WLI

A surge in Lean Hog futures and oversold conditions helped lift Cattle futures on Tuesday, despite last week’s lower cash fed cattle trade and faltering wholesale beef values.

Choice boxed beef cutout value was $2.45 lower on Tuesday afternoon at $205.58/cwt. Select was $2.15 lower at $199.89.

Live Cattle futures closed an average of 55¢ higher (5¢ to 92¢ higher).

Feeder Cattle futures closed an average of $1.00 higher (72¢ to $1.27 higher).

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

Major U.S. financial indices surged sharply higher early in the session on Tuesday before whiplashing to a slightly lower close. Some analysts credited the potential government shutdown as the cause. A spending bill or some other intervention needs to pass by the end of the week in order to prevent a shutdown. Then again, maybe it was more a matter of rally fatigue and rationality.

The Dow Jones Industrial Average closed 10 points lower. The S&P 500 closed 9 points lower. The NASDAQ closed 37 points lower.

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

“International price quotations for bovine meat fell (last month), pressured by increased offerings in both domestic and international markets,” according to analysts with the Food and Agricultural Organization of the United Nations (FAO). “However, pig, poultry and ovine meat quotations changed only little, reflecting an overall balanced supply and demand situation.”

The FAO Meat Price Index averaged 171.6 points in December, marginally below its slightly revised value of November. For 2017, the FAO Meat Price Index averaged 170 points, up 9% from the previous year but 4.7% below the average for the preceding five years (2012-2016).

Futures and equity markets were closed on Monday in observance of Martin Luther King, Jr. Day.

Choice boxed beef cutout value was 20¢ lower on Monday afternoon at $208.03/cwt. Select was 40¢ higher at $202.04.

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

“Total U.S. beef exports are projected to increase another 2.5% to 3.5% year over year in 2018 to a new record level,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. He adds that growth is expected to include some export expansion to China, although he says the total contribution of beef exports to China will likely remain limited in the near term.

Through November, Peel notes that U.S. beef exports to China were 1.97 million lbs., making China the 10th largest U.S. beef export market.

“USDA’s Foreign Agricultural Service has projected that China will import 2.26 billion lbs. of beef in 2018. At the current level, U.S. beef exports to China would represent roughly 1% of Chinese beef imports,” Peel says. “If the U.S. were to increase beef exports to China tenfold to a 10% market share, it would make China the 5th largest beef market for beef exports and add roughly 10% to total U.S. beef exports. However, growth this rapid seems unlikely in 2018. Such a level may be more feasible in three to five years. Still, it is difficult to anticipate how markets will evolve and growth could happen more quickly than is apparent now.”

Cattle futures found some relief on Friday from oversold conditions and short covering.

Live Cattle futures closed an average of 48¢ higher (20¢ to 92¢ higher).

Feeder Cattle futures closed an average of 73¢ higher (10¢ to $1.27 higher).

Wholesale beef values weakened on Friday on light to moderate demand.

Choice boxed beef cutout value was 84¢ lower on Friday afternoon at $208.23/cwt. Select was $1.31 lower at $201.64. Rib and Chuck cuts sold mostly steady, while loin cuts sold steady to weak. Beef trimmings traded weak to lower on moderate demand.

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

Major U.S. financial indices closed sharply higher again on Friday, fueled by strong quarterly earnings reports and the recent corporate tax cut.

The Dow Jones Industrial Average closed 228 points higher. The S&P 500 closed 18 points higher. The NASDAQ closed 49 points higher.

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

Projected cattle price for 2018 rose slightly in the monthly World Agricultural Supply and Demand Estimates (WASDE) released on Friday, reflecting early-year price strength, according to analysts with USDA’s Economic Research Service (ERS).

First-quarter fed steer prices are projected at $120-$124/cwt.; $115-$123 in the second quarter; $110-$120 in the third quarter; $112-$122 in the fourth quarter.

WASDE projects the average fed steer price last year at $121.51

“The 2018 beef production forecast is raised as higher cattle placements in late 2017 are expected to result in higher fed cattle marketings and slaughter in the first half of 2018, say ERS analysts. “Average carcass weights are also expected to be heavier. USDA will release its semi-annual Cattle report Jan. 31, providing estimates of heifers held for breeding and an insight into the number of feeder cattle available for placement during 2018.”

Live Cattle futures closed an average of 16¢ higher, except for an average of 52¢ lower in the back two contracts.

Feeder Cattle futures closed an average of 63¢ lower through the front three contracts, and then 12¢ lower to 27¢ higher.

Wholesale beef values weakened on Thursday on light to moderate demand.

Choice boxed beef cutout value was 99¢ lower on Thursday afternoon at $209.07/cwt. Select was 28¢ lower at $202.95. Chuck cuts sold firm to steady, while rib, loin and round cuts sold steady to weak.

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

Major U.S. financial indices closed sharply higher on Thursday on positive, early quarterly earnings reports.

The Dow Jones Industrial Average closed 205 points higher. The S&P 500 closed 19 points higher. The NASDAQ closed 58 points higher.

Cattle futures drooped lower on Wednesday, following early-session support. The week’s softer cash fed cattle prices applied pressure, as did softer front-month Lean Hogs.

Prices in the weekly Fed Cattle Exchange Auction were $1 lower than country trade at a weighted average price of $119/cwt. for delivery of 1-9 days. Out of 651 offered, 401 head sold—four lots of steers and heifers in Kansas. Another 60 head were offered for delivery at 10-17 days with no takers.

In country trade so far this week, live prices are generally $1-$2 lower at $120 with dressed sales $1-$3 lower at $192.

Live Cattle futures closed an average of 62¢ lower.

After $1.10 lower in spot Jan, Feeder Cattle futures closed an average of 54¢ lower.

Choice boxed beef cutout value was 43¢ lower on Wednesday afternoon at $210.06/cwt. Select was 46¢ lower at $203.23.

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

Major U.S. financial indices closed slightly lower on Wednesday. Other than speculation about trade policy there didn’t seem to be much news driving a trend.

The Dow Jones Industrial Average closed 16 points lower. The S&P 500 closed 3 points lower. The NASDAQ closed 10 points lower.

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

Producer sentiment toward the health of the agricultural economy declined in December for the second consecutive month, according to the latest reading of the Purdue University/CME Group Ag Economy Barometer.

The December barometer dropped 2 points to 126, driven by a 7-point decline in the Index of Future Expectations, one of two sub-indices that comprise the barometer.

“The share of producers expecting better financial positions for their farms fell to just 20% in December, while the share expecting worse financial positions climbed to 30%,” says James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture. “Both of these responses are the least optimistic levels in more than a year.”

Similarly, when asked about the overall agricultural economy, 63% of respondents said they expect bad times over the next 12 months.