WLI

Cattle feeders and beef packers continued their weekly standoff through late Friday afternoon, based on USDA reports. However, the strong rally in Cattle futures had most betting for higher fed prices when all was said and done.

In fact, Live Cattle futures for spot Oct closed at the highest level since March, finally breaking out of the month’s long, sideways trend. That dragged the rest of the complex higher.

There didn’t seem to be a simple explanation for the surge in futures prices. Looking beyond the third quarter, supply fundamentals improve, of course. There was also chatter that some of the spark came from reports that more Foot and Mouth Disease had been confirmed in a Chinese cattle herd.

Except for 60¢ and 37¢ higher in the back two contracts, Live Cattle futures closed an average of $1.93 higher ($1.12 higher to $3.00 higher in spot Oct).

Feeder Cattle futures closed an average of $2.58 higher ($1.77 to $3.47 higher).

“This week’s price movement is working against the seasonal tendency of calf prices as are feeder cattle futures contracts,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “The calf and feeder cattle market have remained strong through the late summer months and the futures market is suggesting continued strength while seasonal price trends would suggest lower prices. Prices are strong now with most of the price risk being to the downside.”

Wholesale beef 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 23¢ higher Friday afternoon at $204.27/cwt. Select was 77¢ lower at $196.47.

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Major U.S. financial indices closed narrowly mixed Friday, between strength from chipmakers and more angst about U.S.-China trade.

The Dow Jones Industrial Average closed 8 points higher. The S&P 500 closed fractionally higher. The NASDAQ was down 3 points.

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Wholesale beef values continue to ride seasonal trends lower, but Andrew P. Griffith, agricultural economist at the University of Tennessee, points out demand remains relatively strong in the face of increased beef production.

“Beef demand the past several years has been relatively strong based on the demand index computed by the Livestock Marketing Information Center (LMIC). Demand for beef in 2015 was at its highest level since 1991, based on LMIC calculations. Demand softened slightly in 2016 and 2017 based on the same calculations, but remained relatively strong compared to the previous decade,” Griffith explains, in his weekly market comments. “Demand in 2018 appears to be rounding into form similar to the previous two years with continued strong demand that has supported beef and cattle prices through the entire production chain. Several factors are contributing to strong beef demand, with the most likely being increased income levels, consumers preference for beef, and exports.”

Negotiated cash fed cattle trade remained undeveloped through Thursday afternoon, with most indications for at least steady money this week.

Although there was pressure early in the session, Cattle futures closed mostly narrowly mixed in the Live pit and a touch higher for Feeder Cattle.

After 67¢ and 12¢ lower in the front two contracts, Live Cattle futures closed an average of 26¢ higher, except for 10¢ lower in away Dec.

Feeder Cattle futures closed an average of 51¢ higher.

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

Choice boxed beef cutout value was 75¢ lower Thursday afternoon at $204.04/cwt. Select was 3¢ lower at $197.24.

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Continued pressure from the latest World Agricultural Supply and Demand Estimates pushed cash bids for grains and soybeans lower Thursday, according to the Daily National Grain Market Summary.

Wheat bids were mostly 5¢ to 10¢ lower. Soybean bids were mostly 6¾¢ lower. Sorghum bids were 3½¢ lower. Corn bids were mostly 2¢ lower.

Corn futures closed 1¢ to 5¢ lower through next July and then mostly fractionally lower.

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Major U.S. financial indices closed higher Thursday. Support included tech stocks, led by Apple, as well as a slower rising Consumer Price Index (CPI) than expected. According to the Bureau of Labor Statistics, the CPI rose 0.2% in August. The index for all items less food and energy rose by 0.1%, the least since April.

The Dow Jones Industrial Average closed 147 points higher. The S&P 500 closed 15 points higher. The NASDAQ was up 59 points.

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Although current feedlot closeout projections are forecast to continue in negative triple digits this month, the most recent Historical and Projected Kansas Feedlot Net Returns suggests significant improvement on the horizon.

For example, estimated net return for steers closed out in August was -$104.20 per head. The estimate for September is -$108.96. For the next eight months after that, estimated returns range from -$63.24 in April to +$18.75 in March.

Keep in mind the projections are on a cash-to-cash basis without any price risk management assumed.

The outlook for heifers is similar. After projected losses of $105-$106 per head in August and September, estimated returns range from -$89.49 in April to +$24.04 in December.

Negotiated cash fed cattle trade remained undeveloped Wednesday, though auctions began providing some indicators, albeit mixed.

For instance, Ch 2-4 steers brought $109.74 to $110.00 on a jag of 205 head. But,

Ch 2-3 steers brought $106-$109 at Sioux Falls Regional Livestock in South Dakota.

Only 444 head were offered in the weekly Fed Cattle Exchange auction Wednesday, with no takers. There were three lots passed out at $108.00-$108.25/cwt.

Cattle futures took a strong step higher Wednesday. Lower grain prices—tied to the World Agricultural Supply and Demand Estimates—helped lift Feeder Cattle, dragging Live Cattle along.

Live Cattle futures closed an average of $1.14 higher (85¢ to $2.17 higher in spot Oct).

Feeder Cattle futures closed an average of $2.00 higher ($1.32 to $2.57 higher).

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

Choice boxed beef cutout value was $1.28 lower Wednesday afternoon at $204.79/cwt. Select was $1.04 lower at $197.27.

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Major U.S. financial indices closed narrowly mixed Wednesday. Support included reports that the U.S. is in the process of proposing new trade talks with China.

The Dow Jones Industrial Average closed 27 points higher. The S&P 500 closed 1 point higher. The NASDAQ was down 18 points.

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Projected beef production of 27.09 billion lbs. was unchanged in the latest monthly World Agricultural Supply and Demand Estimates (WASDE), with anticipated increases in slaughter during the second half of the year offset by an expected decrease in carcass weights.

Fed steer prices (5-area Direct) are projected at $108-$111/cwt. for the third quarter and at $108-$114 in the fourth quarter. Forecast prices for the first and second quarter next year are projected to be $116-$126 and $118-$128, respectively.

Beef production is forecast at 27.72 billion next year. Total red meat production is projected at 55.81 billion next year. Total red meat and poultry production next year is estimated at 105.76 billion lbs., which would be 2.7 billion lbs. more than this year’s estimate.

Cattle futures closed slightly lower to mixed Tuesday, amid limited trade and a lack of cash direction.

Except for unchanged in Apr, Live Cattle futures closed an average of 43¢ lower.

Feeder Cattle futures closed narrowly mixed, 45¢ lower to 22¢ higher.

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

Choice boxed beef cutout value was 23¢ lower Tuesday afternoon at $206.07/cwt. Select was 62¢ lower at $198.31.

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Major U.S. financial indices closed higher Tuesday, with trade worries applying pressure, but higher crude oil prices and further recovery in tech stocks—led by Apple—providing support.

The Dow Jones Industrial Average closed 113 points higher. The S&P 500 closed 10 points higher. The NASDAQ was up 48 points.

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Overall, pasture and range conditions improved last week, according to the latest weekly Crop Progress report (week ending Sept. 9). Among states with 35% or more of pasture and range rated as Poor or Very Poor, week-to-week conditions improved in Arizona, Colorado, Missouri, New Mexico and Texas. Conditions eroded in Idaho, Nevada, Oregon, Utah and Washington.

Nationally, 43% of pasture and range is in Good (36%) or Excellent (7%) condition, 1% more than a week earlier, but 4% less than a year earlier. 26% is rated as Poor (17%) or Very Poor (9%), which is 2% less than a week earlier and 4% more than last year.

States with 35% or more pasture and range rated as Poor or Very Poor include: Arizona (59%), California (45%), Colorado (45%), Idaho (38%); Missouri (44%), Nevada (45%), New Mexico (45%), Oregon (74%), Texas (45%), Utah (64%) and Washington (62%). 

Crop progress continues mostly ahead of last year and the 5-year average.

86% of the corn crop is dented, which is 13% more than last year and 11% more than the average. 35% is mature, which is 15% more than last year and 14% more than average. 5% is harvested, the same as last year, but 2% more than average. 68% is in Good (47%) or Excellent (21%) condition, compared to 61% last year. 12% is in Poor (8%) or Very Poor (4%) condition, which is 1% less than last year.

31% of soybeans are dropping leaves, which is 11% more than last year and 12% ahead of the average. 68% is in Good (50%) or Excellent (18%) condition, compared to 60% last year. 10% is in Poor (7%) or Very Poor (3%) condition, compared to 12% a year earlier.

79% of sorghum is coloring, which is 7% more than last year and 5% more than average. 34% is mature, which is the same as last year but 4% less than average. 24% is harvested, which is the same as last year but 2% less than average. 53% is rated in Good (41%) or Excellent condition (11%), compared to 66% last year. 17% is in Poor (12%) or Very Poor (5%) condition, compared to 7% last year.

93% of spring wheat is harvested, which is 1% less than last year but 8% more than the average.

5% of winter wheat is planted, which is the same as last year and the average.

When the final counting was done last week, negotiated cash fed cattle prices were steady to $1 higher at mostly $107-$108/cwt. on a live basis and at $170 in the beef.

Those steady to higher prices helped Live Cattle futures firm on Monday, while Feeder Cattle closed narrowly mixed.

Except for unchanged in near Dec, Live Cattle futures closed an average of 32¢ higher.

Feeder Cattle futures closed narrowly mixed, 45¢ lower to 22¢ higher.

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

Choice boxed beef cutout value was 26¢ lower Monday afternoon at $206.30/cwt. Select was $1.84 higher at $198.93.

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Major U.S. financial indices closed mixed Monday, between some recovery in tech stocks, but lingering concerns about trade.

The Dow Jones Industrial Average closed 59 points lower. The S&P 500 closed 5 points higher. The NASDAQ was up 21 points.

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“Cattle prices decline from 2018 to 2020 as production continues to increase. Live hog prices remain below $45 cwt. for three straight years, as production continues to expand and tariffs slow growth in U.S. exports,” say analysts with the Food and Agricultural Policy Institute (FAPRI) at the University of Missouri.

That’s one of the conclusions from the recently released Baseline Update for U.S. Agricultural Markets. The update is to the annual U.S. Baseline Outlook published each spring, which provides 10-year projections. The Update looks through 2023.

FAPRI estimated the average price of a 600-650 lb. feeder steer (basis Oklahoma City) at $158.51/cwt. this year, declining as low as $141.06 in 2020; rising each year after that to $162.14 in 2023.

Prices for fed steers (5-area Direct) are projected at $116.59 this year, declining as low as $110.19 in 2020, then ultimately increasing to $119.99 in 2023.

For context, FAPRI forecasts peak beef cow numbers in 2019 at 31.8 million head, just 100,000 head more than the start of this year. Then numbers continue to decline through 2023 at 30.8 million head.

Likewise, total cattle and calves are projected to plateau next year at 94.6 million head—200,000 more than this year—before declining to 91.4 million head in 2023.

Incidentally, peak beef production is estimated to plateau at 28.32 billion lbs. in 2021, then decline to 28.01 billion in 2023. That would still be more than next year’s estimated production of 27.92 billion lbs.