WLI

Cash fed cattle prices softened last week, on light volume with neither packers nor cattle feeders apparently feeling any urgency. Trade volume (5 area direct) was about a third as much as the previous week and half as much as the same week a year earlier. The average live steer price of $110.50/cwt. was $2.13 less than last week; $4.72 less in the beef at $174.05.

After pressure early in Monday’s session, though, traders pushed Live Cattle futures sharply higher, amid thin trade and led by nearby contracts and followed by Feeder Cattle. There was no change in fundamentals. Factors of support likely included continued sings of feedlot currentness, another step through heavy supplies with more success than anticipated, as well as technical buying.

Live Cattle futures closed an average of $1.10 higher (55¢ higher to $2.37 higher in spot Aug).

Feeder Cattle futures closed an average of $1.06 higher (45¢ higher in the back contract to $1.65 higher in spot Aug).

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

Choice boxed beef cutout value was 38¢ lower Monday afternoon at $203.76/cwt. Select was 70¢ lower at $195.67.

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Major U.S. financial indices closed narrowly mixed Monday, on pressure that included lower oil prices and mixed quarterly earnings reports. Crude Oil futures (WTI-CME) were down about $3 for the remainder of the year with the notion that global trade tensions will reduce overall economic activity.

The Dow Jones Industrial average closed 44 points higher. The S&P 500 closed 2 points lower. The NASDAQ was down 20 points.

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Higher acreage for corn and soybeans forecast in last week’s monthly World Agricultural Supply and Demand Estimates should help support cattle prices. Although hay acres increased, too, price impacts are likely to be regional, at least for alfalfa, according to the Livestock Marketing Information Center (LMIC).

For perspective, LMIC analysts say estimated hay acreage increased by more than 1.2 million acres, with alfalfa representing 800,000 acres of the increase.

“Nationally, the bump in alfalfa acres is not expected to have a large impact on prices, but regionally there could be lower prices compared to that of recent years,” LMIC analysts say. “The bulk of acres added in alfalfa are not from high yielding alfalfa states. States with the largest gains came from Montana, South Dakota, North Dakota, and Idaho, which are susceptible to high rates of winterkill and shorter growing seasons. Out of 47 states reporting yields, Montana, South Dakota, and North Dakota are in the bottom 10 for alfalfa yields.”

Negotiated cash fed cattle trade remained mostly undeveloped through Friday afternoon, with no trends from USDA. But, the Texas Cattle Feeders Association reported its members in the Southern Plains trading cattle at $111/cwt., which was $2 less than the previous week.

Cattle futures basically treaded water on Friday, after stronger pressure earlier in the session, with the  lack of cash direction, continued light trade and some apparent positioning ahead of the weekend.

Live Cattle futures closed an average of 35¢ lower.

Except for 30¢ lower in spot Aug and 5¢ lower in Nov, Feeder Cattle futures closed 7¢ to 35¢ higher.

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

Choice boxed beef cutout value was $2.44 lower Friday afternoon at $204.14/cwt. Select was 64¢ lower at $196.37.   

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Major U.S. financial indices held firm to higher Friday, supported by continued strength in quarterly earnings.

The Dow Jones Industrial average closed 94 points higher. The NASDAQ was up 2 points. The S&P 500 closed 3 points higher.

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“Analysis of annual yearling price volatility going back to 1992 shows that price swings this year are on track to be the smallest since 2012,” say analysts with the Livestock Marketing Information Center (LMIC), in the latest Livestock Monitor.

For perspective, yearling steer prices (750-800 lbs., basis Oklahoma City) averaged $145.13/cwt. during the first six months of the year, according to LMIC. That’s $6.45 more than the same time period last year. Steer calves in the same market averaged $176.98 for the first six months, $9.61 more than a year ago.

“Based on monthly average prices, annual price swings from 1992-2002 never topped $20/cwt. Since 2012, annual price swings have been greater than $30/cwt. every year. In 2011 and 2012, the high-to-low price swings were $19.49 and $18.34, respectively,” LMIC analysts say. “Annual price swings greater than $70.00 a year were encountered in 2014 and 2015. During the last 25 years, the most frequent annual price range was $15-$20 (6 years). So far this year, the swing in monthly average prices has been $9.39. The difference in the magnitude of price swings based on weekly versus monthly data makes a statement about how much price volatility has been experienced within some of the months, even though price volatility has been less than in past years.”

Cattle futures bounced back Thursday, about as much and fast as they fell in the previous session, on the same fundamentals. Initial fear—and kneejerk reaction—over the new U.S. tariffs on Chinese imports, fueled by algo trading, provide as apt an explanation as any.

Except for unchanged in the back contract, Live Cattle futures closed an average of 96¢ higher (60¢ to $1.35 higher).

Except for unchanged in April, Feeder Cattle futures closed an average of 97¢ higher (32¢ higher to $1.62higher in spot Aug).

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

Choice boxed beef cutout value was 86¢ lower Thursday afternoon at $206.58/cwt. Select was 13¢ lower at $197.01.

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Major U.S. financial indices closed sharply higher Thursday, erasing losses from the previous session. Rather than ponder the potential trade war with China, investors seemed content to cheer positive quarterly earnings.

The Dow Jones Industrial Average closed 224 points higher. The S&P 500 closed 24 points higher. The NASDAQ closed 107 points higher.

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Beef production for this year was estimated slightly higher in July (27.15 billion lbs.) than the previous month (27.13 billion lbs.) on expectations of increased cow slaughter in the third quarter, according to analysts with USDA’s Economic Research Service (ERS), in the latest monthly World Agricultural Supply and Demand Estimates (WASDE). 

For next year, though, estimated beef production was reduced to 27.69 billion lbs. from 27.72 billon lbs. the previous month. That’s on anticipation of lighter steer and heifer carcasses through the first half of the year.

5-area direct steer prices are projected at $107-$111 in the third quarter and at $108-$116 in the fourth, for an annual price of $114-$117. That’s $1 lower on the top end of the range compared to last month. The annual price for next year is projected at $113-$122, the same as the previous month.

“For 2019, the red meat and poultry production forecast is raised as increases in pork and broiler production more than offsets expected declines in beef production,” ERS analyst say.

There were only four lots—all from Kansas—offered in the weekly Fed Cattle Exchange auction Wednesday. None sold.

Choice 2-4 steers sold for just a touch higher than $111/cwt. at Tama, IA. The same grades brought $108.00-$111.50 at Sioux Falls Regional in South Dakota.

Cattle futures followed outside markets and other commodities—including hogs, soybeans and corn—sharply lower Wednesday, in anticipation of more tariffs from China, following the Trump administration publishing a list of $200 billion worth of Chinese imports that will be subject to 10% tariffs (see below).

Except for 50¢ lower in the back contract, Live Cattle futures closed an average of $1.32 lower (97¢ to $1.60 lower).

Feeder Cattle futures closed an average of $1.50 lower (62¢ to $2.62 lower)

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

Choice boxed beef cutout value was 12¢ higher Wednesday afternoon at $207.44/cwt. Select was $1.25 lower at $197.14.          

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At the end of June, U.S. Agriculture Secretary Sonny Perdue said President Trump instructed him to develop a strategy to support U.S. agriculture producers in the face of retaliatory tariffs. Although no details were provided, odds are increasing for the testing of that strategy.

Late Tuesday night, Robert Lighthizer of the U.S. Trade Representative released a statement saying, that given China’s retaliation to U.S. tariffs, when they were imposed at the end of last week, the President has ordered the U.S Trade Representative to begin the process of imposing tariffs of 10% on an additional $200 billion of Chinese imports…” That’s in addition to the previously announced 25% tariff on $34 billion worth of Chinese imports to the U.S.

As with most commodity markets, the news pressured Major U.S. financial indices sharply lower Wednesday.

The Dow Jones Industrial Average closed 219 points lower. The S&P 500 closed 19 points lower. The NASDAQ closed 42 points lower.

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“Until the trade disputes are resolved, expect cattle and other livestock price volatility to continue,” says Tim Petry, Extension livestock economist at North Dakota State University (NDSU).

In an NDSU Spotlight on Agriculture column published yesterday, Petry explains cattle price volatility in recent months revolves around uncertainty created by several factors.

There’s the drought, for one.

“By the end of June, expanding drought conditions caused about 26% of the U.S. beef cowherd to be in an area experiencing drought,” Petry says. “Last year, only 6% of the beef herd was in drought, with the far northern Plains the hardest hit…Drought conditions pose the threat of forced beef cowherd liquidation and early movement of calves to market. Beef cow slaughter was up more than 12% from last year during the first six months of 2018.”

Those same drought conditions, inducing earlier feedlot placements since last fall, contributed to the seasonal surge in fed cattle supplies this summer.

On the other side of the coin, feed is getting cheaper with a near-perfect start to the growing season for major crops, and with trade concerns pressuring those markets.

“Record highs also create market uncertainty,” Petry says. “U.S. pork, broiler (chicken) and total meat production were all record high in 2017. Those three categories are projected to be record high again in 2018. U.S. beef production likely will follow suit in 2018 with record high production, so record amounts of meat will be available to consume domestically or in the export market. The previous record high beef production occurred in 2002.”

Then throw in the simmering trade issues between the U.S. and what seems like the rest of the world.

“A major reason for increased market volatility in the livestock and grain markets in the last few months revolves around seemingly ever-changing trade negotiations with several important trade countries,” Petry explains. “Positive outcomes with trade agreements are important to the U.S. beef industry so record beef exports, along with robust exports of competing meats, can continue.