WLI

Cash fed cattle trade remained undeveloped through Thursday afternoon, although chatter continued about still-snug front-end supplies, stout boxed beef sales and declining carcass weights.

Other than 12¢ higher in the back contract, Live Cattle futures closed an average of 86¢ higher (50¢ to $1.85 higher in spot Jun).

Feeder Cattle futures closed an average of $1.11 higher, not counting 37¢ higher in the back contract.

Choice boxed beef cutout value was 11¢ higher Thursday afternoon at $231.07/cwt. Select was 19¢ higher at $209.14. Select and Choice rib, round, and loin cuts traded steady to firm, while chuck cuts sold steady to weak, according to the Agricultural Marketing Service.

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Major U.S. financial indices closed sharply higher on Wednesday, for the second consecutive day. Support included a less than expected increase in the monthly Consumer Price Index (CPI), which softened treasury yields a touch.

The CPI for all urban consumers increased 0.2% in April on a seasonally adjusted basis after falling 0.1% in March, according to the U.S. Bureau of Labor Statistics.

The all items index is up 2.5% over the last 12 months before seasonal adjustment.

The Dow Jones Industrial Average closed 196 points higher. The S&P 500 closed 25 points higher. The NASDAQ closed 65 point higher.

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Projected total red meat and poultry production this year was forecast lower than last month in the World Agricultural Supply and Demand Estimates (WASDE) released yesterday. Beef production for the year is estimated at 27.23 billion lbs.,  compared to 27.70 billion last month.

“Cattle slaughter in the second quarter has been slower than anticipated, and the pace of marketings in the second half of the year is slowed,” say analysts with USDA’s Economic Research Service (ERS). “However, carcass weights are increased for the second half of the year, partly offsetting the reduction in the slaughter forecast.”

Projected fed cattle prices for this year were little changed from last month. The second-quarter fed steer price (5-area direct, all grades) is projected at $116-$120/cwt. Prices are projected at $106-$112 in the third quarter and at $108-$116 in the fourth.

The May WASDE provides the first outlook for 2019. U.S. beef production next year is forecast above this year at 27.78 billion lbs.

“Beef production is forecast above 2018 on higher slaughter and heavier carcass weights,” ERS analysts say. “Pork production in 2019 is forecast to increase as expected growth in farrowings and pigs per litter will support larger pig crops…For 2019, fed cattle and hog prices are forecast above 2018 as relatively strong demand absorbs expected increases in supplies.”

ERS projects the annual fed steer price this year at $114-$119. The first projection for next year is $113-$122.

As expected, weekly cash fed cattle trade was slow out of box through Wednesday afternoon.

None of the cattle sold out of the 2,456 head offered in the weekly Fed Cattle Exchange auction Wednesday. There was one lot of Kansas heifers (89 head) passed on at $122.25/cwt.

Likewise, there was too little country trade to trend.

That lack of cash direction helped quash early follow through support for Cattle futures, which closed lower but in the long-term, narrow range.

Live Cattle futures closed an average of 49¢ lower (30¢ to $1.10 lower).

Feeder Cattle futures closed an average of 61¢ lower (42¢ to $1.02 lower).

Choice boxed beef cutout value was 3¢ higher Tuesday afternoon at $230.96/cwt. Select was 98¢ lower at $208.95.

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Cash bids were higher for soybeans on Wednesday, but lower for grains, according to the Daily National Grain Market Summary.

“Much of the day’s trading may have been focused on getting positions set ahead of USDA’s World Supply and Demand Estimates,” said analysts with the Daily National Grain Market Summary. That report comes out Thursday.

Soybean bids were mostly 4½¢ higher. Wheat bids were mostly 1¢ to 4¢ lower. Corn bids were mostly ½¢ lower.  

Corn futures closed mostly unchanged to fractionally lower.

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Major U.S. financial indices closed sharply higher on Wednesday with support from energy stocks, boosted by rallying oil prices, following the announcement that the U.S. is withdrawing from the Iran nuclear pact.

The Dow Jones Industrial Average closed 182 points higher. The S&P 500 closed 25 points higher. The NASDAQ closed 73 point higher.

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As trade talks continue between the U.S. and China, consider this data provided by the North American Meat Institute (NAMI). China is the second largest export destination for U.S. agricultural products. U.S. exports of beef, pork and poultry products to China/Hong Kong exceeded $2.5 billion last year, 13% more than in 2016. Last year, China also imported more than $1 billion worth of U.S. cattle hides, pig skins and semi-processed leather products. Part of the increasing demand is tied to Chinese consumers’ desire for food safety.

“With China’s domestic production constraints and increasing demand from consumers for high quality, safe food products, the resulting import demand offers significant opportunities for U.S. agricultural exporters,” explained, Bill Westman, NAMI senior vice president of International affairs. “The U.S. is in an excellent position to compete in the Chinese market if it can avoid unnecessary, unjustified barriers to agricultural trade.” He was testifying a couple of weeks ago at a U.S.-China Economic and Security Review Commission hearing focused on China’s agricultural policies.

In his testimony, Westman detailed how China uses means, such as high tariffs and sanitary and phytosanitary measures, to restrict market access for U.S. agricultural products. He also identified several trade barriers and regulations—laboratory protocols, maximum residue limit tolerance restrictions and re-inspection processes, among other policies—that China could address or eliminate to bolster U.S. meat imports.

At the same hearing, David Ortega, assistant professor of Agricultural, Food, and Resource Economics at Michigan State University explained, in his statement, “China’s food safety situation poses a significant risk to its domestic economy, threatens the safety of the U.S. food supply and at the same time presents an opportunity for high quality U.S. agricultural exports.”

Ortega conducted one of the pioneer studies that assessed demand for food safety in China; he’s made about 10 research trips to the country.

“Over the past 10 years, I have found that Chinese consumers are very concerned about the safety of the food products they purchase. Furthermore, they are willing to pay significant premiums to ensure the safety of their food,” Ortega said. “The high level of concern regarding food safety (in China) can be linked to incidents involving pork and dairy products, most notably the clenbuterol-contaminated pork and melamine-tainted dairy and infant formula incidents. These, however, are not isolated events. Reports of contaminated foods and incidents of food fraud have been frequently reported since China joined the World Trade Organization in 2001.”

After early pressure, Cattle futures recovered some on last week’s heavy trade and apparent short covering, but still closed mostly lower.

Live Cattle futures closed an average of 47¢ higher in the front four contracts (12¢ to $1.25 higher in spot Jun) and then an average of 20¢ lower.

Other than 10¢ higher and 2¢ higher in the front two contracts, Feeder Cattle futures closed an average of 63¢ lower.

Choice boxed beef cutout value was $1.79 higher Tuesday afternoon at $230.93/cwt. Select was $1.27 lower at $209.93.

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Major U.S. financial indices closed marginally mixed on Tuesday. Key news was President Trump’s announcement to withdraw the U.S. from the Iran nuclear deal and re-impose economic sanctions on that country. Sanctions lifted by the U.S. and other countries when the deal was established in 2015 boosted the Iranian economy, including Iranian oil exports. Though lower yesterday, many analysts attribute a portion of the recent surge in oil prices to the expectation that U.S. sanctions on Iran will decrease global oil supplies.

The Dow Jones Industrial Average closed 2 points higher. The S&P 500 closed fractionally lower. The NASDAQ closed 1 point higher.

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U.S. cattle producers continue to build upon their already-strong track record in areas important to consumers, according to the Cattlemen’s Stewardship Review (CSR) released this week. Those specific areas are animal welfare, beef quality, sustainability and commitment to community.

Funded by the Beef Checkoff, the CSR documents progress made since the benchmark CSR conducted in 2010.

Among the highlights:

87% percent of consumers say that when they make a meal decisionat home, it is important the meal is “extremely safe to eat—90% of cattle producers say they understand their management practices affect the safety and quality of beef (up 3% from 2010). Further, 95% of producers said their management practices are consistent with producing safe food.

More than 100,000 farmers and ranchers are part of the voluntary Beef Quality Assurance program, which influences the health and animal welfare management practices of more than 80% of U.S. cattle.

75% of consumers say it’s important for meat industries to use sound environmental practices—95% of responding producers say conservation of their land is extremely important to them; 88% manage manure and waste in a way that safeguards air and water

62% of consumers feel its important for meat industries to support their local economies—95% of supplies are purchased from the local area in which beef farmers and ranchers live. Nearly half of cattle farmers and ranchers are involved with a youth organization, such as 4-H, FFA, youth sports, or church youth group. More than a third (39%) donate their time to other civic organizations, compared to a national average of 7%. 

“Cattlemen and women raise high-quality beef to feed families in the United States and around the globe,” says Kendal Frazier, CEO of the National Cattlemen’s Beef Association. “As the beef community looks to the future, there will be an ongoing focus to not only improve beef as a product and the process in which it’s raised, but also to appreciate and honor the tradition and history associated with this important industry.”

Although still range-bound, cattle futures closed solidly lower on Monday. More than anything, sluggish trade seems to indicate uncertainty, including ongoing trade talks, the higher U.S. dollar, looming increased fed cattle supplies and wonderments about how many cattle drought could force to town (see below).

Live Cattle futures closed an average of 98¢ lower (25¢ to $1.35 lower).

Feeder Cattle futures closed an average of $1.97 lower (75¢ to $2.77 lower).

Choice boxed beef cutout value was 84¢ higher Monday afternoon at $229.14/cwt. Select was $1.71 higher at $211.20.

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Major U.S. financial indices closed higher on Monday, propelled by energy stocks, which were buoyed by surging crude oil prices that topped $70 for the first time since 2014 (spot CME-WTI).

The Dow Jones Industrial Average closed 94 points higher. The S&P 500 closed 9 points higher. The NASDAQ closed 55 points higher.

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“The drought can pass with little significant additional impact if rains arrive very soon. Failing that, the drought will become a major issue in the next few weeks,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “I’m not aware of any cattle liquidation in the worst drought areas yet. However, hay supplies are tight and if summer pastures do not develop in the next month the situation will be much more critical. Significant removal of cattle could begin by June. The total D3 and D4 drought area in Kansas, Oklahoma and Texas is currently 53.5 million acres. This area has a carrying capacity between 2.0-2.5 million animal units. The drought area and the number of cattle impacted could expand rapidly in the coming weeks.”

Cattle futures edged mostly lower on Friday amid sluggish trade and week-end position taking.

Live Cattle futures closed an average of 35¢ lower (12¢ to 60¢ lower), except for 20¢ higher in the back contract.

Feeder Cattle futures closed an average of 22¢ lower, except for unchanged in the back two contracts.

Choice boxed beef cutout value was 74¢ higher Friday afternoon at $228.30/cwt. Select was 32¢ higher at $209.49.

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Major U.S. financial indices closed sharply higher on Friday. Key support for the day came from tech stocks, led by Apple, which surged on news that billionaire, Warren Buffet has been and aggressive Apple buyer for several months.

Depending on your mindset, the monthly U.S. employment report also provided some support, but less than the trade was expecting.

Non-farm employment increased by 164,000 in April, according to the U.S. Bureau of Labor Statistics; a little less than expectations. The unemployment rate dropped to 3.9% in April, one of the lowest rates in recent history.

The Dow Jones Industrial Average closed 332 points higher. The S&P 500 closed 33 points higher. The NASDAQ closed 121 points higher.

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U.S. beef exports set a new monthly value record in March at $693.1 million, 18% more than the previous year, according to data released by USDA and compiled by the U.S. Meat Export Federation (USMEF). Export volume in March was 6% more than the previous year at 111,994 metric tons (mt).

For the first quarter of this year, beef exports were 9% ahead of last year’s pace in volume (318,073 mt) and 19% higher in value at $1.92 billion.

Beef export value averaged $332.89 per head of fed slaughter in March, up 23% from a year ago. For the first quarter, per-head value averaged $315.67, up 18%.

Asian and Latin American markets drove the increase in beef export value.

March beef exports to leading market Japan were steady with last year’s pace at 28,158 mt, but 6% more in value at $177.5 million. USMEF notes that March was the final month of a higher safeguard tariff rate (50% versus the normal 38.5%) applied to Japan’s imports of frozen U.S. beef. The higher rate took effect in August and expired Apr. 1 with the beginning of the new Japanese fiscal year.

“While beef exports to Japan held up well during those eight months, the higher tariff rate certainly weighed on exports of frozen cuts such as short plate,” says Dan Halstrom, USMEF President and CEO. “U.S. short plate is an essential ingredient for Japan’s gyudon restaurants, which are part of a highly competitive fast-casual dining sector. We are pleased to have the higher safeguard tariff rate behind us, though U.S. beef still faces a widening tariff rate gap in Japan compared to Australian beef, and U.S. beef remains subject to Japan’s quarterly safeguard mechanisms for chilled and frozen imports. USMEF continues to monitor this situation, and we are hopeful that the frozen beef safeguard will not be triggered this year.”

Exports to Mexico—the leading volume destination for U.S. beef variety meat—were steady with last year in volume at 57,039 mt but climbed 10% in value to $250.3 million.