WLI

Negotiated cash fed cattle trade last week ended up steady to higher in late trade.

Live sales were $1-$2 higher in the Southern Plains at $116/cwt. They were steady to $1 higher in the Northern Plains at $114-$116. Live trade was steady in the Western Corn belt at $113-$114. Dressed trade was fully steady at $180.

Despite that, seasonally higher wholesale beef values and apparently snugger packer inventories, Cattle futures headed hard south on Monday. There were no easy explanations, at least not from a fundamental standpoint. Part of it could have been defensive positioning ahead of Tuesday’s election.

Live Cattle futures closed an average of $1.47 lower, from an average of (62¢ to $1.75 lower).

Feeder Cattle futures closed an average of $2.65 lower ($2.20 to $3.32 lower).

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

Choice boxed beef cutout value was 9¢ higher Monday afternoon at $218.59/cwt. Select was 88¢ higher at $202.35.

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Major U.S. financial indices closed mixed Monday. Financial institutions and some energy companies provided support, while tech stocks, including Apple, applied pressure.

The Dow Jones Industrial Average closed 190 points higher. The S&P 500 closed 15 points higher. The NASDAQ was down 28 points.

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U.S. beef exports continued at a stronger year-over-year pace in September, according to data released by USDA and compiled by the U.S. Meat Export Federation (USMEF).

September beef exports of 110,160 metric tons (mt), were 6% more than a year earlier. Export value was 11% more at $687.1 million.

For January through September, beef exports were just over 1 million mt, up 9% from a year ago, while value surged 18% to $6.2 billion.

“With a full quarter still to be reported, beef export value records are already being surpassed in some markets and global value is on track for $8 billion by year’s end,” says USMEF President and CEO Dan Halstrom.

Beef export value equated to $334.63 per head of fed slaughter in September and $320.85 for January through September, each 16% more than a year ago.

For the first three quarters of 2018, exports accounted for 13.5% of total production (up from 12.8%) and 11.1% for muscle cuts, up one full percentage point from last year.

Among the highlights:

Exports to Korea were up 22% from a year ago in volume (19,116 mt) and were 29% percent higher in value ($143.1 million). January-September exports reached 180,495 mt, up 37% from a year ago, while export value soared 51% to $1.29 billion, already breaking last year’s full-year value record.

September beef exports to leading market Japan were up 4% from a year ago in both volume (28,086 mt) and value ($172.3 million). For the first three quarters of 2018, exports to Japan were up 7% from a year ago in volume (252,871 mt), while value increased 10% to $1.59 billion.

Exports to Mexico were up 1% from a year ago in volume (177,906 mt) and 8% higher in value ($783.1 million). With a strong fourth quarter, exports to Mexico should top $1 billion for the first time since 2015.

Negotiated cash fed cattle trade remained mostly undeveloped through late Friday afternoon, although there continued to be chatter that inventory needs would push packers to the trough before the end of the day. The lack of cash direction helped to hold Cattle futures in check, with Feeder Cattle getting extra pressure from rising corn prices.

Live Cattle futures closed narrowly mixed, from an average of 9¢ lower to an average of 37¢ higher.

Feeder Cattle futures closed an average of 46¢ lower in flea-thin trade.

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

Choice boxed beef cutout value was 5¢ lower Friday afternoon at $218.50/cwt. Select was $2.78 lower at $201.47.

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Major U.S. financial indices closed lower Friday, in volatile trade. Pressure included uncertainty surrounding trade issues. Support included a monthly employment report that beat expectations. Non-farm payroll employment increased by 250,000 in October, according to the U.S. Bureau of Labor Statistics. That left the nation’s unemployment rate at 3.7% for the second consecutive month, the lowest rate since 1969.

“…we have a total of 4.5 million new jobs since November 2016. Jobs were added across all industries. Employment hit a record high of 156,562,000,” says U.S. Secretary of Labor Alexander Acosta.

The Dow Jones Industrial Average closed 109 points lower. The S&P 500 closed 17 points lower. The NASDAQ was down 77 points.

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Early tables from USDA for the Agricultural Projections to 2028 that will be published in February suggest the nation’s beef cowherd will peak in 2021 at 32.00 million head, which would be 111,000 head more than the projected inventory on Jan. 1 of next year of 31.89 million head.

Those same projections estimate feeder steer prices (OKC) next year to average $146.50/cwt., compared to this year’s estimate of $148.20. The 5-area Direct fed steer price for next year is estimated at $117.75, compared to this year’s estimate of $116.29.

For this year, analysts with the Livestock Marketing Information Center (LMIC) noted earlier this week, higher costs—including winter feed, fuel, utilities and interest—along with lower cull cow prices are pressuring cow-calf returns.

“Last year had a positive return over cash costs, due to calf prices that strengthened during the second half of the year,” say LMIC analysts, in the latest Livestock Monitor. They estimate cash returns per cow this year at slightly less than breakeven.

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.