WLI

Negotiated cash fed prices were mainly $2-$3 lower last week on a live basis at mostly $110-$111/cwt. Dressed prices were generally $3-$4 lower at $174-$176.

Cattle futures steadied Friday, helped along by light trade volume and sharply lower cash grain prices, tied to the monthly World Agricultural Supply and Demand Estimates.

Live Cattle futures closed narrowly mixed (12¢ lower to 20¢ higher).

Except for unchanged in Jan, Feeder Cattle futures closed an average of 27¢ higher.

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

Choice boxed beef cutout value was 55¢ higher Friday afternoon at $206.61/cwt. Select was 32¢ lower at $197.77. 

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

Major U.S. financial indices closed sharply lower Friday, with global markets rattled by the blooming financial crisis in Turkey.

The Dow Jones Industrial average closed 196 points lower. The S&P 500 closed 20 points lower. The NASDAQ was down 52 points.

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

Beef production for this year was reduced 56 million lbs. from the previous month’s forecast to 27.09 billion lbs. in August World Agricultural Supply and Demand Estimates (ERS) released Friday.

“The decline in beef production largely reflects a slower pace of marketings in the third quarter,” say analysts with USDA’s Economic Research Service (ERS). “Cow slaughter is raised, but recent carcass weight data and a larger proportion of cows in the slaughter mix led to a reduction in expected carcass weights during the second half of the year.”

Fed steer prices (5-area Direct) were unchanged at the midpoint, though. The third-quarter price is forecast at $107-$111/cwt. Estimates for the fourth quarter are $109-$115; $116-$126 for the first quarter next year.

Total red meat and poultry production for this year was raised 27 million lbs. to 103.12 billion lbs. based on increased broiler production.

Corn prices should continue on the lower end of the scale.

“Corn production is forecast at 14.6 billion bu., down less than 1% from last year. Based on conditions as of August 1, yields are expected to average 178.4 bu./acre, up 1.8 bu. from 2017,” said analysts with the National Agricultural Statistics Service (NASS), in the monthly Crop Production report. “If realized, this will be the highest yield on record for the United States. Area harvested for grain is forecast at 81.8 million acres, unchanged from the June forecast, but down 1% from 2017.”

The season-average corn price received by producers is down 20¢ at the midpoint at a range of $3.10 to $4.10/bu.

Apparently, negotiated cash fed cattle trade will continue the trend of recent weeks: move-ahead one week with strong volume and then retreat the next.

Fed cattle sold mainly $3-$4 lower on a dressed basis yesterday at $174-$175/cwt. in Nebraska and the western Corn Belt; a few up to $179 in both regions for the week. Live trade in the western Corn Belt was mostly $2 lower at $109-$112.

Cattle futures started out sharply lower, but were able to pare some of the losses by session’s end. The notion of lower cash prices could have been part of the pressure. Likewise, chatter about the unwinding of hog and cattle spreads may have played a role. More than anything, though, it had the feel of one of those piling-on algo-trading days.

Live Cattle futures closed an average of $1.69 lower through the front three contracts and then an average of 42¢ lower.

Feeder Cattle futures closed an average of $1.02 lower (72¢ to $1.30 lower).

Boxed beef cutout values were firm for Choice and lower for Select on light to moderate demand and moderate offerings, according to the Agricultural Marketing Service.

Choice boxed beef cutout value was 33¢ higher Thursday afternoon at $206.06/cwt. Select was 77¢ lower at $198.09.    

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

Major U.S. financial indices closed mixed Thursday, once again supported by tech stocks and capped by trade worries.

The Dow Jones Industrial average closed 74 points lower. The S&P 500 closed 4 points lower. The NASDAQ was up 3 points.

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

Most bankers in the Eighth Federal Reserve District expect farm income to continue to decline in the third quarter, based on the second-quarter survey of 24 agricultural banks in the region.

“Bankers have reported lower comparative income levels since the fourth quarter of 2013, reaching a low point in the second quarter of 2016,” according to the Agricultural Finance Monitor published by the Federal Reserve Bank of St. Louis. “This correlates with an extended period of depressed prices for commodities.”

The Eighth District includes all or parts of seven Midwest and Mid-South states: Arkansas, Illinois, Indiana, Kentucky, Mississippi, Missouri and Tennessee.

The outlook varies across and within regions, of course.

“Farm income in our region is not as volatile as it is in row crop areas. We are mostly contract poultry and animal production. Independent cattle producers make up the balance of our agriculture production; those prices are off the highs but have stabilized,” says an Arkansas lender.

Similarly, a Missouri lender explained demand for recreational and low-income producing properties is increasing, as buyer confidence grows in the economy.

Quality farmland values in the district declined 3.5% in the second quarter but cash rents increased by 0.4% compared with a year ago.

Conversely, ranchland or pastureland values increased 1.6% relative to a year ago, while cash rents declined by 9%. The drop in cash rents for ranchland or pastureland was the largest percentage drop recorded since the fourth quarter of 2016.

Only 464 head—four lots from Kansas—were offered in the weekly Fed Cattle Exchange Auction Wednesday. None sold, but two lots were passed out at $112/cwt.

Country trade remained undeveloped, although there were a handful of cash trades in Nebraska, but too few to trend. A few traded live at $112/cwt. and a few in the beef at $179.

After early follow-through pressure, especially for Feeder Cattle, Cattle futures firmed, closing mostly marginally higher.

Except for 25¢ and 27¢ lower in two contracts, Live Cattle futures closed an average of 10¢ higher.

Except for 12¢ lower in March, Feeder Cattle futures closed an average of 38¢ higher (5¢ to $1.02 higher).

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

Choice boxed beef cutout value was 24¢ higher Wednesday afternoon at $205.73/cwt. Select was 35¢ higher at $198.86.       

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

Major U.S. financial indices closed mixed Wednesday, supported by tech stocks and capped by trade war angst. Crude Oil futures (WTI-CME) were also sharply lower.

The Dow Jones Industrial average closed 45 points lower. The S&P 500 closed fractionally lower. The NASDAQ was up 4 points.

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

Low commodity prices and worries about trade helped drive the Purdue University-CME Group Ag Economy Barometer 26 points lower in July to 117.

“This summer we’ve seen tariffs placed on imports of U.S. ag products by China and Mexico that are impacting producers’ bottom line,” says James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture. “This month, we asked producers whether they expect to see their net income decline as a result of trade war conflicts. Over two-thirds of respondents indicated they expect to see lower income because of trade conflicts, with over 70% of them expecting a net income decline of 10% or more.”

Sharp declines were also recorded for the Index of Current Conditions, which fell from 138 to 99, and the Index of Future Expectations, which fell from 146 to 126 in July. The Ag Economy barometer is based on a monthly survey of 400 agricultural producers from across the country.

“Commodity prices dropped sharply in June and July, and there is real concern among producers that those prices will remain low and, possibly, fall even further,” Mintert says.

Approximately 4 out of 10 producers responding to the July survey believe it’s likely that near Dec corn futures will trade below $3.25/bu. and that near Nov soybean futures will trade below $8/bu., between mid-July and this fall.

“Prices in that range would result in a significant cash flow squeeze for many farm operators,” Mintert explains. “While prices at those levels would cover variable production expenses, it would leave some farmers falling far short of covering fixed and overhead expenses.”

Cattle futures took a solid step lower Tuesday, led by Feeder Cattle, apparently mostly due to heavier trade and continued profit taking. However, prices at the close remained in the long-established, sideways channel.

Live Cattle futures closed an average of $1.07 lower (32¢ lower in spot Aug to $1.55 lower).

Feeder Cattle futures closed an average of $1.91 lower (62¢ to $3.12 lower).

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

Choice boxed beef cutout value was 19¢ lower Tuesday afternoon at $205.49/cwt. Select was 18¢ higher at $198.51.

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

Major U.S. financial indices continued higher Tuesday, driven by quarterly earnings reports that continue more positive than expected.

The Dow Jones Industrial average closed 126 points higher. The S&P 500 closed 8 points higher. The NASDAQ was up 23 points.

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

U.S. beef exports continue on a record pace, according to the latest data released by USDA and compiled by the U.S. Meat Export Federation (USMEF).

June beef exports of 115,718 metric tons (mt), including variety meats, were 6% more than the previous year. The value of June beef exports was 19% more year over year at $722.1 million, just slightly less than the new record set the previous month.

Beef exports for the first half of this year are also record large in both volume and value. Export volume for the first two quarters was 9% more than the same period last year at 662,875 mt. Export value was up 21% at just over $4 billion.  In previous years, export value never topped the $4 billion mark before August.

“It’s remarkable to think that as recently as 2010, beef exports for the entire year totaled $4 billion, and now that milestone has been reached in just six months,” says Dan Halstrom, USMEF president and CEO. “This should be a source of great pride for the beef industry, which has remained committed to expanding exports even when facing numerous obstacles. And with global demand hitting on all cylinders, there is plenty of room for further growth.”

Beef export value averaged $313.56 per head of fed slaughter in June, up 19% from a year ago. The first-half average was $316.94 per head, up 18%.

U.S. pork exports, though, are beginning to sag beneath the weight of trade issues.

Export volume trended lower the past two months, mainly due to lower exports to the China/Hong Kong region. June pork exports were 4.5% less than a year earlier and 3% less for value at $510.4 million. Due to strength before then, U.S. pork exports are 2% more in volume for the first six months of the year—compared to the same period last year—and 5% more in value at $3.36 billion.

“Pork exports–and especially variety meats–face a very challenging environment in China/Hong Kong due not only to retaliatory duties but also because of increasing domestic production in China,” Halstrom explains. “On the positive side, exports are achieving solid growth in most other markets and reached new heights in destinations such as Korea and Latin America.”

When last week’s tally was complete, negotiated cash fed cattle trade was mostly $1-$2 higher at $112 to $114/cwt. Dressed trade was mostly steady to $4 higher at mostly $178.

Cattle futures were a touch lower Monday, presumably on profit taking and retrenching in light of recent strength, stronger cash prices and firmer wholesale beef values.

Except for unchanged in the back two contracts, Live Cattle futures closed an average of 28¢ lower.

Feeder Cattle futures closed an average of 83¢ lower (65¢ to $1.17 lower).

At $149.74, the CME Feeder Cattle Index closed at the highest level since January.

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

Choice boxed beef cutout value was 93¢ higher Monday afternoon at $205.68/cwt. Select was $1.24 higher at $198.33.      

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

Major U.S. financial indices continued higher Monday, buoyed by more positive quarterly earnings reports from the likes of Berkshire Hathaway and Tyson Foods.

The Dow Jones Industrial average closed 39 points higher. The S&P 500 closed 10 points higher. The NASDAQ was up 47 points.

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

“Agricultural markets are caught in a whirlwind of trade disruptions. Direct market shocks will lead to ripple effects and are likely to affect most agricultural markets worldwide in the coming months,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “In some cases, global market shares may be affected in the short run and possibly long term as well.”

In order to anticipate how markets may be impacted, Peel suggests considering global supply and demand profiles. Among those he highlights, based on current USDA estimates:

Beef—the U.S. produces 20% of the global beef supply. Brazil is second largest at 15.7%, followed by the European Union at 12.5% and China at 11.6%.

Brazil accounts for 19.3% of global beef exports, followed by India (18.1%), Australia (15.4%) and the U.S. (13.1 percent).

The U.S. is the world’s largest beef importer (16.6%), followed by China (14.4%), Japan (10.0%), Hong Kong (7.0%) and South Korea (6.7%).

Pork—China is the largest pork producer, accounting for 48.2% of the global supply. The European Union is next at 21.2%, followed by the U.S. at 10.7%.

The EU accounts for 34.8% of global pork exports, followed by the U.S. (32.1%) and Canada (16.2%).

China is the largest pork importer (19.2%), followed by Japan (18.9%) and Mexico (15.1%).

Corn—The U.S. produces 35.9% of the world’s corn. China accounts for 20.9%, followed by Brazil (8.1%) and the EU (6.0%).

The U.S. exports 40.5% of total global corn exports, ahead of Brazil (17.3%), Argentina (15.9%) and the Ukraine (13.0%).

The European Union (12.3%) and Mexico (11.1%) are the two largest corn importers.

Soybeans—The U.S. and Brazil each produce 35.5% of the global soybean supply, followed by Argentina at 11.0%. China accounts for 62.9% of global soybean imports, followed by the European Union (9.1%) and Mexico (3.0%).