WLI

Cattle futures, led by Feeder Cattle, closed mostly higher on Tuesday, although off of session highs. Apparently, they were so far oversold for so long that traders had little other choice.

Live Cattle futures closed fractionally mixed (5¢ lower to 32¢ higher).

Except for 17¢ higher in the back contract, Feeder Cattle futures closed an average of 86¢ higher.

Choice boxed beef cutout value was 17¢ lower Tuesday afternoon at $222.36/cwt. Select was $1.22 lower at $214.24.

******************************

Major U.S. financial indices continued to rebound early in Tuesday’s session and then headed south in a hurry, led by tech stocks.

The Dow Jones Industrial Average closed 344 points lower. The S&P 500 closed 45 points lower. The NASDAQ closed 211 points lower.

******************************

“Red meat, especially beef, continues to move briskly through the marketing chain, but chicken has struggled in that regard,” say analysts with the Livestock Marketing Information Center (LMIC), citing last week’s monthly Cold Storage report from USDA.

Total pounds of beef in freezers Feb. 28 were 8% less than the previous month and 8% less than the previous year, according to the recent report. Frozen pork supplies were up 6% from the previous month and up 8% from last year. Total frozen poultry supplies were up 6% from the previous month and up 14% percent from a year ago.

“In January and February, according to the latest Livestock Slaughter report from USDA’s National Agricultural Statistics Service, U.S. output of beef was up 5.2% year over year,” say LMIC analysts in the latest Livestock Monitor. “Beef production was the largest for those two months since 2008. January-February U.S. pork output this year increased 5.0% from a year ago and was record-large for that timeframe. Chicken output also was record-large for those two months and rose 3.4% year-over-year.”

LMIC analysts note that chicken in cold storage was more than 900 million lbs. for the first time in any month.

Cattle futures tried for gains early in yesterday’s session but quickly fell lower on Friday’s monthly Cattle on Feed report and general overall bearishness. Wonderments about trade wars continue to add uncertainty, although equity markets rebounded Monday, with reports of easing trade tensions with China.

Live Cattle futures closed an average of 89¢ lower (45¢ to $1.35 lower).

Except for 77¢ and 45¢ lower at either end of the board, Feeder Cattle futures closed an average of $1.41 lower ($1.22 to $1.95 lower).

Choice boxed beef cutout value was 56¢ lower Monday afternoon at $222.53/cwt. Select was 94¢ lower at $215.46.

******************************

Major U.S. financial indices bounced sharply higher to start the week, with optimism stemming from weekend trade talks with China, according to a variety of reports. The upshot was that China might offer some give and take.

The Dow Jones Industrial Average closed 669 points higher. The S&P 500 closed 70 points higher. The NASDAQ closed 227 points higher.

******************************

“Cattle producers need to closely monitor the broad range of macroeconomic and global conditions and be prepared to abruptly switch to a strongly defensive business strategy,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “Markets are increasingly volatile and it will be important to maintain as much short-term flexibility as possible to deal with rapidly changing conditions.”

On the one hand, Peel points to continuing fundamental strength for the time being—demand strength in the face of increasing supplies and higher cattle and beef prices year over year.

On the other hand, Peel cites the increasingly negative market tone stemming from looming supplies, as well as growing volatility associated with trade uncertainty. The wonderments include ongoing U.S. negotiations around several agreements, including NAFTA, the potential response from U.S. trading partners to recently imposed tariffs on U.S. imports of aluminum and steel, as well as last week’s announced increased duties on up to $60 billion worth of Chinese goods.

“It’s as though the economy has one foot on the accelerator and another foot on the brakes, making it extremely difficult to figure out what happens next or, perhaps more importantly, what happens after that,” Peel says. “Markets, in general, are increasingly scared and running for cover. The fear of the unknown may be the worst of it but the reality of the unknown could be far worse.”

Cattle futures took another step down on Friday, unable to build upon gains established a day earlier. Along with the overall bearish bent tied to larger beef supplies, pressure came from China placing pork on a list of U.S. products that could be subject to increased import duties. That was in response to President Trump’s Executive Memo calling for tariffs on up to $60 billion worth of Chinese imports, in retaliation for intellectual property theft by that nation. The monthly Cattle on Feed report (see below) will likely add more pressure to start the week.

Live Cattle futures closed an average of $1.91 lower through the front three contracts, an average of 87¢ lower through the next three and then an average of 38¢ lower.

Feeder Cattle futures closed an average of $1.74 lower ($1.22 to $1.95 lower).

Choice boxed beef cutout value was $2.12 lower Friday afternoon at $223.09/cwt. Select was $1.62 lower at $216.40.

******************************

Major U.S. financial indices closed sharply lower again on Friday as trade tensions with China escalated.

The Dow Jones Industrial Average closed 424 points lower. The S&P 500 closed 55 points lower. The NASDAQ closed 174 points lower.

******************************

Despite more cattle being placed earlier from late fall through the winter, in response to drought-reduced small grain pastures, more cattle than expected continue to be placed, according to Friday’s monthly Cattle on Feed report.

Feedlots with a capacity of 1,000 head or more placed 1.8 million head on feed in February, which was 7.3% more than the previous year. That’s at least 3% more than most estimates heading into the report. Most of the cattle placed in February (52.7%) weighed 700-899 lbs.; 36.3% went on feed weighing 699 lbs. or less; 11.1% weighed 900 lbs. or more.

Marketings in February of 1.68 million head were 1.6% more than last year, about in line with expectations.

Total cattle on feed Mar. 1 of 11.72 million head was 8.8% more than the previous year, which was about 1% more than most projections ahead of the report.

Cattle futures finally closed strongly higher on Thursday, presumably fueled in part by technicals, short covering and perhaps positioning ahead of Friday’s monthly Cattle on Feed report.

Except for 45¢ and 77¢ higher at either end of the board, Live Cattle futures closed an average of $1.26 higher.

Except for 75¢ higher in spot Mar, Feeder Cattle futures closed an average of $1.86 higher ($1.57 to $2.05 higher).

The CME Feeder Cattle Index for Wednesday was $139.39, the first time below $140 since last April.

Choice boxed beef cutout value was 83¢ higher Thursday afternoon at $225.21/cwt. Select was $1.63 higher at $218.02.

******************************

Jitters ran high on Wall Street Thursday as investors sold hard, apparently spooked by the growing specter of a trade war with China. That following President Trump signing an Executive Order that would impose tariffs on up to $60 billion worth of Chinese imports, in retaliation for intellectual property theft by that country.

The Dow Jones Industrial Average closed 700 points lower. The S&P 500 closed 68 points lower. The NASDAQ closed 178 points lower.

******************************

Frozen beef supplies remain less year over year, according to the latest monthly Cold Storage report from USDA.

Total pounds of beef in freezers Feb. 28 were 8% less than the previous month and 8% less than the previous year.

Frozen pork supplies were up 6% from the previous month and up 8% from last year.

Total red meat supplies in freezers were down slightly from the previous month but up 1% from last year.

Total frozen poultry supplies on February 28, 2018 were up 6% from the previous month and up 14% percent from a year ago.

Negotiated cash fed cattle sales continued to trend lower on Wednesday at mostly $126/cwt. in the Northern Plains and $125-$127 in the western Corn Belt. Dressed trade was $2-$5 lower than last week at $200-$203.

There were only two lots from Kansas—166 head—offered in the weekly Fed Cattle Exchange Auction. They sold for a weighted average price of $126.63/cwt. for delivery at 1-9 days.

Feeder Cattle futures tried for some stability in yesterday’s session but ultimately followed Live Cattle lower, led by the spot month.

Except for 20¢ lower at the back, Live Cattle futures closed an average of $1.23 lower (65¢ to $1.87 lower in spot Apr, which closed $5.30 lower week to week).

Feeder Cattle futures closed an average of $1.33 lower ($1.00 to $1.47 lower).

Choice boxed beef cutout value was $1.03 higher Wednesday afternoon at $224.38/cwt. Select was 35¢ lower at $216.39.

********************************

After bouncing higher early in the session, major U.S. financial indices closed narrowly lower on Wednesday. Though expected, a wide swath of analysts attributed pressure to the Federal Reserve raising interest rates again.

Since it last met in January, according to the Federal Open Market Committee, “Information indicates that the labor market has continued to strengthen and that economic activity has been rising at a moderate rate. Job gains have been strong in recent months, and the unemployment rate has stayed low. Recent data suggest that growth rates of household spending and business fixed investment have moderated from their strong fourth-quarter readings. On a 12-month basis, both overall inflation and inflation for items other than food and energy have continued to run below 2%. Market-based measures of inflation compensation have increased in recent months but remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.”

The committee raised the target range for the federal funds rate 0.25% to 1.50-1.75%.

The Dow Jones Industrial Average closed 44 points lower. The S&P 500 closed 5 points lower. The NASDAQ closed 19 points lower.

******************************

Reduced year-over-year steer slaughter last month, compared to heifers and cows, helped fuel the rally in cash fed cattle prices, says David Anderson, an Extension livestock economist with Texas A&M University.

In the latest issue of In the Cattle Markets, Anderson explains steer slaughter in February was 2.1% less than the previous year, while heifer slaughter increased 7.8%. Through the first half of March, steer slaughter was running about even with last year.

“The mix of animals going to market is an important part of this spring rally in prices,” Anderson says. “Relatively more heifers and cows than steers is working to moderate beef production, which is only up 2.5% so far this year…The expectation of growing steer and heifer supplies is contributing to falling Live Cattle prices on the futures market.”

Anderson notes that steer dressed weights are up 2.5 lbs. over last year. Heifer weights are up 7.2 lbs. and are 56 lbs. less than steer dressed weights. Cow dressed weights are 13.3 lbs. heavier.