WLI

It took all week, and then some, but cash fed cattle trade ended up moderate on moderate demand in all major cattle feeding regions late on Friday. Prices were steady to $2 higher on a live basis at $108/cwt. in the western Corn belt, to $109 in the Southern Plains, to $110 in Colorado; as high as $110.50 in Nebraska. Dressed trade was steady to $2 higher at $172-$174.

Cattle futures mostly treaded water to start the week, amid sluggish trade tied to Columbus Day, which was a holiday for some.

Except for unchanged in Dec and 2¢ lower in April, Live Cattle futures closed an average of 34¢ higher (7¢ to 55¢ higher).      

Feeder Cattle futures closed narrowly mixed but mostly marginally higher (25¢ lower to 25¢ higher).

Choice boxed beef cutout value was 91¢ higher Monday afternoon at $198.13/cwt. Select was $1.43 higher at $188.66.

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Major U.S. financial indices closed marginally lower on Monday as investors positioned ahead of quarterly earnings reports.

The Dow Jones Industrial Average closed 12 points lower. The S&P 500 closed 4 points lower. The NASDAQ closed 10 points lower.

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Net live cattle imports to the United States continue higher year over year, according to Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments.

Those imports are feeder cattle and fed cattle from Canada and mainly feeder cattle from Mexico.

“For the year to date, total cattle imports are up 3.9%, with imports from Canada down 16.5% and imports of Mexican cattle up 21.7%,” Peel says. “Canadian feeder cattle imports were down 34.0% through August and slaughter cattle imports were up 9.7%. Slaughter cattle imports from Canada for the year to date consist of 68.8% slaughter steers and heifers and 31.2% slaughter cows and bulls.”

Total feeder cattle imports from Canada and Mexico were up 9.7% for the January through August period, Peel says.

“Year to date, feeder heifer imports from Mexico have more than doubled from last year with heifers making up 15.3% of feeder cattle imports from Mexico,” Peel explains. “Increased heifer imports from Mexico may be a reflection of stronger domestic Mexican demand for steers to support growing feedlot production in Mexico, leaving heifers to make up a bigger share of cattle exports. It may also signal slowing heifer retention and herd growth in Mexico as heifer exports compete with domestic breeding demand for heifers.”

Steers imported from Mexico are up 13.6% year over year through August, Peel says.

Cash fed cattle trade remained a no-go through Friday afternoon. Cattle feeder confidence and logic both suggested ultimate trade of steady money at worst, but perhaps $1-$2 higher.

Except for unchanged and 17¢ higher at the back of the board, Live Cattle futures closed an average of 76¢ higher (50¢ to 95¢ higher).       

Feeder Cattle futures closed an average of 68¢ higher (32¢ to $1.12 higher).

Choice boxed beef cutout value was 3¢ lower Friday afternoon at $197.22/cwt. Select was $1.55 lower at $187.23.

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Major U.S. financial indices closed narrowly mixed on Friday. Pressure included fewer new jobs than anticipated in the monthly employment report. There was 33,000 less non-farm employment in September than the previous months. Keep in mind that a couple of hurricanes affected the number.

The Dow Jones Industrial Average closed 1 points lower. The S&P 500 closed 2 points lower. The NASDAQ closed 4 points higher.

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So far this year, U.S. beef exports are 10% more in volume compared to last year and 16% more in value at $4.65 billion. That’s through August, the most recent month for statistics released by USDA and compiled by the U.S. Meat Export Federation (USMEF).

For the month of August, volume was 5% more year to year at 112,069 metric tons (mt) and value was the second-highest on record at $679.1 million, up 20% from a year ago. The record high is $688.8 million established in October 2014.

“As we head into the final quarter, 2017 is shaping up as a very solid year for red meat exports but one in which the U.S. industry still faces significant challenges,” says USMEF CEO Philip Seng. “We have new pork plants coming on line and strong cattle-on-feed numbers, which sends a positive signal to our international customers about product availability. But the international markets are increasingly competitive, so we must continue to aggressively pursue new opportunities for U.S. red meat products in both our traditional mainstay destinations and in emerging markets.”

Export value per head of fed slaughter averaged $290.05 in August, up 13% from a year ago. Through August, per-head export value was up 9% to $275.81.

August beef exports to leading market Japan were 22% higher than a year ago at 31,001 mt, the most of the post-BSE era. Export value to Japan increased 35% and broke the $200 million mark ($200.05 million) for the first time since May 1996. For January through August, exports to Japan were up 23% percent in volume (209,502 mt) and 30% in value ($1.28 billion).

Keep in mind that Japan’s frozen beef safeguard was triggered in late July, increasing the duty on frozen beef imports from the U.S. and other suppliers without a trade agreement with Japan. The duty increased from 38.5% to 50%.

“The true impact of the higher duty rate will be revealed over the next few months, but August demand was not significantly affected,” according to USMEF.

Cash fed cattle trade for the week continued at an impasse on Thursday, as Cattle futures crawled higher—continuing the week’s two-sided action—helped along by firming wholesale beef values and steady to stronger cash fed cattle prices at auction.

Except for 20¢ higher at the back of the board, Live Cattle futures closed an average of 83¢ higher (45¢ to $1.12 higher).        

Except for 2¢ higher at the back of the board, Feeder Cattle futures closed an average of $1.50 higher ($1.35 to $1.70 higher).

Choice boxed beef cutout value was 16¢ lower Thursday afternoon at $197.26/cwt. Select was 77¢ lower at $188.78.

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Major U.S. financial indices closed higher again on Thursday as investors deemed the House budget approval another stepping stone to tax reform.

The Dow Jones Industrial Average closed 113 points higher. The S&P 500 closed 14 points higher. The NASDAQ closed 50 points higher.

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“While we have seen increases over the past few months, cold storage inventories have remained below 2016 levels on a monthly basis since February despite increases in beef production,” says Josh Maples, livestock economist at Mississippi State University, in the latest issue of In the Cattle Markets. “Beef production in July was 4% higher than July 2016. The large increase from July to August still leaves inventories (cold storage) just below the August 2016 total (less than 1% lower). Granted, cold storage inventories were large in 2016. While beef in cold storage is only a small component of the total beef supply picture, year-over-year stocks are not increasing even with larger beef production.”

Although most of the beef produced in the U.S. never enters cold storage, Maples explains inventories can be an indicator of overall market conditions.

“Cold storage inventories are primarily driven by the ground beef market and international trade,” Maples says. “Stocks may build up due to larger imports or to support larger exports as pointed out in the latest Livestock Monitor. “…The Cold Storage report indicated that frozen stocks were at 476.3 million lbs. Aug. 31. This represented a 10.3% increase in stocks compared to July. On a percentage point basis, this was the largest increase for August stocks over July since 2002. It also followed moderate month-over-month increases for the previous three months. Cold storage inventories typically increase seasonally near the end of the year and then decline into the summer grilling-season months.”

The weekly Fed Cattle Exchange auction on Wednesday offered hope that cash fed cattle trade this week might be no worse than steady. Out of 1,732 head offered, 784 head sold for a weighted average price of $108/cwt. for delivery at 1-9 days and 1-17 days. That’s about even with last week’s country trade. There were no sales at the auction the previous week.

Similarly, slaughter steers sold mostly steady to $1 higher at Sioux Falls Regional Livestock on Wednesday. Slaughter heifers traded steady to $3 higher.

Cattle futures closed mixed on Wednesday after an up and down day of trading.

Live Cattle futures closed narrowly mixed (30¢ lower to 40¢ higher). 

Feeder Cattle futures closed an average of 82¢ lower (32¢ to $1.17 lower).

Choice boxed beef cutout value was 46¢ lower Wednesday afternoon at $197.41/cwt. Select was 53¢ higher at $189.55.

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Major U.S. financial indices closed higher again on Wednesday. Support included positive employment and non-manufacturing numbers.

The Dow Jones Industrial Average closed 19 points higher. The S&P 500 closed 3 points higher. The NASDAQ closed 2 points higher.

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Although the September Purdue University/CME Group Ag Economy Barometer held steady from August to September, the sub-index for future expectations declined by seven points. Conversely, the sub-index for current conditions increased 10 points month to month.

“Although the decline in the Index of Future Expectations was modest, it could be an indication that some of the optimism that surfaced among producers in late 2016 and early 2017 is eroding,” says Jim Mintert, director of Purdue’s Center for Commercial Agriculture and principal investigator for the barometer. “One of the drivers of the jump in producer sentiment after the 2016 U.S. presidential election was a sharp increase in expectations about the U.S. economy. But the last two times the barometer survey has posed questions about the overall economy, respondents were noticeably less optimistic.”

For example, on the September survey, just 40% of the respondents said the U.S. economy was likely to expand, a decline of almost one-third from March when nearly 60% said they expected expansion.

Another topic on the September survey was trade agreements and negotiations, specifically the North American Free Trade Agreement (NAFTA). The survey asked respondents whether NAFTA has been good or bad for the U.S. economy, and separately, for U.S. farmers and ranchers. In both cases, more producers than not reported that the agreement had been good. In the case of the U.S. economy, 52% of respondents said they thought NAFTA had been good. Fifty-nine percent reported that they thought the agreement had been good for U.S. farmers and ranchers.”

“An unusually large percentage of survey participants—24% in the case of the U.S. economy and 20% in the case of farmers and ranchers—opted not to answer these two questions,” Mintert says. “Although we can’t say for sure why producers opted not to respond to these two questions, it might also reflect a relatively high degree of uncertainty regarding NAFTA’s impact.”

The Ag Economy Barometer is based on a monthly survey of 400 U.S. agricultural producers.

Cattle futures borrowed support from limit up moves in Lean Hog futures and stronger wholesale beef values to rebound and close higher on Tuesday.

Live Cattle futures closed an average of $1.28 higher (92¢ to $1.47 higher).

Feeder Cattle futures closed an average of $2.28 higher ($1.85 to $2.70 higher).

Choice boxed beef cutout value was 65¢ higher Tuesday afternoon at $197.87/cwt. Select was 74¢ higher at $189.02.

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Major U.S. financial indices closed higher again on Tuesday, extending the recent rally, tied in part to betting on lower corporate rates in the tax reform proposal currently under consideration.

The Dow Jones Industrial Average closed 84 points higher. The S&P 500 closed 5 points higher. The NASDAQ closed 15 points higher.

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“A strong rally in Feeder Cattle futures since late August offers improved winter stocker profit potential,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “At current levels, March Feeder futures would allow a 750 lb. steer to be priced at roughly $150/cwt. in Oklahoma. A 475 lb. steer at today’s prices, would have a March 1 breakeven of $130-$137/cwt. at 750 lbs. depending on pasture and other costs. Such opportunities to price in winter stocker margins are rare and generally fleeting.”

Currently, Peel explains the strength of current prices for spring Feeder Cattle contracts is difficult to justify from a fundamental perspective.

“Producers should act promptly if these futures price levels are attractive,” Peel says. “Remember that futures have been notoriously volatile in recent years and Feeder futures can move $11.25/cwt. in two days of limit moves. While no major cattle market weakness is foreseeable at this time, general expectations are for modestly lower cattle prices in 2018 on continued growth in cattle supplies and beef production. There is clearly more downside risk than upside potential from current levels.”

Incidentally, contrary to early promise, Peel says wheat pasture planting in Oklahoma is behind the average pace due to dry topsoil conditions last month and the continued threat of army worms.