WLI

Besides lower cash fed cattle prices and wholesale beef values, analysts credited rising grain prices for the pressure on Feeder Cattle futures Monday. Pressure spilled over into front-month Live Cattle, too. Keep in mind, trade was light in both pits with the shorter trading hours.

Live Cattle futures closed an average of 36¢ lower through the front four contracts (10¢ to 55¢ lower) and then and average of 26¢ higher (7¢ to 65¢ higher).

Feeder Cattle futures closed an average of $1.24 lower (85¢ to $1.82 lower).

Choice boxed beef cutout value was $1.84 lower Monday afternoon at $222.89/cwt. Select was 97¢ lower at $207.45.

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Corn futures closed 7¢ higher through Mar 18 and then 2¢-6¢ higher (mostly 2¢ higher).

Cash prices for grain and soybeans were sharply higher again on Monday, supported by bearish weather and last Friday’s mostly-favorable USDA reports.

Wheat bids were 25¢ to 30¢ higher. Soybean bids were mostly 22¢ to 23¢ higher. Sorghum bids were 13¢ higher. Corn bids were 6¢ to 10¢ higher.

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Major financial indices closed mostly higher at the end of Monday’s holiday-shortened trading session. Along with higher oil prices, apparently, some investors are swapping dollars from recently pressured tech stocks with financial ones.

The Dow Jones Industrial Average closed 129 points higher. The S&P 500 closed 5 points higher. The NASDAQ closed 30 points lower.

Among the news supporting markets on Monday was the latest Manufacturing ISM® Report On Business® indicating that economic activity in the manufacturing sector expanded in June, and the overall economy grew for the 97th consecutive month.

“Comments from the panel generally reflect expanding business conditions; with new orders, production, employment, backlog and exports all growing in June compared to May and with supplier deliveries and inventories struggling to keep up with the production pace,” says Timothy Fiore, Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee.

The June PMI® (Purchasing Managers Index) was 2.9% higher than in May at 57.8%. The New Orders Index was 4% higher at 63.5%.

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The global beef complex has been characterized by a series of market disruptions through the second quarter, according to the most recent quarterly report from Rabobank.

“While U.S. beef exports continue to perform strongly (and have now reached record levels), reduced supply from Australia and New Zealand, along with potential shocks from Brazil and India, could see the balance in the beef market shift back to a supply-limited market,” says Angus Gidley-Baird, Rabobank Senior Analyst Animal Protein.

Specifically, Rabobank points to political scandals in Brazil, the new beef trade agreement between the U.S. and China, as well as India’s proposed ban on cattle slaughter. All involve major beef-exporting nations and have the potential to cause material shifts in global trade.

• “Brazilian beef exports dropped by around 10% year over year in the first five months of 2017, opening space in the global beef market,” say Rabobank analysts. They add that the recent drop in cattle prices there may lead to a future reduction in production.
• India is one of the largest global bovine exporters. Any ban on slaughter would have enormous global impact. At the time of writing their report, Rabobank analysts said no information was available as to how many states would conform to the federal government directive, and when.
• As for the U.S.-China pact, the first shipment of U.S. beef arrived in China mid-June.

In the meantime, the Rabobank Seven-Nation Beef Index remained relatively stable up to May.

The next issue of Cattle Current will come out Thursday morning, July, 6.

Negotiated cash fed cattle trade for the week was $3-$5 lower at mostly $118-$119/cwt. Dressed trade was mostly $4-$5 lower at $189-$191.

Even so, Cattle futures continued to find stability toward the end of the week. Some credited Friday’s higher close, after early pressure, to the overall lack of trade.

Other than $1.10 lower in expiring June and 20¢ lower in spot Aug, Live Cattle futures closed an average of 61¢ higher (22¢ to 97¢ higher).

Feeder Cattle futures closed an average of $1.32 higher (75¢ to $2.32 higher).

Choice boxed beef cutout value was $1.82 lower Friday afternoon at $224.73/cwt. Select was $1.74 lower at $208.42.

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Major financial indices ended the seesaw week mixed on Friday as investors prepared for a long weekend. Although markets will be open today—closing early—you get the idea lots of folks are making this a 4-day weekend.

The Dow Jones Industrial Average closed 62 points higher. The S&P 500 closed 3 points higher. The NASDAQ closed 3 points lower.

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The Acreage and Quarterly Grain Stocks reports from USDA on Friday added fuel to grain markets that have been surging in recent days with expanding drought in the Northern Plains.

Corn

Corn planted area for all purposes in 2017 is estimated at 90.9 million acres, down 3% from last year.

Corn stocks of 5.23 billion bu. are 11% more than the same time last year. On-farm corn stocks were up 15% from a year ago and off-farm stocks were up 6%.

Soybeans

Soybean planted area for 2017 is estimated at a record-high 89.5 million acres, up 7% from last year. Soybean area for harvest is estimated at a record-high 88.7 million acres, which is 7% more than last year.

Soybeans stocks of 963 million bu. are 11% more than a year earlier. On-farm soybean stocks were up 18% from a year ago; off-farm stocks up 7%.

Wheat

The all wheat planted area for 2017 is estimated at 45.7 million acres, 9% less than last year and the lowest all wheat planted area since records began in 1919.

Wheat stocks of 1.18 billion bu. are 21% more than a year ago. On-farm all wheat stocks were down 3% from last year, while off-farm stocks were up 28%.

Stability and narrower price ranges were welcome in Cattle futures on Thursday with Live Cattle support firming as the session continued, helping Feeder Cattle along the way.

Other than 5¢ lower in expiring June and unchanged at the back, Live Cattle futures closed an average of $1.10 higher (87¢ to $1.32 higher).

Feeder Cattle futures closed an average of $1.28 higher (77¢ to $2.17 higher).

Choice boxed beef cutout value was $2.88 lower Thursday afternoon at $226.55/cwt. Select was $2.51 lower at $210.16.

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Sharp seesaw gyrations continued on Wall Street Thursday with major U.S. financial indices closing sharply lower. Tech stocks led the charge lower, bolstered by investors taking profits and squaring positions with the quarter ending today.

The Dow Jones Industrial Average closed 167 points lower. The S&P 500 closed 20 points lower. The NASDAQ closed 90 points lower.

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U.S. beef made its official return to China June 19, according to USDA—a shipment from Great Omaha Packing Company in Nebraska.

U.S. Secretary of Agriculture Sonny Perdue will join U.S. Ambassador, Terry Branstad, in China this weekend to formally mark the return of U.S. beef after a 13-year hiatus.

“I will be proud to be on hand for the official reintroduction of U.S. beef to China,” Perdue said. “This is tremendous news for the American beef industry, the agriculture community, and the American economy in general. We will once again have access to the enormous Chinese market, with a strong and growing middle class, which had been closed to our ranchers for a long, long time. There’s no doubt in my mind that when the Chinese people taste our high-quality U.S. beef, they’ll want more of it.”

Greg Ibach, Nebraska Department of Agriculture (NDA) Director will also be on hand in China. According to Nebraska Governor Pete Ricketts, “Nebraska is home to four of the six eligible suppliers that are currently approved to ship beef to China.”

China has emerged as a major beef buyer in recent years, with imports increasing from $275 million in 2012 to $2.5 billion in 2016. The United States is the world’s largest beef producer and in 2016 was the world’s fourth-largest exporter, with global sales of more than $5.4 billion.

Only about 20% of the offering sold in the weekly Fed Cattle Exchange auction on Wednesday. Specifically, 480 head sold out of the 2,554 offered. The weighted average price was $119.51/cwt. for delivery at 1-9 days and $120 for delivery at 1-17 days.

Country trade in Nebraska opened even lower at $118/cwt. on a live basis, which was $1-$5 less than last week. Dressed trade there was $3-$4 lower at $190-$191. Similar prices and declines were seen on early sales in the western Corn Belt, but there were too few to trend.

Choice boxed beef cutout value was $4.48 lower Wednesday afternoon at $229.43/cwt. Select was $2.59 lower at $212.67.

Even so, and despite early pressure, Cattle futures rebounded late in the session to close with gains.

Live Cattle futures closed an average of 79¢ higher (60¢ to $1.10 higher).

Feeder Cattle futures closed an average of $1.61 higher (60¢ to $2.10 higher).

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Major U.S. financial indices closed sharply higher on Wednesday, buoyed in part by a more dovish tone from the European Central Bank, regarding ongoing quantitative easing in those countries.

The Dow Jones Industrial Average closed 143 points higher. The S&P 500 closed 21 points higher. The NASDAQ closed 87 points higher.

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Beef Products Inc. (BPI)—the nations’ leading supplier of Lean Finely Textured Beef (LFTB)—settled its billion-dollar lawsuit against ABC and Jim Avila, according to a statement from BPI yesterday.

“We are extraordinarily pleased to have reached a settlement of our lawsuit against ABC and Jim Avila,” reads the statement. “While this has not been an easy road to travel, it was necessary to begin rectifying the harm we suffered as a result of what we believed to be biased and baseless reporting in 2012. Through this process, we have again established what we all know to be true about Lean Finely Textured Beef: it is beef, and is safe, wholesome, and nutritious.”

You’ll recall that ABC ignited a firestorm of controversy about LFTB with what it termed a startling investigation into what could be found in ground beef (first broadcast in march of 2012). By the time ABC reporter Jim Avila was through telling all that would listen that: “…70% of the ground beef we buy at the supermarket contains something he (former USDA scientist) calls pink slime, beef trimmings that were once only used in dog food and cooking oil, now sprayed with ammonia to make them safe to eat…” it was easy for anyone unfamiliar with LFTB to walk away feeling like they’d been feeding their families something harmful.

In fact, LFTB is 96-98% lean beef, first approved by USDA in 1993, borne by technology that enables the mechanical separation of lean from fat. It’s not sprayed with ammonia, as the ABC report indicated. The process employed by BPI blasts a puff of ammonium hydroxide on the beef. Ammonium hydroxide is approved by the FDA for use in many food industry practices.

Consumer reaction was furious and fast, fueled by the Internet. Major grocers quit buying ground beef that included LFTB. Food service giants like McDonalds and Burger King followed suit. Along the way, even USDA gave schools participating in its National School Lunch Program the option of buying ground beef with or without LFTB.

Less than three weeks after the ABC report, BPI was forced to idle three of its four plants, costing around 700 jobs. In the meantime, the price of 50% ground beef plunged and the drop credit sank. The reason is that LFTB means more of every beef carcass can be utilized at a higher value.

In September of 2012, BPI sued ABC and others associated with the report.

“Through nearly 200 false, misleading and defamatory statements, repeated continuously during a month-long disinformation campaign, ABC and other individuals knowingly misled consumers into believing that LFTB was not beef and not safe for public consumption, which is completely false,” said Dan Webb, Chairman, Winston & Strawn LLP at the time. “BPI has filed suit because their business has been severely damaged by this conduct. As a result, we will be asking a jury to award BPI over one billion dollars in compensatory and statutory damages, plus punitive damages.” BPI sought to recover damages for defamation, product and food disparagement, and tortious interference with business relationships.

The trial finally began the first week of June this year. Terms of the settlement were not disclosed.