WLI

There were only 474 head offered (5 lots) in the weekly Fed Cattle Exchange Auction on Wednesday, but most of them sold: 387 head (4 lots) for a weighted average price of $126/cwt. for delivery at 1-9 days. That’s the same price paid the previous day in early Nebraska trade. It also mirrored eventual country trade.

Early live trade was at $126 in the Southern Plains on Wednesday, in light trade with light to moderate demand. Early dressed trade in Nebraska was at $203-$204; $204 in the western Corn Belt.

After strong support early, Cattle futures drifted to a mostly narrowly mixed close.

Live Cattle futures closed unchanged to an average of 17¢ higher.

After an average of 64¢ lower in the front two contracts, Feeder Cattle futures closed narrowly mixed (22¢ lower to 35¢ higher).

Wholesale beef values were little changed Wednesday with Choice boxed beef cutout value 22¢ higher in the afternoon at $223.57/cwt. Select was even at $215.20.

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Major U.S. financial indices closed mixed on Wednesday and off of session lows, following chatter that tariffs on steel and aluminum might not apply to key trading partners, Canada and Mexico.

The Dow Jones Industrial Average closed 82 points lower. The S&P 500 closed 1 point lower. The NASDAQ closed 24 points higher.

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“The underlying agricultural story for 2018 may be due to the global demand for meat,” say Lee Schulz, Extension livestock economist and Chris Hart, livestock economist with Iowa State University (ISU). “Currently, the surge in meat consumption globally has improved livestock market returns and led to significant increases in production. That is, in turn, providing support for the crop markets, at a time when those markets need a usage boost.”

Schulz and Hart provide a summary of USDA’s annual outlook in the most recent Agricultural Policy Review from ISU’s Center for Rural Agriculture and Development (CARD).

“For the livestock sector, expansion is projected in all of the major product groups,” they say. “Beef production is set to be 6% higher and pork production will grow by 5%. Broiler production will climb to nearly 42.5 billion lbs. and turkey production will reach 6 billion lbs…Price projections for 2018 show lower prices, but the drops in prices are being offset by the gains in production.

Cattle futures tried to build on the previous day’s gains early in Tuesday’s session but quickly lost traction, amid sluggish two-sided trade with more uncertainly than direction.

Live Cattle futures closed an average of 48¢ lower through the front three contracts (5¢ to 67¢ lower) and then an average of 42¢ higher.

Feeder Cattle futures closed an average of 57¢ lower across the front half of the board (10¢ to 85¢ lower) and then an average of 28¢ higher.

There were a handful of early negotiated cash fed cattle live sales reported in Nebraska on Tuesday at $126/cwt., but there were too few transactions to trend.

Wholesale beef values were little changed Tuesday with Choice boxed beef cutout value 12¢ higher in the afternoon at $223.35/cwt. Select was 36¢ higher at $215.20.

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Major U.S. financial indices edged higher on Tuesday, as folks tried to sort out the potential of President Trump moving forward with his announced tariffs on aluminum and steel. There’s plenty of backlash and uncertainty.

The Dow Jones Industrial Average closed 9 points higher. The S&P 500 closed 7 points higher. The NASDAQ closed 41 points higher.

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Producer sentiment increased 5 points in February to 140—the second consecutive month of improved optimism—according to the most recent Purdue University-CME Group Ag Economy Barometer. But, producers continued to indicate uncertainty surrounding a possible U.S. withdrawal from the North American Free Trade Agreement (NAFTA).

The barometer is based on a monthly survey of 400 U.S. agricultural producers.

“In early 2017, producer sentiment was largely driven by an uptick in the future-looking measure of producer sentiment, the Index of Future Expectations,” explains James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture. “More recently, the barometer’s upturn has been driven in part by a shift toward more positive sentiment regarding current farm financial conditions, as measured by the Index of Current Conditions.”

In the recent survey, researchers asked agricultural producers about the likelihood of the U.S. withdrawing from NAFTA. On a scale of 1-9, the most common response at 39% was a neutral rating of 5, while 34% of respondents said they thought a U.S. NAFTA withdrawal was likely (a rating of 6 or higher), and 29% thought withdrawal was unlikely (a rating of 4 or lower).

“Taken as a whole, the February survey indicates that producers are really uncertain about the future of NAFTA,” Mintert says. “But despite the uncertainty surrounding NAFTA, producers remain optimistic about the future of U.S. agricultural exports.”

Half of responding producers said they expect U.S. agricultural exports to increase over the next five years, while another 37% said they expect exports to remain about the same. Only 13% expected U.S. agricultural exports to be lower five years from now.

Cattle futures found a foothold on Monday and recovered a portion of Friday’s losses. Depending on whom you talked to, explanations ranged from some seeing a bottom and hunting for bargains, to strength in wholesale beef prices and feedlot market currentness.

Except for 57¢ higher in the back two contracts, Live Cattle futures closed an average of $1.04 higher.

Feeder Cattle futures closed an average of $1.47 higher ($1.15 to $1.60 higher).

Choice boxed beef cutout value was 71¢ higher on Monday afternoon at $223.23/cwt. Select was 20¢ higher at $214.84.

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Major U.S. financial indices closed solidly higher on Monday. Presumably, it was something of a relief rally as President Trump softened his rhetoric about imposing tariffs on aluminum and steel, leading some to believe a trade war will be averted.

The Dow Jones Industrial Average closed 336 points higher. The S&P 500 closed 29 points higher. The NASDAQ closed 72 points higher.

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“In general, there is no reason to expect feeder markets not to follow seasonal tendencies,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “While there may be relatively fewer feeder cattle marketed in the March to May period, feedlot demand is likely to be somewhat muted as feedlots are quite full until some cattle are marketed. Thus, the overall demand/supply balance likely has not changed a great deal for the spring period.”

Lightweight feeder prices typically peak in March, while heavyweight feeder prices usually increase from a February low heading towards a summer peak, Peel says.

Peel is speaking to the increased late-fall and early-winter placements resulting, in part, from dry conditions the pushed cattle from wheat pasture early or prevented them ever going to pasture.

Moreover, unless it rains soon in winter wheat portions of the Southern Plains, Peel explains, “Wheat production prospects will decrease sharply and it is increasingly likely that wheat producers will terminate wheat and switch to a summer crop. Even if the wheat receives rain and begins to grow it is unlikely that many producers will purchase new stockers for graze-out.”

Cattle futures continued to trudge lower on Friday, helped along by apparent technical selling and continued fund liquidation.

Live Cattle futures closed an average of 65¢ lower (7¢ lower toward the back of the board to $1.15 lower in spot Apr).

Feeder Cattle futures closed an average of $1.22 lower (80¢ to $1.47 lower).

Choice boxed beef cutout value was 22¢ higher on Friday afternoon at $222.52/cwt. Select was 96¢ lower at $214.64.

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Major U.S. financial indices closed mixed on Friday. There was follow-through pressure tied to the previous day’s announcement by President Trump’s that the U.S. will levy tariffs on steel and aluminum imports, starting next week.

The Dow Jones Industrial Average closed 70 points lower. The S&P 500 closed 13 points higher. The NASDAQ closed 77 points higher.

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Pressure in deferred Live Cattle futures and the number of cattle already placed against summer months weakened feeder cattle prices last week.

“Moderate to good demand for this large offering, with the best demand seen for cattle suitable for grass,” explained the AMS reporter on hand for Friday’s sale at Herreid Livestock Auction in South Dakota, where about 5,000 head were on offer. “…The volume of finishing type cattle moving right now, coupled with the dismal looking summer futures, when most of these cattle will finish, is making buyers nervous and very choosy about what they send to feed.”

If pen space and lower cash fed cattle prices explain last week’s softer feeder cattle demand, then the decline might be short lived, says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments.

“However, if the price decline is due to a larger underlying issue, such as in-creased beef production and no further increases in beef demand, then softer prices may persist,” Griffith says.