WLI

Negotiated cash fed cattle trade remained largely undeveloped through USDA’s late-afternoon report Friday. There were some live sales in the western Corn Belt at $115/cwt., unevenly steady with Wednesday’s $114-$116, which was $1-$2 higher than the previous week. There was some early dressed trade in Nebraska at $183, but too few transactions to trend; prices the previous week were at $180-$185, mostly $185.

Live Cattle futures firmed on Friday (17¢ lower to 32¢ higher), supported by the steady to higher feel in the cash market.

Feeder Cattle futures softened amid continued lackluster trade and perhaps some month-end position squaring. Except for 7¢ lower in the back two contracts, Feeder Cattle futures closed an average of 60¢ lower.

Though futures prices remain channel-bound, there continue to be expectations for a secondary boost, if and when China and the U.S. settle their trade differences. The notion is that China’s ongoing problems with African Swine Fever mean that nation needs to import lots more pork, potentially significantly more from the U.S. President Trump and China’s President Xi Jingping were scheduled to meet over the weekend during the G20 Summit.

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

Choice boxed beef cutout value was even with the previous day Thursday afternoon at $212.61/cwt. Select was 12¢ lower at $198.41.

*******************************

Major U.S. financial indices closed higher Friday, apparently boosted by optimism that the U.S. and China would make headway in solving their trade issues when leaders meet during the G20 Summit in Argentina over the weekend.

The Dow Jones Industrial Average closed 199 points higher. The S&P 500 closed 22 points higher. The NASDAQ was up 57 points.

*******************************

Leaders of the United States, Mexico, and Canada signed the U.S.-Mexico-Canada Agreement (USMCA) on Friday, during the G-20 meeting in Argentina. The USMCA maintains unrestricted, duty-free trade for beef and cattle in North America. It also maintains science-based trade standards.

All three countries must complete their own domestic processes before the USMCA comes into force. In the U.S., Congress will need to pass legislation to implement the deal. The U.S. International Trade Commission is currently conducting an investigation into the likely impacts of USMCA.

“With the signing of the, U.S. beef producers are one step closer to knowing that unrestricted, science-based trade will continue in North America,” says Kevin Kester, president of the National Cattlemen’s Beef Association. “The agreement brings the trading relationship with our neighbors into the 21st century – and clearly rejects the failed beef and cattle trade policies of the past. Open markets have helped U.S. producers flourish and created billion-dollar markets for U.S. beef. We look forward to working with Congress to get USMCA passed into law as quickly as possible.”

Other than early live sales in the western Corn Belt Wednesday, which were $1-$2 higher than last week at $114-$116/cwt., negotiated cash fed cattle trade remained undeveloped through Thursday afternoon.

Cattle futures dipped, recovering some from the strongest early pressure. Other than, arguably, more interest flowing to Lean Hogs, there seemed no apparent fundamental reason for the decline. Given the current support of fed cattle prices, it was one of those sessions that left you wondering exactly what components comprise electronic-trading algorithms, and perhaps more important, how far ahead.

After 17¢ lower in spot Dec and 27¢ lower in near Feb, Live Cattle futures closed an average of 97¢ lower (52¢ to $1.30 lower).

Feeder Cattle futures closed an average of $1.46 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 67¢ lower Thursday afternoon at $212.61/cwt. Select was 3¢ higher at $198.53.

*******************************

Major U.S. financial indices trickled lower Thursday, as investors digested the interest rate news and trade hopes that boosted markets the previous day.

Battered nearby Crude Oil futures (WTI-CME) bounced about $1 higher.

The Dow Jones Industrial Average closed 27 points lower. The S&P 500 closed 6 points lower. The NASDAQ was down 18 points.

*******************************

Judging by projections in the latest Outlook for U.S. Agricultural Trade, beef exports will continue to lead the way next year.

Projected beef exports for fiscal year 2019 (October-September) were projected $500 million higher than the August forecast at $7.6 billion. That would be about $278 million more than this year. According to analysts with USDA’s Economic Research Service (ERS), the increase is driven mostly by higher unit values.

Overall, the projection for total livestock, dairy, and poultry exports are forecast $200 million less than the August projection at $30.1 billion, pressured by weaker demand for dairy, poultry and products, hides and skins, as well as rendered products.

For context, according to ERS analysts, “Per capita world GDP growth is expected to be robust at 2.1% in 2018 and to remain healthy at 2.0% percent in 2019, led by a thriving U.S. economy…Per capita GDP growth in the United States of 2.2% in 2018 is expected to be sustained in 2019. In 2018, the U.S. economy is bolstered by strong consumer spending and favorable business investment. Income growth is expected to slow during 2019, due to diminishing effects of fiscal stimulus, rising inflation and slower economic growth outside the United States.”

Notions grew stronger yesterday for steady to higher cash fed cattle prices this week.

Early live sales in the western Corn Belt were $1-$2 higher at $114-$116/cwt., on slow trade and light demand.

There were 620 head (seven lots) offered in the weekly Fed Cattle Exchange auction. One lot (148 head) of steers from Kansas sold at $116.75/cwt. for delivery at 1-9 days. That’s toward the top of the price range for country trade in the region last week.

Live Cattle futures closed marginally mixed Wednesday, while Feeder Cattle softened slightly, amid light trade and a lack of direction.

Live Cattle futures closed narrowly mixed, from an average of 5¢ higher in three contracts to an average of 12¢ lower.

Feeder Cattle futures closed an average of 54¢ lower.

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

Choice boxed beef cutout value was 72¢ lower Wednesday afternoon at $213.28/cwt. Select was $1.74 lower at $198.50.

*******************************

Major U.S. financial indices closed sharply higher Wednesday, propelled by comments from Federal Reserve Chairman, Jerome Powell, suggesting interest rate increases may be nearing an end.

“Interest rates are still low by historical standards, and they remain just below the broad range of estimates of the level that would be neutral for the economy—that is, neither speeding up nor slowing down growth,” Powell explained in prepared remarks at the Economic Club of New York Wednesday. “My FOMC colleagues and I, as well as many private-sector economists, are forecasting continued solid growth, low unemployment, and inflation near 2%.”

The Dow Jones Industrial Average closed 617 points higher. The S&P 500 closed 61 points higher. The NASDAQ was up 208 points.

*******************************

“Declining unemployment rates and a small increase in population ages 16 and older corresponded to the addition of more than 650,000 jobs in rural counties between 2013 and 2017,” according to the recently released Rural America at a Glance, from USDA’s Economic Research Service (ERS).

“At the same time, falling labor force participation (due primarily to an aging population among non-Hispanic Whites) corresponded to a decline in employment of nearly 280,000, leaving a net increase in jobs of roughly 370,000,” ERS analysts say.

In 2016-2017, rural counties added population for the first time in a decade, according to the report, though the total rural population has remained close to 46.1 million since 2013.

“The recent upturn in rural population comes from increasing rates of net migration as opposed to natural change (births minus deaths). Increased net migration has coincided with declining rural unemployment, rising incomes, and declining poverty since 2013,” say ERS analysts.

Cattle futures closed mainly narrowly lower Tuesday, with little direction one way or the other.

Except for 5¢ higher in away Dec and unchanged at the back, Live Cattle futures closed an average of 21¢ lower.

Feeder Cattle futures closed an average of 28¢ lower.

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

Choice boxed beef cutout value was 45¢ lower Tuesday afternoon at $214.00/cwt. Select was 45¢ higher at $200.24.

*******************************

Major U.S. financial indices gained for the second consecutive day, reportedly buoyed by chatter about a U.S.-China trade truce.

The Dow Jones Industrial Average closed 108 points higher. The S&P 500 closed 8 points higher. The NASDAQ was fractionally higher.

*******************************

Although boxed beef cutout values never received as much seasonal pop as some expected, they continue to be strong in the face of increased production.

“The wholesale price of beef remained fairly strong through the holiday week. There may still be some end-of-the-year holiday beef buying on the table, which could provide support to the beef cutout,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. How much buying is left to be completed will determine the amount of support provided as retailers will soon be moving their focus to end cuts.”

Analysts with USDA’s Economic Research Service note that since early August, Choice wholesale beef cutout prices stayed well above year-earlier levels. 

“In fact, the weekly beef cutout price for the week ending Nov. 9 climbed to within June price levels despite higher year-over-year beef production for third-quarter 2018 and higher expected production in fourth-quarter 2018,” ERS analysts say in the latest monthly Livestock, Dairy and Poultry Outlook.

Cattle futures closed marginally mixed but mostly higher Monday, supported by last week’s friendly Cattle on Feed report and a recent bump in wholesale beef values.

Live Cattle futures closed an average of 21¢ lower through the front four contracts and then unchanged to 5¢ higher.  

Other than 22¢ lower in spot Jan, Feeder Cattle futures closed an average of 24¢ higher.

Corn futures closed mostly 1¢ to 2¢ 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 60¢ higher Monday afternoon at $214.45/cwt. Select was $1.28 higher at $199.79.

*******************************

Major U.S. financial indices rallied higher on Monday, supported by a rebound in key tech stocks like Apple and Amazon. Retail stocks and higher oil prices also provided support.

West Texas Intermediate futures (CME) closed $1.05 to $1.21 higher through the front 12 contracts.

The Dow Jones Industrial Average closed 354 points higher. The S&P 500 closed 40 points higher. The NASDAQ was up 142 points.

*******************************

“The beef cow herd likely increased less than 1% year over year in 2018 to a projected Jan. 1, 2019 level of about 31.9 million head,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “This may be the cyclical peak in herd inventory or very close to it. From the 2014 low of 29.1 million head, this cyclical expansion has increased the beef cow herd by 2.8 million head or 9.6% over five years. The last full cyclical herd expansion occurred in 1990-1996 resulting in an 8.8% herd expansion in six years.”

Moreover, Peel explains beef cowherd dynamics are finally returning to normal, following the unprecedented market forces that drove volatility during the past decade. That included the drought-induced herd liquidation of 2011-2013 that took more cows out of production than would otherwise be expected, followed by the recent rapid expansion.

For instance, Peel says heifer retention projected at 19.3% this year and 18-18.5% are nearing the previous 30-year average of 17.6%. It was as low as 16.6% in 2011 and as high as 21% in 2016.

Similarly, Peel points to the steer-to-heifer ratio of the slaughter mix, which averaged 1.71 during the past 30 years. He explains the ratio increased to 2.14 in 2016, the highest since the early 1970s. It was 1.95 last year and is projected at 1.83 this year.

Finally, at its current rate, Peel says cow slaughter this year will be around 9.7%, close to the long-term average.