WLI

In rare early-week trade late in the day on Monday, cash fed cattle prices softened Live prices were $1-$2 lower than last week at $120/cwt. in the Southern Plains and Colorado. Follow-through buying yesterday in Nebraska and the western Corn Belt was $2-$3 lower at the same $120 on a live basis. Dressed trade was $1-$3 lower at mostly $192.

Following early follow-through selling, Cattle futures found a foothold on Tuesday.

Live Cattle futures closed an average of 38¢ higher.

Other than 97¢ lower in spot Jan, Feeder Cattle futures closed an average of 79¢ higher (57¢ to $1.72 higher).

Choice boxed beef cutout value was 29¢ higher on Tuesday afternoon at $210.49/cwt. Select was 32¢ higher at $203.69.

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Major U.S. financial indices closed at record-high levels on Tuesday. Expectations for strong fourth-quarter earnings—reports begin this week—were widely attributed to the bullishness.

The Dow Jones Industrial Average closed 103 points higher. The S&P 500 closed 3 points higher. The NASDAQ closed 6 points higher.

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Producers need to use both technical and economic measures to monitor and their operations for maximum economic returns, says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments.

While technical measure like calving percentage and pounds of weaned calf per cow exposed are useful to monitor and manage production systems, Peel explains such measures tend to emphasize maximums (such as weaning weights) or minimums (such as death loss). And, often times, maximums and minimums are not optimal in terms of economic outcome.”

That’s where economic efficiency measures come in.

“For example, Peel explains, dollars of return per cow will reign in excessive focus on weaning weights by recognizing that some means of increasing weaning weights, such as increasing cow size, may be very expensive and not efficient at some point.

Likewise, Peel says, with land investment the biggest component for many cow-calf operations, the final assessment of economic efficiency is returns per acre. This incorporates physical animal components related to reproductive, nutritional, and health productivity along with feed and forage management plus output values and input costs.”

Considered alone, though, measures of economic efficiency have limitations as well.

“Economic efficiency measures focus on optimal use of inputs relative to the value of outputs. However, changes in output values or input costs can lead, for example, to improved returns due solely to changing market conditions while masking stagnant or even declining physical productivity,” Peel explains.

Cattle futures—especially Live Cattle—took another step lower on Monday, with technical selling, last week’s lower cash fed cattle prices and early reports of fed cattle trading for lower money on Monday.

Except for 25¢ lower in the back contract, Live Cattle futures closed an average of $1.17 lower (80¢ to $2.02 lower).

Feeder Cattle futures closed an average of 40¢ lower.

Choice boxed beef cutout value was 69¢ higher on Monday afternoon at $210.20/cwt. Select was $1.05 higher at $203.37.

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Major U.S. financial indices closed little changed on Monday, at historically high levels and amid general overall optimism stemming from the cut in the corporate tax rate.

The Dow Jones Industrial Average closed 12 points lower. The S&P 500 closed 4 points higher. The NASDAQ closed 20 points higher.

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U.S. beef exports continued their steamy pace in November, according to export results released by USDA and compiled by the U.S. Meat Export Federation (USMEF).

Although U.S. beef exports in November were 3% less than the prior year in terms of volume, value was 8% more at $666.4 million. For January through November, volume of beef exports was 7% more than the same period a year earlier and value was up 15% at $6.6 billion, slightly more than the record pace established in 2014.

November beef export value averaged $306.63 per head of fed slaughter, up 4% from a year ago and the highest in nearly three years. January-November export value averaged $282.34 per head, up 9%.

Japan continued to be the pacesetter for U.S. beef exports in November, with volume increasing 5% year over year and value up 6% to $159.2 million. Through November, the value of U.S. beef exports to Japan was 27% more at $1.75 billion.

November exports to China (655 mt) were the largest since the mid-June market opening, valued at $5.7 million. Through November, exports reached 2,225 mt valued at $22.8 million.

“U.S. beef has only really scratched the surface in China, so exports are still relatively small but the value per pound is among the highest in the world,” says Dan Halstrom, USMEF president and CEO. “This makes China an exciting addition to our strong portfolio of Asian markets, where beef exports continue to expand at an impressive rate.”

Surging U.S. pork exports—on pace to be record large for the year—also continue providing support to domestic beef prices.

Through November U.S. pork exports were 7% higher year over while the value of those exports was 10% more at $5.9 billion.

Another round of long liquidation and technical selling rattled Cattle futures on Friday, fueled along by the surprising downturn in cash fed cattle prices that were mostly steady to $1-$2 lower on a live basis $121-$123/cwt. Dressed trade was steady to $1 lower at $193-$195.

Other than 80¢ lower in the back contract, Live Cattle futures closed an average of $2.17 lower ($1.77 to $3.00 lower).

Feeder Cattle futures closed an average of $2.95 lower ($2.40 to $3.57 lower).

Packers also benefited from increasing wholesale beef values. Choice boxed beef cutout value was 84¢ higher on Friday afternoon at $209.51/cwt. Select was $1.46 higher at $202.32.

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Major U.S. financial indices surged higher again on Friday. That was despite a less bullish U.S. jobs report than expected; also less bullish than the December ADP National Employment Report^® released a day earlier.

Total nonfarm payroll employment increased by 148,000 in December, and the unemployment rate was unchanged at 4.1%, according to the U.S. Bureau of Labor Statistics. Employment gains came in health care, construction and manufacturing.

The Dow Jones Industrial Average closed 200 points higher. The S&P 500 closed 19 points higher. The NASDAQ closed 58 points higher.

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“Producers should continue to keep an eye on feeder cattle basis the next several weeks and see if it maintains its strength,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “The wide basis continues to point to a discrepancy between what traders believe cattle prices are going to do and what cattle feeders think they will do in coming months.”

Griffith notes that the basis between the CME Feeder Cattle Index and spot Feeder Cattle continues to be historically strong at more than $6.

Price strength through the fourth quarter suggests continued strength through the first quarter, Griffith says.

“This statement should not be taken as prices increasing but prices holding steady the next several weeks,” Griffith says. “It may be difficult for prices to increase given the number of cattle on feed. Placements of cattle into feedlots the next few months will provide a better picture for the outlook of prices moving forward.”

Cash fed cattle trade remained at an impasse through Thursday afternoon. Cattle feeders appear to have the leverage on their side, though, with current marketing and the recent weight-robbing winter weather. Plus, wholesale beef prices appear poised to continue trending higher.

Choice boxed beef cutout value was 5¢ higher on Thursday afternoon at $208.67/cwt. Select was $1.70 higher at $200.86; up about $8 in the last three days.

Following a positive start, sluggish trade and the lack of direction from cash fed cattle helped pressure Cattle futures on Thursday.

Other than 80¢ higher in the back contract, Live Cattle futures closed an average of 54¢ lower.

After 35¢ lower in spot Jan, Feeder Cattle futures closed and average of $1.18 lower.

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Major U.S. financial indices closed higher again on Thursday—the Dow closed above 25000 for the first time—supported by strong employment data.

Private sector employment increased by 250,000 jobs from November to December according to the December ADP National Employment Report®. That was significantly more than expected. The U.S. employment report comes out on Friday.

The Dow Jones Industrial Average closed 152 points higher. The S&P 500 closed 10 points higher. The NASDAQ closed 12 points higher.

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Despite increasing cattle numbers and beef production borne by ongoing herd expansion last year, Josh Maples, livestock economist at Mississippi State University points out average annual prices last year were near or above prior-year levels for fed cattle and feeder cattle.

For quick perspective, Maples explains about 1.3 million more calves were born in 2017 than the prior year. Cattle on feed Dec. 1 were 8.1% more than the previous year. Cattle slaughtered in 2017 was about 5% more than in 2016.

Heading into 2018, Maples suggests three key factors that will shape markets.

Herd Expansion—In the latest issue of In the Cattle Markets, Maples explains, “We’ll get a good measure of this when the annual USDA Jan. 1 Cattle Inventory report is released Jan. 31. I anticipate that expansion has continued, but not as rapidly as in the past few years.”

U.S. Beef Exports—“Our export markets are a primary reason for

stronger than expected prices in 2017,” Maples says. “With even more supplies coming in 2018, can export markets exceed expectations again in 2018?”

Impact of Total Meat Production—“While beef production is increasing, chicken and pork production are also expanding. This has set the stage for 2018 to be largest total meat consumption year of the past decade,” Maples says. “How will this increased production get sorted out at the grocery meat case by consumers?”