WLI

Firmer wholesale beef values helped Cattle futures close mostly higher on Tuesday, after follow-through pressure early in the session.

Live Cattle futures closed an average of 72¢ lower through the front three contracts and then unchanged to 50¢ higher.

Feeder Cattle futures closed an average of 41¢ higher.

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

Choice boxed beef cutout value was 40¢ higher Tuesday afternoon at $207.32/cwt. Select was 23¢ lower at $198.39.           

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Major U.S. financial indices closed higher Tuesday, buoyed by strong quarterly earnings, including better than expected results from Dow DuPont and Proctor & Gamble.

The Dow Jones Industrial Average closed 143 points higher. The S&P 500 closed 9 points higher. The NASDAQ closed 3 points higher.

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When all was said and done last week, the 5-area weighed average steer price was $5.76 higher at $112.63/cwt. on a live basis; $8.87 higher in the beef at $178.77.

“The higher prices may not pull closeouts completely out of the red, but it will reduce losses significantly and may make a few cattle profitable,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “This price resurgence does not necessarily mean fed cattle prices have hit their summer low, as the potential to move to the $105 area re-mains feasible. However, higher prices may be shedding some light that moving that low is not as likely as previously thought. The stronger live cattle prices have also strengthened cattle feeders’ outlook which means strong demand for feeder cattle.”

Pressure on grain prices is helping, too.

“The weakening feed market has translated into strengthening calf prices relative to the fed cattle and beef markets,” says Stephen Koontz, agricultural economist at Colorado State University, in the latest issue of In the Cattle Markets. “The overall protein market outlook is much the same as the beginning of summer: there is a lot of protein to come to market through the summer and fall—and no end to the potential trade gymnastics—but the calf market outlook is holding strong largely because of cheapening feed.”

Despite the surge in cash fed cattle prices late week, Cattle futures softened some on Monday, pressured by overall bearishness in commodities, tied to trade concerns. Seasonally limping wholesale beef values added to the negative tone.

Live Cattle futures closed an average of 44¢ lower (12¢ to $1.00 lower).

Except for 12¢ higher in Apr, Feeder Cattle futures closed an average of 44¢ lower (15¢ to 75¢ lower).

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

Choice boxed beef cutout value was $1.11 lower Monday afternoon at $206.92/cwt. Select was 9¢ lower at $198.62.    

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Major U.S. financial indices closed higher Monday, extending gains from the previous session. Support included Friday’s strong employment report, and apparently high hopes heading into quarterly earnings.

The Dow Jones Industrial Average closed 320 points higher. The S&P 500 closed 24 points higher. The NASDAQ closed 67 points higher.

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U.S. beef exports set a new monthly value record in May at $722.1 million, which was 24% more than a year earlier and 4% more than the previous record, according to data released by USDA and compiled by the U.S. Meat Export Federation (USMEF). In terms of volume, May beef exports of 117,871 metric tons (mt) were the sixth most on record.

“Despite the intense competition U.S. beef faces in Japan and Korea, these markets continue to display a terrific appetite for a growing range of cuts,” says Dan Halstrom, USMEF President and CEO. “Beef items that are traditionally popular in Asia continue to perform and other items more suitable for thick-cut steaks and barbecue concepts are gaining more traction, resulting in exceptional growth opportunities. But the enthusiasm for U.S. beef extends well beyond these two leading markets, and that’s how exports have reached this record-breaking pace.”

Export volume to Japan in May was 19% more year over year, with value 22% higher at $196.8 million. Exports to Korea for the month were 46% more in terms of volume and 64% more in value at a record $146.2 million.

Through the first five months of this year, total U.S. beef exports were up 10% in volume to 547,157 mt, while export value was 21% more than last year’s record pace at $3.32 billion.

Beef export value averaged $313.39 per head of fed slaughter in May, up 18% from a year ago. The January-May average was $317.69 per head, also up 18%.

For U.S. pork exports, though, the weight of recent tariffs is beginning to take a toll.

For instance, pork exports to the China/Hong Kong region were 31% less than a year earlier for volume and 25% less for value. According to USMEF, the decline was due in part to the additional 25% tariff increase imposed by China in April.

“Exports to China will face an even steeper challenge in the second half of 2018, as China recently hiked the duty rate on U.S. pork by another 25%,” according to USMEF. “This means U.S. pork cuts and pork variety meat entering China now face a duty rate of 62%, compared to 12% for China’s other suppliers, including the European Union, Brazil and Canada.”

Moreover, Mexico’s retaliatory duties on U.S. pork took effect in June, so these January-May results were not directly impacted.

Apparently, beef packers over-played their hand of bought-ahead cattle last week. Cash fed cattle tore sharply higher on Friday. Live trade was $5-$6 higher in the Southern Plains at mostly $112-$113/cwt. In Nebraska and the western Corn Belt, it was $3-$7 higher at $112-$114. Dressed trade was $5-$11 higher at $175-$180.

Higher cash prices helped Cattle futures surge higher for much of Friday’s session. Futures closed slightly lower, though, likely on profit taking and week-end positioning.

Except for unchanged in spot Aug, Live Cattle futures closed an average of 22¢ lower.

Other than 2¢ and 15¢ higher in the back two contracts, Feeder Cattle futures closed an average of 33¢ lower.

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

Choice boxed beef cutout value was 40¢ lower Friday afternoon at $208.03/cwt. Select was 1¢ higher at $198.71.         

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Major U.S. financial indices closed higher Friday, buoyed by more jobs than expected in the monthly national employment report. Total non-farm employment increased by 213,000 in June, according to the U.S. Bureau of Labor Statistics.

The Dow Jones Industrial Average closed 99 points higher. The S&P 500 closed 23 points higher. The NASDAQ closed 101 points higher.

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“Young bred cow prices have been under more pressure than mid-aged cows this spring. Prices have declined by more than $200 from last spring and have averaged a discount of $40 compared to mid-aged bred cows,” say analysts with the Livestock Marketing Information Center (LMIC), in the most recent Livestock Monitor. “Over the last 15 years, discounts have occurred only about 20% of the time and $40-$45 is as big as the discounts tend to get. The year of the biggest premiums for young bred cows was 2015 (when feeder cattle prices peaked) at $165.”

Regionally, LMIC analysts explain the value of young bred cows in the Northern Plains has been at a premium to those in the Southern Plains for the last six years.

“Prices for young bred cows in Montana markets have held steady with a year ago this spring after declining $100 from 2016 to 2017,” LMIC analysts say. “A $400 premium for Montana young bred cows versus the Oklahoma City market this year rivals the euphoric Montana premium of 2015, even though actual prices are $1,000 lower than three years ago.”

For perspective, the LMIC folks say mid-aged bred cows (1,200-1,300 lbs.) at Oklahoma City averaged $1,082 per head during April and May. That $112 less than the same period last year.

“These prices tend to follow the trend set by feeder cattle prices, but with a bit of a time lag,” explain LMIC analysts. “This spring’s mid-age bred cow price was 6.11 times the price of steers (500-550 lbs.) at Oklahoma City. Last year, the ratio was 6.74, and in 2016 the ratio peaked out at 8.06 for the 2004-2018 interval.”

Cattle futures closed mainly a touch higher Thursday, supported by follow-through buying and expectations for firm to higher cash fed cattle prices this week. Trade and volume continued to be sluggish, though.

Except for 7¢ lower in spot Aug, Live Cattle futures closed an average of 19¢ higher.

Other than 22¢ and 2¢ lower in the front two contracts, and 12¢ lower at the back of the board, Feeder Cattle futures closed an average of 40¢ higher.

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

Choice boxed beef cutout value was $1.83 lower Thursday afternoon at $208.43/cwt. Select was $1.01 lower at $198.70. 

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Major U.S. financial indices closed higher Thursday, boosted by tech stocks and positive economic news. Optimism was capped by worries about the impact of U.S. and China counter-tariffs scheduled to begin Friday.

The Dow Jones Industrial Average closed 181 points higher. The S&P 500 closed 23 points higher. The NASDAQ closed 83 points higher.

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Despite pressure on commodity prices and concerns about trade, producer sentiment crept 2 points higher in June to 143, according to the Purdue University/CME Group Ag Economy Barometer. The barometer is based on a monthly survey of 400 agricultural producers from across the country.

 “In June, we saw a sizeable drop in commodity prices that caught many observers by surprise,” says James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture. “Despite the price decline, producers’ appraisal of current economic conditions improved compared to May. However, it was clear from survey responses that uncertainty regarding the agricultural outlook increased considerably.”

The barometer’s rise was underpinned by an increase in the Index of Current Conditions, which climbed to 138 compared to a reading of 132 a month earlier. The Index of Future Expectations remained nearly unchanged with a reading of 146 in June, 1 point higher than in May.

The June barometer survey asked producers how much their crop acreage changed in 2018 and whether or not they use flexible cash rental leases to rent farmland. As expected, most farmers’ crop acreage did not change in 2018 compared to a year earlier, but the survey revealed that some farms were expanding crop acreage rapidly. For example, 8% of farms increased their crop acreage by more than 10%, and 6% of farms increased their crop acreage by up to 10% in 2018, compared to last year. Among farms in the survey that rent cropland, 36% reported they plan to use a flexible cash rent lease on some of their acreage.

“Flexible cash rent leases provide a way for farm operators to share some risk with land owners, while also providing landowners some of the stability that comes with a cash rental agreement,” Mintert explains. “The increase in volatility in crop agriculture could be stimulating interest in flexible cash rent leases.

Cattle futures mostly held within a narrowly mixed range on Tuesday, amid extremely light pre-holiday trade.

Except for 45¢ lower in spot Aug, Live Cattle futures closed an average of 30¢ higher.

Other than 87¢ higher in spot Aug, Feeder Cattle futures closed narrowly mixed, from an average of 24¢ lower to an average of 27¢ higher.

Futures markets will open again on Thursday.

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

Choice boxed beef cutout value was $1.62 lower Tuesday afternoon at $210.26/cwt. Select was 94¢ higher at $199.71.  

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Major U.S. financial indices closed lower Tuesday, pressured by tech stocks and worries about the tariffs set to go into effect Friday.

The Dow Jones Industrial Average closed 132 points lower. The S&P 500 closed 13 points lower. The NASDAQ closed 65 points lower.

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“Trade concerns pose the single greatest risk to the projected global economic growth of 3-4%,” says Tanner Ehmke, manager of CoBank’s Knowledge Exchange Division (KED). “The U.S. and China have been driving the growth, benefitting emerging markets around the globe. A trade war between the two is dangerous for economies around the world.”

Moreover, according to the most recent Rural Economic Review from CoBank’s KED, uncertainty around trade presents escalating concern to U.S. agriculture, with 70% of U.S. agriculture exports going to destinations that are in current negotiation or trade disputes.

“Aside from potentially losing market share in emerging markets, the U.S. may face shake-ups in historical supply chain commitments, as competitors seek new trade relationships amid current trade disputes,” according to the report.

Although the pork sector is at greatest of risk of trade impacts as the industry expands—with tariffs set to increase in Mexico and China—the report emphasizes total domestic red meat production this year is forecast to increase 3-4%.

“Overall current market conditions including rising interest rates, high fuel costs, relatively high land rental rates and little price relief from other inputs point to a decline in net farm cash income in 2018, continuing the trend from the past few years” says Ehmke. “This indicates the potential for increased debt load as the Federal Reserve considers three more interest rate hikes.”