WLI

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.

Negotiated cash fed cattle trade was $2 higher in the Southern Plains at $126/cwt. on Thursday. Elsewhere, prices were trending generally steady with the previous week, but a higher range in Nebraska with too few to trend.

That and strong wholesale beef values helped push Cattle futures sharply higher, led by Live Cattle.

Live Cattle futures closed an average of $1.20 higher.

Other than 17¢ higher in the back contract, Feeder Cattle futures closed an average of $1.84 higher. 

Choice boxed beef cutout value was 26¢ higher Thursday afternoon at $227.56/cwt. Select was $1.29 higher at $209.17.

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Major U.S. financial indices closed narrowly mixed on Thursday. There were sharp losses early in the session, tied to worries about the possible trade war with China, and then support by the end of the day with more positive quarterly earnings reports.

The Dow Jones Industrial Average closed 5 points higher. The S&P 500 closed 5 points lower. The NASDAQ closed 12 points lower.

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There are two supply-related keys to cull cow prices for the balance of this year, according to analysts with the Livestock Marketing Information Center (LMIC). One is persistently low milk prices that could increase dairy cow slaughter more than expected. The other is drought, which could force the culling of more beef cows than anticipated.

In the latest Livestock Monitor, LMIC analysts point out that so far this year, federally inspected cow slaughter is 7% more than last year—10% more for beef cows and 5% more for dairy cows.

Country cash fed cattle trade remained undeveloped through Wednesday afternoon. Four lots (413 head from Kansas) sold out of the 2,982 head offered in the weekly Fed Cattle Exchange auction, for a weighted average price of $122.40/cwt. (delivery 1-9 days). That was $2 less than most of last week’s country trade in the region.

Cattle futures continued the same overall sideways back and forth of late, this time settling mostly higher.

Other than 97¢ and 10¢ lower in the front two contracts, Live Cattle futures closed an average of 75¢ higher.

Feeder Cattle futures closed an average of 87¢ higher (55¢ to $1.17 higher).

Boxed beef cutout values moved higher on Wednesday with moderate to fairly good demand and light to moderate offerings, according to the Agricultural Marketing Service. Select and Choice rib, chuck, round, and loin cuts steady to firm.

Choice boxed beef cutout value was 87¢ higher Wednesday afternoon at $227.30/cwt. Select was 79¢ higher at $207.88.

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Major U.S. financial indices closed lower in late selling on Wednesday, perhaps on profit taking. Indices were higher for most of the session, supported by the Fed’s decision to leave interest rates unchanged, as expected.

The Dow Jones Industrial Average closed 174 points lower. The S&P 500 closed 19 points lower. The NASDAQ closed 29 points lower.

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Consumer adoption of online grocery shopping continues to grow, but slowly compared to other categories.

 About 10% of U.S. consumers regularly buy groceries on line, according to a new report from the NPD Group (NPD). Nearly all of those (99%) still shop in brick-and-mortar grocery stores, too.

As might be suspected, a key reason more consumers haven’t adopted buying groceries online more quickly has to do with wanting to select their own fresh items. Another is a reluctance to pay for delivery.

According to NPD, the benefits of online grocery shopping, like not needing to leave home, price comparisons, speed, and not having to wait in lines are enough for a growing number of consumers to be enticed, but not enough to get them to do all of their grocery shopping online. 

The NPD folks suggest groceries may follow the same path as other categories, like electronics, where consumers still want to see the item up close and personal.  Like electronics, NPD analysts say often the answer is in an omnichannel approach, which many of the major grocers are now offering.

“With major brick-and-mortar grocery stores announcing click and collect and various speedy delivery options, the line between physical and online is blurring and, as a result, consumers are getting the best of both worlds,” says Darren Seifer, NPD food and beverage industry analyst. “There is also a place for pure-play ecommerce grocers but it looks like, as of now, consumers want a seamless experience between brick-and-mortar and e-commerce.”

Increased grain prices helped pressure Feeder Cattle futures on Tuesday, while apparent continued fund liquidation held Live Cattle in check.

Other than 22¢ and $1.35 higher in the back two contracts, Live Cattle futures closed an average of 49¢ lower.

Feeder Cattle futures closed an average of $2.09 lower across the front half of the board ($1.50 to $2.72 lower) and then an average of 51¢ lower.

Choice boxed beef cutout value was $2.01 higher Tuesday afternoon at $226.43/cwt. Select was $2.30 higher at $207.09.

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Major U.S. financial indices closed mixed on Tuesday. Support came from a surge in Apple stock, ahead of that company’s after-hours earnings report.

The Dow Jones Industrial Average closed 64 points lower. The S&P 500 closed 6 points higher. The NASDAQ closed 64 points higher.

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Trade war concerns continue to drive a sharp decline in producer sentiment toward the agricultural economy, according to the latest Purdue University/CME Group Ag Economy Barometer.

The April barometer reading of 125 was 10 points lower than a month earlier and 15 points below the February reading. The barometer is based on a monthly survey of 400 agricultural producers from across the country.

The drop in producer sentiment was driven by declines in both the Index of Current Conditions, which fell 11 points to 123, and the Index of Future Expectations, which fell 9 points to 126.

The Index of Current Conditions was at its lowest level since May 2017. The Ag Economy Barometer and the Index of Future Expectations were at their lowest levels since March 2017.

“There seems to be a spillover effect that is driving concern among agricultural producers,” says James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture. “Negative perceptions about exports spill over into lower expectations for commodity prices, and then that changes producers’ views about farmland prices.”

The biggest issue surrounding U.S. agriculture and the trade dispute with China currently revolves around the possible impact on U.S. soybean exports, according to Mintert. About 30% of U.S. soybean exports go to China.

Producers were also more pessimistic about the livestock sector, in the April survey. Just 45% said they felt optimistic about the future, compared to 59% a month earlier. That’s the largest one-month drop since data collection began in fall 2015.

“There was already a sharp drop in hog prices that took place from mid to late- winter,” Mintert explains. “Then, add to that the impact of China’s 25% tariff on U.S. pork imports. It adds a layer of doubt regarding the profitability of pork production and appears to be affecting producers’ plans to increase hog production.”

Cash fed cattle trade last week ended up mostly $2-$3 higher in the Southern Plains at mostly $124/cwt. Live trade in Nebraska was mostly $4 higher at mostly $126; steady to $3 higher in the beef at $195-$198. Live trade in the western Corn Belt was mostly $1 higher at mostly $123-$126; mostly steady to $2 higher in the beef at mostly $195-$197

That and significantly higher wholesale beef values should help maintain the market stability established last week. Cattle futures closed lower on Monday with light trade, but apparently due to position squaring at the end of the month, rather than a directional shift.

Live Cattle futures closed an average of $1.25 lower (70¢ to $1.87 lower).

Feeder Cattle futures closed an average of $1.87 lower ($1.60 to $2.05 lower).

Choice boxed beef cutout value was $2.68 higher Monday afternoon at $224.42/cwt. Select was 47¢ higher at $204.79.

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Major U.S. financial indices closed lower on Monday, with some likely profit taking. T-Mobile’s announced intention to acquire rival, Sprint, also applied pressure.

The Dow Jones Industrial Average closed 148 points lower. The S&P 500 closed 21 points lower. The NASDAQ closed 53 points lower.

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“Higher cutout values are feeding into higher fed cattle prices,” says David Anderson, Extension livestock economist at Texas A&M University, in the latest issue of In the Cattle Markets. “The Choice beef cutout started this week at $224.50, up $13 in the last seven weekdays. The Choice cutout is about $5 above this point a year ago, while fed cattle prices are about $12 below this point last year. That has resulted in a live-to-cutout price spread more than $100 per head greater than April 2017. The Choice-Select spread is widening, seasonally, as the Choice cutout has increased faster than the Select cutout.”

Plus, Anderson reminds that the lingering winter likely delayed beef orders and featuring.

“There is some evidence of a rapid spike in beef orders for retail featuring over the next several months,” Anderson explains. “The rib and loin primal cut values are pulling the cutout higher with both primals up over $20 in the last week.”