tariff impacts will continue to grow unless the trade situation is resolved very soon. Consumers will see growing tariff impacts that may impact consumer spending and beef demand…Tariff-driven price increases could push consumers to cheap and abundant pork and poultry at the expense of beef demand.”

Negotiated cash fed cattle trade remained largely undeveloped through late Friday afternoon, at least in term of trades reported to USDA. Although too few to trend, early prices in Nebraska and the western Corn Belt were unevenly steady to a touch softer than the previous week. Early dressed sales were at $178/cwt. in both regions. Early live sales in the western Corn Belt were at $111.50-$112.00.

Late Friday, the Texas Cattle Feeders Association reported its members trading at $114, just a touch lower than the previous week’s weighted average.

Live Cattle futures mainly paddled sideways on Friday as traders awaited direction from the cash market. Feeder Cattle softened a bit, amid anemic trade volume.

Live Cattle futures closed mostly higher, from an average of 26¢ lower to an average of 45¢ higher.

Other than $1.32 lower in spot Jan and 15¢ lower in the back two contracts, Feeder Cattle futures closed an average of 69¢ 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 64¢ lower Friday afternoon at $212.91/cwt. Select was 01¢ lower at $197.57.

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Cash bids were mixed for grains and soybeans Friday.

“Export sales for the week ending Nov. 8 were all within trade expectations,” said analysts with the Daily National Grain Market Summary. “Corn sales totaled 35.1 million bu., which was at the highest end of the range. Soybean sales totaled 17.3 million bu., which was on the low end of estimates.

Wheat bids were 3½¢ lower to 2¾¢ higher. Soybean bids were ½¢ lower to 3½¢ higher. Sorghum bids were 5¢ lower. Corn bids were 2¾¢ to 3¢ lower.

Corn futures closed mostly fractionally lower to 2¢ lower.

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Major U.S. financial indices closed mixed Friday, pressured by tech stocks, but buoyed by hopes regarding trade talks with China.

The Dow Jones Industrial Average closed 123 points higher. The S&P 500 closed 6 points higher. The NASDAQ was down 11 points.

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If the most recent USDA Farm Labor report is in the ballpark, job competition is helping to push farm wages higher.

“Farm operators paid their hired workers an average wage of $14.47 per hour during the October 2018 reference week (Oct. 7-13), up 8% from the October 2017 reference week,” according to the report from the National Agricultural Statistics Service (NASS). “Field workers received an average of $13.74 per hour, an increase of 7%. Livestock workers earned $13.38 per hour, up 9%. The field and livestock worker combined wage rate, at $13.64 per hour, was up 8% from the 2017 reference week. Hired laborers worked an average of 41.5 hours during the October 2018 reference week, down slightly from the hours worked during the October 2017 reference week.”

According to NASS, farm and ranch operators hired (directly) 784,000 workers during the October reference week, which was 7% less than a year earlier.

Negotiated cash fed cattle trade remained undeveloped through Thursday afternoon.

Cattle futures gained a little ground, with some attributing part of the strength to rumors that Japan will remove its age restriction on U.S. beef—implemented in the wake of BSE discovered here in 2003.

Other than 20¢ lower in the back contract, Live Cattle futures closed an average of 27¢ higher.

Other than 35¢ lower in expiring Nov, Feeder Cattle futures closed an average of 85¢ higher.

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

Choice boxed beef cutout value was 39¢ higher Thursday afternoon at $213.55/cwt. Select was 40¢ higher at $197.58.

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Major U.S. financial indices closed higher Thursday, buoyed by tech stocks and reports that the U.S. and China were inching closer on trade talks.

The Dow Jones Industrial Average closed 208 points higher. The S&P 500 closed 28 points higher. The NASDAQ was up 122 points.

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The estimated number of cattle outside feedlots Oct. 1—cattle available to place on feed— was 30.1 million head, just 0.6% more than a year earlier, according to the most recent monthly Livestock, Dairy and Poultry Outlook.

“Winter forage seems to be in better condition than last year, which could provide a home for these calves to stock over the winter. While this may be a positive sign for feeder calf prices in the coming months, limiting factors are the record numbers of cattle already on feed at the beginning of October and expectations of higher feed prices,” say analysts with USDA’s Economic Research Service (ERS). “In addition, cattle are staying on feed longer than last year.”

The estimated percentage of cattle on feed for more than 150 days in October was around 17%, which was approximately 3% more than last year; slightly above the average for 2013-2017, but less than in 2016.

“The higher number of cattle already in feedlots may limit the competition from feedlots for ownership of these calves, and higher feed prices may limit feedlot management’s willingness to pay higher prices for calves,” say ERS analysts.

ERS left the projected fourth-quarter feeder steer price unchanged from the previous month at $151-$155/cwt. The 2019 annual price forecast was lowered to $140-$151 on slightly higher anticipated feed costs and continued large feedlot numbers.