WLI

Cash fed cattle prices continued to tick lower on Wednesday at $115/cwt. in the Southern Plains, which was $7 less than last week. The same price and week-to-week decline defined trade in Nebraska a day earlier.

There were 2,586 head offered in the weekly Fed Cattle Exchange auction, but no takers.

Cattle futures continued lower, perhaps partly due to technical positioning, but there was at least a sense of trying to find some stable ground.

Other than 47¢ and 15¢ lower in the back two contracts, Live Cattle futures closed an average of 91¢ lower. 

Feeder Cattle futures closed an average of $1.07 lower (45¢ to $1.72 lower).

Choice boxed beef cutout value was 61¢ lower Wednesday afternoon at $231.03/cwt. Select was $1.01 lower at $208.50. Select and Choice rib cuts sold steady to firm, while chuck, round, and loin cuts traded steady to weak, according to the Agricultural Marketing Service. Beef trimmings traded mostly sharply lower on light demand and heavy offerings.

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Major U.S. financial indices closed higher on Wednesday, regaining some of the ground lost the previous day. Support included a bounce in retailer stocks, led by stronger than expected quarterly earnings from Macy’s, according to various analysts.

The Dow Jones Industrial Average closed 62 points higher. The S&P 500 closed 11 points higher. The NASDAQ closed 46 points higher.

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“Firm demand and a moderate marketing pace will likely support fed steer prices in the second quarter to average $116-$120/cwt…However, fed cattle prices will likely edge lower in the second half of the year as the supply of fed cattle increases and carcass weights make their seasonal rebound,” say analysts with USDA’s Economic Research Service (ERS), in the monthly Livestock, Dairy and Poultry Outlook.

From March to April, steer carcass weights declined 17 lbs. to 861 lbs., but were still 12 lbs. heavier than the previous year, according to ERS. Heifer carcass weights declined 22 lbs. to 798 lbs., but were 7 lbs. more than the previous year.

“It should be noted that the large drop in carcass weights vis-à-vis March reflects, in part, a seasonal shift toward a greater proportion of cattle weighing under 600 lbs. placed in feedlots in fourth-quarter 2017,” ERS analysts say. “Cattle placed at lighter weights are likely marketed at lighter weights.”

The folks at ERS expect the annual fed steer price (5-area direct) this year to average $114-$119/cwt. They forecast next year’s annual fed steer prices to average $113-$122./cwt.

Annual feeder steer prices for this year are forecast to average $138-$144; $135-$147 next year.

Market bears had their way on Tuesday, with continued follow-through pressure in Cattle futures, skittishness over heavy supplies and sliding fed cattle prices.

Negotiated fed cattle trade was at significantly lower prices on Tuesday. Early live trade in Nebraska was mostly $7 lower than last week at $115/cwt., with a few up to $117; that was on light to moderate trade and light demand. Early dressed purchases in the western Corn belt traded at mostly $184, which was $4-$9 lower than last week. Live sales in the western Corn Belt so far this week are at mostly $121-$122, in the middle of the previous week’s trading range.

Live Cattle futures closed an average of $1.25 lower (87¢ to $1.65 lower in spot Jun). That’s an average of $3.25 lower in the last two sessions.

Feeder Cattle futures closed an average of $1.84 lower ($1.60-$2.02 lower). That’s an average of $4.50 lower over the last two days.

Choice boxed beef cutout value was 48¢ lower Tuesday afternoon at $231.64/cwt. Select was 39¢ higher at $209.51. Select and Choice rib and loin cuts sold steady to firm, while chuck and round cuts traded steady to weak, according to the Agricultural Marketing Service. Beef trimmings sold sharply lower on light demand and offerings.  

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Major U.S. financial indices closed solidly lower on Tuesday, under pressure from an assortment of news, including a surge in interest rates and a month-to-month decline in consumer retail sales. According to the U.S. Commerce Department, U.S. food services and retail sales increased 0.3% in April, down from the 0.8% increase a month earlier.

The Dow Jones Industrial Average closed 193 points lower. The S&P 500 closed 18 points lower. The NASDAQ closed 59 point lower.

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The nation’s pasture and range is off to a poorer year-over-year start, as expected, given the long winter and wide swaths of dry conditions.

According to the most recent USDA Crop Progress report, 43% of pasture and range is in Good (37%) or Excellent (6%) condition, compared to 72% last year, which was historically high. 20% is rated as Poor (15%) or Very Poor (5%) compared to 10% last year. That’s the worst first week of the reporting season since 2014, according to the Livestock Marketing Information Center (LMIC).

In the latest Livestock Monitor, LMIC analysts add that the hay stock as of May 1 were the lowest since 2013.

“Nearly half of U.S. states saw declines of 30% or more in hay stocks. Only 16 states showed higher year-over-year May 1 stocks,” LMIC analysts say. “In critical drought areas of Texas and Oklahoma, declines were over 50%…Surrounding states also have large declines in inventory. Louisiana was down 63%, Missouri fell 61%, and Kansas by 30%. In most of the U.S., tight hay stocks will support new-crop hay prices, at least in the near-term.”

For most other crops, producers made significant strides in planting last week.

For instance, 62% of the corn is planted, which is 6% less than last year but just 1% less than the 5-year average.

In late trade on Friday, negotiated cash fed cattle trade ended up mostly $4 lower at $122/cwt. in the Southern Plains and Nebraska and at $118-$126 in the western Corn Belt. Dressed trade was steady to $5 lower in Nebraska at $189-$195; $3-$7 less in the western Corn Belt at $188-$193. Live trade in Colorado was mixed at $119-$122.

That news helped pressure Cattle futures, first a little and then a lot on Monday. Perhaps there was also some sense that wholesale beef values are running out steam sooner than later. The gap between spot Live Cattle and last week’s cash trade remains huge at $17 or so.

Live Cattle futures closed an average of $2.00 lower ($1.12 to $3.00 lower).

Feeder Cattle futures closed an average of $2.66 lower ($1.05-$3.52 lower).

Choice boxed beef cutout value was $1.15 higher Monday afternoon at $232.12/cwt. Select was 43¢ higher at $209.12. That was with fairly good demand and heavy offerings, according to the Agricultural Marketing Service.

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Major U.S. financial indices edged higher on Monday, amid chatter about trade tensions between the U.S. and China easing a bit.

The Dow Jones Industrial Average closed 68 points higher. The S&P 500 closed 2 points higher. The NASDAQ closed 8 point higher.

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“Beef exports continue to support cattle and beef markets with six strong major markets, plus a number of smaller markets, including lots of potential for China to be a much bigger market for U.S. beef over time,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments.

The six major markets account for 86.5% of U.S. beef exports so far this year. In order of market size, those nations are: Japan, South Korea, Mexico, Hong Kong, Canada and Taiwan.

“China is currently the number 12 beef export market for the U.S. and has accounted for less than 1% of total beef exports since exports to China resumed in June, 2017,” Peel says. “Despite the slow pace of exports to China thus far, there is tremendous potential for China to be a very significant beef export market for the U.S. Despite relatively low per capita beef consumption, China is the second largest beef consuming nation in the world, behind the U.S.”

First-quarter U.S. beef exports this year were 9% more than last year for volume and 19% more for value at $1.92 billion, according to the most recent data released by USDA and compiled by the U.S. Meat Export Federation. Beef export value averaged $315.67 per head of fed slaughter in the first quarter, up 18% year over year.

Cattle futures finished marginally mixed on Friday, following strong pressure early on. Cash markets offered no direction as negotiated fed cattle trade remained undeveloped through Friday afternoon.

Live Cattle futures closed unchanged to an average of 12¢ higher, except for 5¢ lower in Apr.

Except for 45¢ higher in the back contract, Feeder Cattle futures closed an average of 28¢ lower.

Choice boxed beef cutout value was 10¢ lower Friday afternoon at $230.97/cwt. Select was 45¢ lower at $208.69. Select and Choice rib, round, and loin cuts sold steady to weak, according to the Agricultural Marketing Service. Chuck cuts traded steady to firm. Beef trimmings sold unevenly steady on light to moderate demand and offerings.

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Major U.S. financial indices closed on a mixed basis Friday, but finishing the week higher, supported by surging crude oil prices and positive quarterly earnings.

The Dow Jones Industrial Average closed 91 points higher. The S&P 500 closed 4 points higher. The NASDAQ closed 2 point lower.

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Farm income declined in the first quarter of this year for the 17th consecutive quarter, according to the latest Agricultural Finance Monitor (AFM) published by the Federal Reserve Bank of St. Louis. That’s for the Eighth District, which includes all or parts of seven Midwest and Mid-South states: Arkansas, Illinois, Indiana, Kentucky, Mississippi, Missouri and Tennessee.

The majority of agricultural bankers (34 within the boundaries of the Eighth Federal Reserve District) continue to report declines in farm income relative to a year earlier.

More specifically, bankers attribute part of declining income to diversification and consolidation.

On the one hand, according to a Missouri lender, “In the past, producers sought off-farm income to bridge cash flow shortages. Today, larger producers are seeking to diversify (excavating, construction, trucking, and new livestock confinement) to provide additional income by using existing equipment and labor.”

On the other hand is consolidation borne by producer retirement.

“Older farmers are discontinuing operations at a fast pace to secure equity for retirement,” explained the same lender. “Few farmers and their bankers are interested in acquiring land due to really tight cash flow coverage ratios. Few producers start up in agriculture unless ushered in by a retiring producer.”

Quality farmland values fell 1.4% in the Eighth Federal Reserve District during the first quarter, compared to the same quarter last year. Cash rents for quality farmland declined 0.5%.

Pasture was a different story.

First-quarter ranchland or pastureland values increased 13.0% compared to the previous year. Cash rent for ranchland or pastureland increased 12.6%.