WLI

Negotiated cash fed cattle trade for the week began to take shape Thursday, on light to moderate trade and moderate demand in the western Corn Belt. Early live sales were $1 higher at $113-$114/cwt., with dressed sales steady at $180. Although too few to trend, there were a few early live trades in Nebraska at $114, which was steady to $1 lower than last week.

Cattle futures firmed on Thursday, mostly retaining gains from the previous session. Along with increasing whole beef values and the promise of steady to higher cash fed cattle prices, strength was also attributed to lighter carcass weights, as a barometer of marketing currentness. According to USDA’s Actual Slaughter Under Federal Inspection report yesterday, steer carcass weights of 894 lbs. (week ending Oct. 20) were 5 lbs. lighter than the previous week and previous year. Heifer carcass weights of 826 lbs. were 5 lbs. lighter than the previous week and 3 lbs. lighter than the previous year.

Live Cattle futures closed an average of 49¢ higher.

Except for 17¢ lower in spot Nov, Feeder Cattle futures closed an average of 49¢ higher.

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

Choice boxed beef cutout value was $1.62 higher Thursday afternoon at $218.55/cwt. Select was 22¢ higher at $204.25.

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Cash bids for grains and soybeans were higher Thursday.

“Corn shipments are up 76% in 2018-19, still a bullish pace, but sales have dropped off the past few weeks,” said analysts with the Daily National Grain market Summary. They add that sales and shipments of soybeans were bearish last week. As well, wheat exports remain 21% below last year’s pace.

Wheat bids were steady to 8¢ higher. Soybean bids were 30¢ lower to 44¢ higher. Sorghum bids were 6¼¢ higher. Corn bids were 3½¢ to 10½¢ higher.

Corn futures closed mostly 1¢ to 3¢ higher.

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Major U.S. financial indices closed sharply higher again Thursday, buoyed by positive quarterly earnings, as well as a more positive outlook for trade talks with China.

The Dow Jones Industrial Average closed 264 points higher. The S&P 500 closed 28 points higher. The NASDAQ was up 128 points.

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Lower same-store sales and lighter traffic pressured the Restaurant Performance Index (RPI) 0.9% lower to 101.1 in September, according to the National Restaurant Association (NRA).

More specifically, according to the report, “The RPI’s September decline was primarily the result of a pullback in the current situation indicators.” The Current Situation Index—one sub-index comprising the RPI—declined 1.7% in September to 100.6. That index accounts for same-store sales, traffic, labor and capital expenditures.

“In addition, 23% of operators expect economic conditions to worsen in six months–the highest level in two years,” according to NRA.

The other sub-index that informs the RPI is the Future Expectations Index. It was 0.1% lower in September at 101.6. That index measure restaurant operators’ six-month outlook for same-store sales, employees, capital expenditures and business conditions.

Only 209 head were offered in the weekly Fed Cattle Exchange Auction on Wednesday—no takers.

Cattle futures closed higher Wednesday, led by Feeder Cattle. Increasing wholesale beef values continued to provide support, as did increasing open interest and expectations for cash fed cattle prices this week to be at least steady with last week’s higher level.

After $1.95 higher in expiring Oct, Live Cattle futures closed an average of 40¢ higher, except for an average of 14¢ lower in two contracts.

Feeder Cattle futures closed an average of $1.35 higher (97¢ to $2.02 higher).

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

Choice boxed beef cutout value was $1.33 higher Wednesday afternoon at $216.93/cwt. Select was $1.15 higher at $204.03.

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Major U.S. financial indices closed sharply higher Wednesday, for a second consecutive day. Support included better than expected quarterly earnings from the likes of General Motors and Facebook.

The Dow Jones Industrial Average closed 241 points higher. The S&P 500 closed 29 points higher. The NASDAQ was up 144 points.

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African Swine Fever (ASF) could impact U.S. beef markets a couple of ways.

On one hand, and arguably, strength in Lean Hog futures in recent weeks can be attributed at least partly to speculation that the ASF outbreak in China and other countries will mean more international demand for U.S. pork, ultimately.

“The U.S. produces approximately 32% of world pork exports,” explains Brenda Boetel, an Extension economist at the University of Wisconsin-River Falls, in the latest issue of In the Cattle Markets. “U.S. pork export quantities have increased in 2018, although prices have not held up as well. One country where U.S. export quantities have decreased steadily since April 2018 is China. China imports approximately 26% of the world trade, and in September 2018 China increased pork imports by 8.4% over September 2017. Yet, volume of U.S. pork exports to China and Hong Kong are down 9% from 2017. Given the African Swine Fever issues in China, and increasing Chinese demand for pork, one can assume the decrease in U.S. exports to China is related to tariff issues.”

On the other hand, U.S. pork exports could suffer if ASF to occur in this nation.

“Given that the U.S. will produce over 26 billion lbs. of pork in 2018, and over 22% will be exported, an incident of ASF in the U.S. would be challenging with regionalization and devastating without regionalization. Should the U.S. become infected with ASF, the impact on pork prices would be severe even if we can keep some of our export trade with regionalization.”

Regionalization refers to the notion of countries not infected with ASF or some other Foreign Animal Disease, continuing to accept exports from uninfected regions within ‘infected’ countries.

“The incidence of ASF in China has both the potential to increase U.S. pork exports, if we can work out a trade agreement with China to lower tariffs on U.S. pork, while also providing huge risk should ASF make the jump to the US,” Boetel says. “Cattle producers need to pay attention, as significant changes in pork prices will impact beef prices and eventually cattle prices.”

Despite seasonally higher wholesale beef values and last week’s higher cash market, Cattle futures closed lower on Tuesday, led by Feeder Cattle, but still basically paddling sideways.

Live Cattle futures closed mostly an average of 51¢ lower.

Feeder Cattle futures closed an average of $1.39 lower.

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

Choice boxed beef cutout value was $1.52 higher Tuesday afternoon at $215.28/cwt. Select was $1.77 higher at $202.88.

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Major U.S. financial indices closed sharply higher Tuesday, with a rebound in tech stocks and some positive quarterly earnings reports, such as those from Coca-Cola.

The Dow Jones Industrial Average closed 431 points higher. The S&P 500 closed 41 points higher. The NASDAQ was up 111 points.

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“With ample wheat pasture virtually assured at this point, producers may stock wheat pastures a bit heavier than usual, leading to additional stocker demand in the coming weeks,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in is weekly market comments. 

In the meantime, wheat planting and development remain behind the average.

78% of winter wheat is planted, according to the most recent Crop Progress report (week ending Oct. 29), which is 5% less than last year and 7% less than the average. 63% has emerged, which the same as last year, but 4% less than the average. 53% is rated in Good or Excellent condition, which is 2% more than a year earlier.

Overall, pasture and range conditions continue more favorable than last year, as well. 50% was in Good (42%) or Excellent (8%) condition compared to 40% a year earlier. 20% was rated as Poor (13%) or Very Poor (7%), which was 5% less than last year.

As for crops, corn harvest caught up with the average of 63%, which is 11% behind last year.

Soybean harvest remains behind, though, with 72% in the bin, which is 9% less than last year and the average.

Cattle futures settled mainly narrowly mixed on Monday, unable to build on last week’s strong cash markets and the seasonal uptick in wholesale beef values. Though trade was light, some analysts pinned part of the weakness on shifting fund positions, from the long side.

Live Cattle futures closed mostly narrowly mixed (from an average of 73¢ lower in three contracts to an average of 24¢ higher).

Except for 90¢ lower in spot Nov, Feeder Cattle futures closed narrowly mixed (25¢ lower to 15¢ higher).

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

Choice boxed beef cutout value was 29¢ higher Monday afternoon at $213.76/cwt. Select was $2.28 higher at $201.11.

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Major U.S. financial indices closed sharply lower again on Monday, amid a volatile day of trading with pressure from tech stocks and continuing trade worries, relative to China.

The Dow Jones Industrial Average closed 245 points lower. The S&P 500 closed 17 points lower. The NASDAQ was down 116 points

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Higher costs—including winter feed, fuel, utilities and interest—along with lower cull cow prices are pressuring cow-calf returns this year, according to the Livestock Marketing Information Center (LMIC).

“On a per cow basis, cash return for 2018 is expected to be slightly negative (about -$10 per cow),” say LMIC analysts, in the latest Livestock Monitor. “Last year had a positive return over cash costs, due to calf prices that strengthened during the second half of the year. Estimated loss per cow in 2018 was smaller than 2016’s. The preliminary 2019 LMIC forecast is for positive returns over cash costs. That situation may further improve in 2020.”

For context, LMIC emphasizes their annual calculations are for market analysis; they don’t reflect any individual operation.

“The estimates only incorporate cash production costs plus pasture rent. A commercial size herd that weans and sells calves in the fall is assumed,” LMIC analysts explain. “…These estimates are best interpreted in a broad context, focusing on the direction of change.”