WLI

Although Cattle futures closed mixed on Monday, the rally in the session earlier hinted at some stability, and with the higher week-to-week close, the sense that the bottom might have been established.

Live Cattle futures closed narrowly mixed (25¢ lower to 17¢ higher).

Feeder Cattle futures closed mixed (an average of 35¢ lower—10¢-87¢ lower—except for 12¢-35¢ higher in three contracts).

Choice boxed beef cutout value was 73¢ higher Monday afternoon at $215.04/cwt. Select was $2.46 lower at $203.14.

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Major U.S. financial indices were sharply higher for much of Monday’s session, on what were perceived as hopeful statements from the U.S. Treasury Secretary, regarding the prospects of a trade war with China. Markets barreled lower late a report circulated that the FBI raided the offices of President Trump’s personal lawyer.

The Dow Jones Industrial Average closed 46 points higher. The S&P 500 closed 8 points higher. The NASDAQ closed 35 points higher.

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“As we work through the escalating trade tensions that are currently roiling markets, it will be beneficial if all sides remember that trade adds value and is not a zero-sum game,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments.

Whether between individuals or nations, Peel points out that trade boils down to the same factors.

“Trade between two economic agents adds value to both and is the basis for nearly all economic growth,” Peel explains. “These gains from trade are the result of specialization where market participants capitalize on their comparative advantage in some activity. Comparative advantage allows all parties in a market to produce at their lowest opportunity cost thereby using scarce resources most efficiently.”

He uses the example of an individual buying the parts to build a computer rather than buying one off the shelf. It’s more efficient to buy one—capitalizing on someone else’s comparative advantage.

“International trade is fundamentally no different than any other trade in terms of the underlying economic forces. However, the complication of multiple governments and lots of politics often puts international trade under a different lens,” Peel explains. “One of the concerns is trade deficits that sometimes result from international trade. The term trade deficit is usually applied to the negative balance of goods that occurs when a country imports more products from another country than it exports to that country. To call this negative balance of trade a deficit is really a misnomer as it does not imply any unpaid obligation, in contrast to, say, a budget deficit.” 

For instance, Peel says Oklahoma has a tae deficit with Florida and California in terms of the fruits and vegetables consumed in the state.

“Oklahoma does not have a comparative advantage in fruit and vegetable production and it would not be efficient to produce them all in the state. However, the state’s trade deficit regarding fruits and vegetables is part of a bigger economic picture and not a source of concern,” Peel explains. “In general, the same is true for country-to-country trade deficits…it is part of a larger picture involving the entire macro-economy of the country and the broader global trade picture. For example, goods sourced cheaper in another country free up resources and consumer dollars in the U.S. to support other businesses.”

Cattle futures dropped on Friday, amid more trade worries, even as the most recent statistics show that U.S. beef exports continue higher year over year…coming up on your Cattle Current Market Update with Wes Ishmael.

Cattle futures closed sharply lower on Friday, amid position squaring and renewed angst about international trade issues.

Live Cattle futures closed an average of $1.54 lower (72¢ to $2.72 lower).

Feeder Cattle futures closed an average of $1.69 lower ($1.22 to $2.42 lower).

Choice boxed beef cutout value was 78¢ lower Friday afternoon at $214.31/cwt. Select was 71¢ lower at $205.60.

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Major U.S. financial indices closed sharply lower on Friday, on more worries about a trade war with China after the Trump Administration directed the U.S. Trade Representative to determine if an additional $100 billion worth of tariffs on Chinese imports would be appropriate. Some also viewed the monthly unemployment report as bearish. Although non-farm payroll employment increased by 103,000 in March, according to the Bureau of Labor Statistics, it was less than the trade anticipated.

The Dow Jones Industrial Average closed 572 points lower. The S&P 500 closed 58 points lower. The NASDAQ closed 161 points lower.

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U.S. beef exports continue to provide critical support for domestic prices.

February exports of U.S. beef were higher than a year ago in both volume and value, according to statistics released by USDA and compiled by the U.S. Meat Export Federation (USMEF).

Specifically, February beef export volume (100,593 metric tons) improved 11% from the previous year, while export value increased 18% to $599.8 million. For the first two months of the year, beef export volume (206,079 mt) was 10% more than the first two months of 2017, while export value was 20% more at $1.22 billion.

For meaning closer to home, February beef export value averaged $322.29 per head of fed slaughter, up 16% from a year ago. Through February, per-head export value averaged $306.69, up 15%.

“Red meat exports are off to a strong start in 2018 and continue to deliver excellent returns for U.S. producers,” says Dan Halstrom, USMEF President and CEO. “The outstanding level of export value per head slaughtered is especially encouraging at a time in which U.S. meat production is high and the trade climate is somewhat volatile. Through all the uncertainty, international customers remain very committed to U.S. pork and beef.”

Cattle futures continued sharply higher on Thursday for the second day in a row. The surge, coupled with heavy volume in Live Cattle the previous day, increases hopes that a near-term bottom was established earlier this week.

Live Cattle futures closed an average of $1.65 higher (67¢ to $2.72 higher.

Feeder Cattle futures closed an average of $2.36 higher ($1.77 to $2.97 higher).

Choice boxed beef cutout value was $3.08 lower Thursday afternoon at $215.09/cwt. Select was 13¢ higher at $206.31.

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Major U.S. financial indices closed sharply higher again on Thursday, bouncing back further from aggressive pressure earlier in the week, tied to the brewing trade war with China.

The Dow Jones Industrial Average closed 240 points higher. The S&P 500 closed 18 points higher. The NASDAQ closed 34 points higher.

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Levi Russell, an agricultural economist at the University of Georgia provides some year-over-year market perspective, in light of recent pressure exerted on calf and feeder prices by fewer than expected corn acres.

“At this time last year, we were seeing a typical spring rally thanks to several factors,” Russell says, in the latest issue of In the Cattle Markets. “Demand was quite strong and was offsetting increases in beef production. Supply fundamentals across all proteins were bearish, but both domestic and export demand were strong enough to keep prices moving higher. Additionally, the prospective plantings report was bearish for corn, which was good news for feedlot demand. Time will tell whether export demand (which has been strong) and domestic demand (which is increasingly tied to consumers’ incomes) will buoy prices into grilling season.”

Only four lots (373 head) were offered in the weekly Fed Cattle Exchange auction. One lot of steers and one lot of heifers (156 head total)—both from Kansas—sold for a weighted average price of $117/cwt., for delivery at 1-9 days. That ended up mostly mirroring country trade.

Live trade was $2-$3 lower in the Southern Plains through Wednesday afternoon at $117-$118/cwt. In Nebraska live prices were at mostly $114, which was $3.50 to $8.00 less than last week. Dressed prices in Nebraska and the western Corn Belt were generally $2-$6 lower at $184-$188.

Cattle futures closed sharply higher on Wednesday, perhaps with traders believing that lengthy long liquidation has established a near-term bottom. That came after Cattle futures trending strongly lower for much of the session, reacting in part, to China’s proposed tariffs on a long list of goods that included U.S. beef (see below).

Live Cattle futures closed an average of $1.99 higher through the front five contracts and then 62¢ to $1.50 higher.

Feeder Cattle futures closed an average of $3.00 higher ($2.22 to $4.15 higher).

Choice boxed beef cutout value was $1.51 lower Wednesday afternoon at $218.17/cwt. Select was $3.15 lower at $206.18.

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It was a wild rollercoaster on Wall Street Wednesday as major U.S. financial indices started out sharply lower, in response to China’s proposed tariffs on U.S. goods. Markets roared back, though, presumably on chatter from the White House that eased investor worries.

The Dow Jones Industrial Average closed 230 points higher. The S&P 500 closed 30 points higher. The NASDAQ closed 100 points higher.

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China fired another retaliatory round in the brewing trade war with the U.S., issuing proposed tariffs on 25% of the agricultural and food products it imports from the United States, including U.S. beef. That came after the Trump Administration took another step toward imposing tariffs on $50 billion worth of Chinese exports to the U.S., as a penalty for China’s ongoing violation of intellectual property rights.

“China is a promising market for U.S. beef, and, since the June 2017 reopening, the U.S. industry has made an exceptional effort to provide customers with high-quality beef at an affordable price. This is not an easy task, due to our 13-year absence from the market and China’s beef import requirements,” says Dan Halstrom, president and CEO of the U.S. Meat Export Federation (USMEF).

In the second half of last year, after China reopened the doors, U.S. beef exports to China totaled 3,020 metric tons valued at $31 million, according to USMEF. In January 2018, exports reached the highest monthly volume to date at 819 metric tons, valued at $7.5 million.

In a special edition of Beltway Beef, Kent Bacus points out the tariff on U.S. beef is contingent on the proposed U.S. tariffs going into effect on the imports from China. He reckons there are 6-8 weeks before that happens, if it does, based on ultimate findings by the U.S. Trade Representative. Bacus is director of international trade and market access for the National Cattlemen’s Beef Association.

“Over the past nine months, interest in U.S. beef has steadily gained momentum in China and our customer base has grown. But if an additional import tariff is imposed on U.S. beef, these constructive business relationships, and opportunities for further growth, will be put at risk,” Halstrom says.

Cash fed cattle trade wobbled out of the blocks on Tuesday with a decidedly lower tone, as expected. Although too few to trend, there were some early live sales in the Southern Plains at $117-$118/cwt. and a few dressed trades in the western Corn Belt at $188-$192. That’s about $3 lower on a live basis and $2-$3 lower in the beef for those regions.

Early two-side trading in Cattle futures gave way to the bears on Tuesday, amid light volume and uncertainty about how much lower cash fed cattle will trade this week.

Live Cattle futures closed an average of 55¢ lower across a broad range (12¢ to $1.32 lower). Near Jun and Aug closed below $100 at a contract low for Aug and within spitting distance of the low for Jun, which was established early on in March of last year.

Except for an average of 30¢ lower in the back two contracts, Feeder Cattle futures closed an average of $1.36 lower.

Wholesale beef value continued to tread water on Tuesday, with Choice boxed beef cutout value was 12¢ lower in the afternoon at $219.68/cwt. Select was $1.17 lower at $209.33.

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Major U.S. financial indices closed sharply higher on Tuesday, led by tech stocks, which were behind the previous day’s sharp decline; nothing new fundamentally except for perhaps being oversold.

The Dow Jones Industrial Average closed 389 points higher. The S&P 500 closed 32 points higher. The NASDAQ closed 71 points higher.

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Producer concern about trade issues helped pressure the Purdue University/CME Group Ag Economy Barometer five points lower to 135 last month. Both sub-indices that comprise the overall index were lower, too. The Index of Current Conditions fell 9 points in March to 134, while the Index of Future Expectations dropped by 4 points to 135.

Nearly half (47%) of respondents to the March survey said that a trade war negatively impacting agricultural exports was somewhat likely, compared with just 28% who thought it was unlikely. The remaining 25% indicated uncertainty with a neutral rating.

Producers also were asked about the likelihood of a U.S. withdrawal from the North American Free Trade Agreement (NAFTA). More than one-third expressed uncertainty, while 28% expected the U.S. to remain in NAFTA and 34% said they expect the U.S. to exit the agreement.

“Interestingly, when comparing results from the two trade questions, a larger share of respondents reported a significant decline in agricultural exports from a trade war was more likely than the U.S. withdrawing from NAFTA,” says James Mintert, director of Purdue University’s Center for Commercial Agriculture and principal investigator on the barometer project. “These results are important for two reasons. First, nearly half of producers rated the risk of a trade war as at least somewhat likely. Second, producers’ concerns about risks to agricultural trade are broader than just the ongoing NAFTA situation.”

The barometer and both sub-indices are based on a monthly survey of 400 U.S. agricultural producers.