WLI

Negotiated cash fed cattle trade was light on light to moderate demand in Nebraska and the western Corn Belt through Tuesday afternoon. There were a few live trades in both regions at $110.50/cwt.—steady with last week—but too few to trend.

Live Cattle futures closed an average of 14¢ higher.

Feeder Cattle futures closed an average of 24¢ higher.

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

Choice boxed beef cutout value was 43¢ lower Tuesday afternoon at $205.73/cwt. Select was 52¢ lower at $194.87.

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Except mixed for soybeans and wheat, cash bids for grains were higher Tuesday.

“Most of the Midwest is at a standstill in regards to harvest due to precipitation,” explained analysts with the Daily National Grain Market Summary. “The 10-day forecast is calling for more precipitation, which could slow harvest further.” 

Wheat bids were 7¢ lower to 1¢ higher. Soybean bids were ¼¢ lower to 16¾¢ higher. Sorghum bids were 5¾¢ higher. Corn bids were 3¢ lower to 5¼¢ higher.

Corn futures closed mostly 2¢ to 3¢ higher through March’20 and then fractionally higher to 1¢ higher.

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Major U.S. financial indices closed mostly lower on Tuesday. Pressure included more tough trade talk from the White House and higher 10-year Treasury yield.

The Dow Jones Industrial Average closed 69 points lower. The S&P 500 closed 3 points lower. The NASDAQ was up 14 points.

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 “We are entering into a new KORUS (Korea-U.S.) agreement that is a better deal for the entire United States economy, including the agricultural sector,” said Agriculture, Sonny Perdue on Tuesday. “This represents an important improvement in trade relations between our two nations, building on long-standing cooperation we have enjoyed. This agreement adds to the momentum building for President Trump’s approach to trade, which is to stand strong for America’s interests and strike better deals. I am optimistic that the dominoes will continue to fall: KORUS, then a new NAFTA, and new agreements with the European Union, Japan, and, most notably, China. As an avid sportsman, I would say ‘put this one in the bag and keep hunting for more.’”       

“Signing of the revised KORUS agreement (Korea-U.S. trade agreement) is reassuring news for the U.S. beef and pork industries,” said Dan Halstrom, president and CEO of the U.S. Meat Export Federation (USMEF), following Tuesday’s announcement of the agreement. “The market access terms secured in the original KORUS not only helped increase U.S. red meat’s market share in South Korea, but also bolstered consumption by making our beef and pork products more affordable and accessible to Korean consumers.”

The U.S. is the world’s largest beef supplier to Korea and second largest supplier of pork, according to Halstrom.

“U.S. red meat exports to Korea set a record last year of $1.7 billion, up 19% year-over-year and up 69% from 2012, when KORUS entered into force,” Halstom explains. “This trend continues in 2018, with both U.S. beef and pork export value increasing more than 50% percent compared to a year ago. Korea is now the second-largest value market for U.S. beef (after Japan) and fourth largest for U.S. pork (after Japan, Mexico and China/Hong Kong).

The duty rate on U.S. beef has been reduced from 40% to 21.3% and will continue to decline each year until it is eliminated by 2026.

Negotiated cash fed cattle trade ended up being steady to $1 lower last week at $110-$111/cwt. on a live basis and mostly $175 in the beef.

Higher feedlot placements in August weighed on Cattle futures Monday.

Except for 15¢ lower in the back contract, Live Cattle futures closed an average of 79¢ lower (42¢ to $1.45 lower).

Except for 50¢ lower in the front contract, Feeder Cattle futures closed an average of $1.19 lower (75¢ to $1.87 lower).

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

Choice boxed beef cutout value was $1.36 higher Monday afternoon at $206.16/cwt. Select was 68¢ higher at $195.39.

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Major U.S. financial indices closed mostly lower on Monday. Pressure included cancellation of trade talks between the U.S. and China as counter tariffs begin this week.

The Dow Jones Industrial Average closed 181 points lower. The S&P 500 closed 10 points lower. The NASDAQ was up 6 points.

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 “Lightweight placements since May will result in lighter and later fed cattle marketings and may contribute to relatively tighter fed cattle supplies for the remainder of the year,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments.

As noted in the last issue of Cattle Current, placements in feedlots with more than 1,000 head capacity were 7.36% more than the previous year at 2.07 million head, according to Friday’s Cattle on Feed report.

“Increased August placements largely consisted of cattle under 700 lbs., with the under-600 lb. category up 19.4% year over year and cattle placed weighing 600-700 lbs. up 17.5% compared to last year,” Peel says. “In the last four months, placements of cattle under 700 lbs. has been up 13.2% year over year, while placements weighing over 700 lbs. were down 1.0% year over year. Lightweight feedlot placements likely include lighter-weight steer placements, as well as continued high proportions of heifers in the feedlot total. Heifers are typically placed 50-100 lbs. lighter in weight compared to steers.”

Although total cattle slaughter is 3.2% more so far this year, Peel notes heifer slaughter is 8.3% higher for the year to date.

“However, heifer slaughter is expected to show much smaller year-over-year increases in the fourth quarter, thereby moderating the annual increase,” Peel explains. “Beef cow slaughter is 11.4% larger year over year so far this year. Dairy cow slaughter continues to inch higher and is up 4.5% so far this year. Steer slaughter continues below year-ago levels and is down 0.8% year over year for the year to date. Steer slaughter will likely increase some relative to last year and result in an annual total slightly larger than last year.”

Other than Nebraska, negotiated cash fed cattle trade remained mostly undeveloped through late Friday afternoon. Live trades there were $1 lower than the previous week at $110-$110.50/cwt. Dressed trade was steady at $175.

Late Friday, the Texas Cattle Feeders Association reported its members trading cattle at steady money of $111.

Cattle futures firmed on Friday with apparent positioning ahead of the monthly Cattle on Feed report (see below).

Except for 5¢ higher in the back contract, Live Cattle futures closed an average of 51¢ higher.

Feeder Cattle futures closed an average of 87¢ higher across the front half of the board, and then an average of 10¢ higher.

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

Choice boxed beef cutout value was 28¢ higher Friday afternoon at $204.80/cwt. Select was 20¢ lower at $194.71.

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Major U.S. financial indices closed mixed on Friday, with investors squaring the books amid little market-moving news.

The Dow Jones Industrial Average closed 85 points higher. The S&P 500 closed 1 point lower. The NASDAQ was down 41 points.

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Friday’s monthly Cattle on Feed report will likely be viewed as bearish, with more August placements than average estimates ahead of the report.

Placements in feedlots with more than 1,000 head capacity were 7.36% more than the previous year at 2.07 million head. That’s 2-4% more than expected.

Most cattle went on feed weighing less than 800 lbs. Specifically, 20.8% weighed less than 600 lbs.; 16.2% weighed 600-699 lbs.; 22.2% at 700-799 lbs.; 22.9% weighing 800-899 lbs.; 11.6% weighing 900-999 lbs.; 6.3% at weights of 1,000 lbs. or more.

Marketings in August of 1.98 million head were just about even with the previous year, but 4,000 head more.

All told, 11.125 million head were on feed Sept. 1, which was 5.9% more (+621,000 head) than the same time last year. That’s the largest inventory for the month since the data series began in 1996.

Negotiated cash fed cattle trade was slow on light to moderate demand in Nebraska through Thursday afternoon, with a few dressed trades at $175/cwt.; steady with last week, but too few to trend.

Early support faded in Cattle futures Thursday, ending with a mainly narrowly mixed to narrowly lower close.

Except for 65¢ lower in spot Oct, Live Cattle futures closed narrowly mixed, from 2¢ to 25¢ lower across the front half of the board, then 5¢ to 15¢ higher the rest of the way.

Other than 15¢ higher in spot Sep, Feeder Cattle futures closed an average of 29¢ lower, with most pressure in the front contracts.

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

Choice boxed beef cutout value was 27¢ higher Thursday afternoon at $204.52/cwt. Select was 73¢ higher at $194.91.

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Major U.S. financial indices surged higher Thursday, fueled by global bell-weather stocks such as Boeing, Caterpillar and Apple, presumably on optimism over what traders gauged as a muted response by China to the most recent tariffs imposed by the U.S.

The Dow Jones Industrial Average closed 251 points higher. The S&P 500 closed 22 points higher. The NASDAQ was up 78 points.

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“A strong domestic economy and robust exports have buffered beef, and hence, cattle prices against near record large U.S. beef production and all-time highs in competing meats and poultry supplies,” say analysts with the Livestock Marketing Information Center (LMIC), in the latest Livestock Monitor. “There are unknowns and potential headwinds for cattle markets during the next few years, not the least of which is the potential for U.S. beef, pork, and chicken exports to falter under a cycle of tariffs and retaliation. Also, any significant weakness in the domestic or global economy compared to the healthy conditions of the last 12 months could dampen demand for beef, and therefore cattle.”

In the meantime, LMIC analysts point out projected beef production this year of 27.5 billion lbs.—assuming normal weather conditions—will be the smallest year-to-year increase since 2015 at 1-2%.   

“In the first quarter of 2019, fed cattle prices could be below 2018’s. In subsequent quarters prices are forecast to be similar to a year earlier,” say LMIC analysts.  “A normal 2019 Midwest corn crop would set the stage for steady to modestly higher yearling and calf cattle prices in the second half of 2019, compared to the corresponding quarters in 2018.”

Negotiated cash fed cattle trade remained undeveloped through Wednesday afternoon. Depending on the snugness of packer inventories, odds appear to favor at least steady money.

There were only 528 head offered in the weekly Fed Cattle Exchange auction. No takers.

Cattle futures continued to putter along, holding on to most of last week’s gains, closing narrowly mixed to a touch lower and awaiting cash direction.

Live Cattle futures closed unchanged to an average of 10¢ lower.

Feeder Cattle futures closed from 42¢ lower to 50¢ higher.

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

Choice boxed beef cutout value was $1.04 lower Wednesday afternoon at $204.25/cwt. Select was $1.29 lower at $194.18.

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Major U.S. financial indices closed mixed Wednesday, with bank shares pushing the Dow higher with support from the higher 10-year treasury yield.

The Dow Jones Industrial Average closed 158 points higher. The S&P 500 closed 3 points higher. The NASDAQ was down 6 points.

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“Feeder cattle prices have shown strength through the summer, but seasonal pressures will likely take hold, moving prices lower in the fourth quarter,” say analysts with USDA’s Economic Research Service (ERS), in the latest monthly Livestock, Dairy and Poultry Outlook. “Prices typically decrease when the spring-born calves (about two-thirds of the annual calf crop) are brought to market in the fall. Assuming normal weather in the Great Plains, availability of winter forages for backgrounding could bolster prices in fourth-quarter 2018.”

Prices for the rest of this year and next were forecast slightly higher than the previous month at $148-$151/cwt. in the third quarter; $143-$151 in the fourth quarter; $139-$151 for the 2019 annual price, based on lower projected corn prices.

“Regarding fed cattle prices in second-half 2018, feedlots seem to have resisted recent lower prices from packers, which may be reflected in a greater proportion of cattle on feed over 120 days. To the extent these cattle are remaining on feed longer as producers respond to the prospects of higher future prices, there could be a shift of some marketings from the third quarter to the fourth,” say ERS analysts. “The fed steer price forecast for the 5-area marketing region in third-quarter of 2018 is $108-$111/cwt., but the fourth-quarter forecast is lowered to $108-$114/cwt., in line with expectations of increased marketings.”