WLI

Negotiated cash fed cattle sold steady in the beef on Friday at $197/cwt. Live sales were steady to mostly $1 lower at $123 in Kansas and Nebraska and at $123.00 to $125.50 in the western Corn Belt. The Texas Cattle Feeders Association reported its members selling steers at $123, which was $1 less than the previous week.

Softer cash trade and pressure in Lean Hog futures helped pressure Cattle futures on Friday.

Other than 70¢ and 37¢ higher in the front two contracts, Live Cattle futures closed an average of 37¢ lower.

Feeder Cattle futures closed an average of 45¢ lower.

Corn futures closed mostly 2¢ to 3¢ higher.

Soybean futures closed mostly 5¢ to 9¢ higher. 

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 74¢ lower Friday afternoon at $217.01/cwt. Select was 11¢ lower at $212.02.

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Major U.S. financial indices closed higher Friday with the announcement that Congress and President Trump reached a resolution to reopen the government, at least temporarily—until Feb. 15—with hopes all sides can come to agreement on a national budget and border security.

The Dow Jones Industrial Average closed 183 points higher. The S&P 500 closed 22 points higher. The NASDAQ was up 91 points.

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USDA’s monthly Cattle on Feed report was due to be published Friday, but went missing due to the partial government shutdown. Even when government reopens for business, the report may go unpublished.

According to various pre-report estimates, December feedlot placements—feedlots with 1,000 head or more capacity—were likely about 2% more year over year.

For instance, David Anderson, Extension livestock economist at Texas A&M University, in the latest issue of In the Cattle Markets, says “December saw an increase in cattle imports from Mexico and larger calf and feeder sales. Placements in December are typically much lower than in November, as much as 500,000 fewer in some years.”

The Livestock Marketing Information Center (LMIC) is more conservative, though, expecting placements to be 0.6% more.

“Feeder cattle imports from Mexico and Canada were about 25,000 head higher year-over-year. Auction receipts showed strong volumes relative to a year ago, both pointing to more placements,” LMIC analysts say in the latest Livestock Monitor. “The headwind to placements has been extremely muddy conditions in feedlots, especially in Kansas and Nebraska.

All of the sources mentioned here expect December marketings to be about on par with the previous year.

“Actual weekly slaughter has not been released since Dec. 8, so this estimate relies on estimated daily slaughter,” LMIC analysts explain. “While the estimated slaughter data is better than no data, there is a large difference in precision. Estimated daily slaughter for steers and heifers are rounded to the nearest 1,000 head, while actual slaughter is down to the number of head. Over the course of an entire month, estimated versus actual can vary.”

For Anderson, and the majority of analysts in the Urner Barry Survey—reported by the Daily Livestock Report—that leaves estimated inventory of cattle on feed Jan. 1 about 2% higher than a year earlier.

“That represents a relatively large number of cattle on feed, as have the last several reports,” Anderson says. “It also continues to represent a narrowing of the growth in on-feed numbers compared to months earlier in the year.”

Negotiated cash fed cattle trade remained undeveloped through Thursday afternoon.

Pressure in Lean Hog futures, undeveloped cash trade and light interest held Cattle futures to minimal gains.

Other than 20¢ and 2¢ lower in the front two contracts, Live Cattle futures closed an average of 28¢ higher.

Feeder Cattle futures closed an average of 50¢ higher.

Corn futures closed mostly fractionally lower to 1¢ lower.

Soybean futures closed mostly unchanged to fractionally mixed. 

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

Choice boxed beef cutout value was 54¢ higher Thursday afternoon at $217.75/cwt. Select was 10¢ higher at $212.14.

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Major U.S. financial indices closed narrowly mixed Thursday, with strong quarterly earnings reports tempered by continued fretting over the ongoing trade dispute between China and the U.S.

The Dow Jones Industrial Average closed 22 points lower. The S&P 500 closed 3 points higher. The NASDAQ was up 47 points.

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“Wholesale beef markets are starting 2019 with a continuation of generally strong prices seen last year,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his recent market comments. “For the first three weeks of the year, boxed beef cutout prices are up 2.9% for Choice and 3.4% for Select compared to the same period last year.” 

Week to week on Thursday, Choice boxed beef cutout value was $5.25 higher at $217.75/cwt. Select was at $4.50 higher at $212.14.

“In 2018, weekly boxed beef prices averaged 2.2% higher year over year compared to 2017,” Peel explains. “Wholesale beef prices were higher in 2018 despite a projected 2.8% increase in beef production and larger pork and poultry supplies.”

Middle meats provided the most support to cutout values in recent months, according to Peel. He explains, “Current Choice rib primal price is $344.79/cwt., up 9.8% year over year. Last year, rib primal prices averaged 6.2% higher compared to 2017. Choice loin primal price is currently $280.80/cwt., up 4.7% compared to the same week last year. In 2018, Choice loin primal prices averaged 1.5% higher year over year.”

Negotiated cash fed cattle trade remained undeveloped through Wednesday afternoon. Although too few to trend, there were a few live trades in the western Corn Belt at $122-$125.

Prices were higher at some fat cattle auctions. For instance, Ch 2-4 steers brought $127.29 to $128.87/cwt. at Tama, IA, which was $2-$3 higher than last week’s negotiated trade in the region. On the other hand, Ch 2-3 steers brought $120.00 to $123.25 at Sioux Falls.

There were 4,139 head offered in the weekly Fed Cattle Exchange Auction. One lot of Texas steers (63 head) sold for 1-9 day delivery at $123/cwt. One lot of Kansas heifers (116 head) were passed out at $123 for 1-9 day delivery.

Feeder Cattle futures led Live Cattle higher Wednesday. Support included firmer outside markets and resurgent wholesale beef values.

Live Cattle futures closed an average of 53¢ higher.

Feeder Cattle futures closed an average of $1.60 higher ($1.37 to $2.15 higher).

Corn futures closed mostly fractionally higher to 1¢ higher.

Soybean futures closed mostly 2¢ to 5¢ higher. 

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

Choice boxed beef cutout value was 87¢ higher Wednesday afternoon at $217.21/cwt. Select was 32¢ higher at $212.04.

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Major U.S. financial indices closed higher Wednesday, gathering back some of the previous session’s losses. Support included strong quarterly earnings reports from the likes of IBM and Procter and Gamble.

The Dow Jones Industrial Average closed 171 points higher. The S&P 500 closed 5 points higher. The NASDAQ was up 5 points.

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“Trade uncertainty, rising debt levels and market volatility are threatening to derail the global economy and creating difficult operating environments for U.S. agriculture,” says Dan Kowalski, vice president of CoBank’s Knowledge Exchange Division (KED). “Trade is the outsized risk. Unresolved disputes with Mexico, Canada, Europe and China are the greatest collective threat to the U.S. economy in 2019.”

Although the U.S. economy is still performing well by most key measures, global and U.S. economic prospects are weakening and the agricultural economy shows few signs of an imminent comeback, according to a comprehensive 2019 outlook report from CoBank’s KED.

The CoBank report examines 10 key factors that will shape agriculture and markets sectors that serve rural communities throughout the U.S. Among them:

Global Economy—World economic output hit an 8-year high in 2018, powered by both advanced economies and emerging markets. Challenges mounted in late 2018 and risks are decisively weighted to the downside for the coming year… Trade policy between the U.S. and China will remain the leading risk to the global economy. Increasing debt levels is another undercurrent that threatens to derail the global economy. Total global debt levels (all public and private debt) are now more than three times greater than in 2001.

U.S. Economy—The U.S. economic expansion is set to become the lengthiest in history this summer, but clouds forming on the horizon suggest more modest growth in 2019 and greater concerns for 2020.

Dairy and Animal Protein—In 2018, the U.S. animal protein sector began suffering from the same oversupply and weak margins that have plagued U.S. dairy producers since 2015. Despite the less favorable profitability environment, the protein and dairy sectors will continue to expand production in 2019, prolonging the margin squeeze.

Of the three major animal protein species, beef appears to be weathering the animal protein oversupply situation best, with favorable fed cattle prices and historically high packer margins resulting from tight processing capacity.

Negotiated cash fed cattle trade remained undeveloped through Tuesday afternoon. Although too few to trend, there was a limited number of sales in Kansas at $122/cwt. on a live basis and at $123 in Nebraska.

Despite stronger wholesale beef values and recent firmness in cash fed cattle prices, Cattle Futures closed lower Tuesday, led by Feeder Cattle. Pressure included sharply lower outside markets, perhaps less weather impact from the weekend than anticipated and concerns about longer term demand strength (see “financial indices” below).

Live Cattle futures closed an average of $1.24 lower through the front three contracts and then an average of 61¢ lower.

After 40¢ lower in spot Jan, Feeder Cattle futures closed an average of $1.35 lower.

Corn futures closed mostly 2¢ lower through Sep ’20 and then fractionally lower to 1¢ lower.

Soybean futures closed 5¢ to 7¢ lower through Sep ’20 and then 2¢ to 3¢ lower.

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

Choice boxed beef cutout value was $1.08 higher Tuesday afternoon at $216.34/cwt. Select was 86¢ higher at $211.72.

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Major U.S. financial indices closed sharply lower Tuesday, erasing gains from the previous session. Pressure included news from the International Monetary Fund the previous day, suggesting that global economic growth is slowing. Investors also seemed to be rattled by reports of slowing economic growth in China, specifically.

The Dow Jones Industrial Average closed 301 points lower. The S&P 500 closed 37 points lower. The NASDAQ was down 136 points.

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“Interest in purchasing breeding stock has been cautious, relative to current spot and futures market pricing for calves and yearlings…Bred cow prices at auctions during the last quarter of 2018 were down 10-20% from a year earlier in key cattle production regions,” say analysts with the Livestock Marketing Information Center (LMIC), in the latest Livestock Monitor.

Based on average prices reported by the Agricultural Marketing Service (AMS), LMIC analysts say prices in Georgia were 19% less for cows weighing 1,200-1,300 lbs. and bred 4-6 months. They brought $912.30/head in December, versus $1,119.89 a year earlier.

For the same month, mid-age cows in Montana weighing 1,200-1,300 lbs. sold 6% less year over year.

“Not surprisingly, Midwest auction cow price changes from late 2017 to late 2018 posted a drop between that of Montana and Georgia; prices at Saint Joseph, MO were down 15%,” say LMIC analysts.

Keep in mind, breeding stock markets in some areas, like Missouri, were pressured by drought.

As for calf prices, LMIC projects Southern Plains steer calf prices (500-600 lbs.) to average $167-$174/cwt. this year, compared to the 2018 calf price average of $171.39 last year. LMIC forecasts yearling steer prices (700-800 lbs.) at $145-$150/cwt., compared to $150 last year. LMIC analysts point out that in mid-January, the November Feeder Cattle futures contract closed at $149.85, versus $144.93 a year earlier.

When all was said and done, negotiated cash fed cattle trade was mostly steady last week at $124/cwt. on a live basis in the Southern Plains and Nebraska, but $1 higher in the western Corn Belt at $123-$125. Dressed trade was steady at $197.

Futures and equity markets were closed Monday in honor of Martin Luther King Day.

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Global economic growth continues to weaken, according to the latest World Economic Outlook Update from the International Monetary Fund (IMF).

IMF projects global economic growth at 3.5% this year and 3.6% next year; 0.2% and 0.1% less than October’s estimate.

“Even as the world economy continues to move ahead, it is facing significantly higher risks, some of them related to policy,” explained Christine Lagarde, IMF chair and managing director, at press conference for the update. “These risks are now increasingly intertwined: think of how higher tariffs and rising uncertainty over future trade policy fed into lower asset prices and higher market volatility. This in turn contributed to tightening financial conditions, including for advanced economies, which is a major risk factor in a world of high debt burdens.”

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Even if the partial government shutdown—the longest in history—ended this week, odds are against the monthly Cattle on Feed report going out Jan. 25, as originally planned.

To their credit, and understanding the limitations of available data, the Livestock Marketing Information Center (LMIC) provided its estimates on Friday.

“Placements (feedlots with a capacity of 1,000 head or more) are expected to be slightly larger than a year ago. Feeder cattle imports from Mexico and Canada were about 25,000 head higher year-over-year. Auction receipts showed strong volumes relative to a year ago, both pointing to more placements,” say LMIC analysts, in the latest Livestock Monitor. “The headwind to placements has been extremely muddy conditions in feedlots, especially in Kansas and Nebraska. LMIC estimates that placements during December were 0.6% more than a year ago. This would be the highest December placement number since 2010.”

LMIC projects December marketings at 0.5% less than a year ago. Analysts emphasize this is the most difficult projection, based on missing data.

“Actual weekly slaughter has not been released since Dec. 8, so this estimate relies on estimated daily slaughter,” LMIC analysts explain. “While the estimated slaughter data is better than no data, there is a large difference in precision. Estimated daily slaughter for steers and heifers are rounded to the nearest 1,000 head, while actual slaughter is down to the number of head. Over the course of an entire month, estimated versus actual can vary.”

Between placement and marketing estimates, LMIC projects the inventory of cattle on feed Jan. 1 to be 2.1% more than a year earlier.