Daily Market Highlights

Cattle futures retraced some ground from the previous session’s strong and somewhat surprising rally, but kept the lion’s share of gains.

Live Cattle futures closed an average of 57¢ lower.

Feeder Cattle futures closed an average of 80¢ lower (40¢ lower to $1.52 lower in spot Jan).

Wholesale beef values were steady on moderate demand and heavy offerings, according to the Agricultural Marketing Service.

Choice boxed beef cutout value was 9¢ lower Monday afternoon at $209.56/cwt. Select was 2¢ higher at $206.82.

Corn futures closed unchanged to fractionally mixed.

Soybean futures closed mostly unchanged to 1¢ lower through Mar ’21 and then fractionally higher to 2¢ higher.

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Major U.S. financial indices closed lower Tuesday, with most of the investor unease seeming to stem from uncertainty around recently escalated tensions with Iran.

The Dow Jones Industrial Average closed 119 points lower. The S&P 500 closed 9 points lower. The NASDAQ was down 2 points.

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The weighted 5-area average live steer (FOB) price in December was $120/cwt., which was $4.65 more than the previous month and 64¢ more than the same time a year earlier, according to USDA. In the beef (delivered), the average weighted price was $191.18, which was $9.27 more than the previous month and $2.81 more than a year earlier.

“Fed cattle prices tend to increase seasonally from late summer lows to the end of the year. It’s also not uncommon for prices to weaken between Thanksgiving and Christmas, and again in February, before the spring rally,” says David Anderson, Extension livestock economist at Texas A&M University.

In the latest issue of In the Cattle Markets, Anderson explains the five-year (2013-17) average price increase during the fall rally was $11/cwt. or 8.8%. It was $15 in 2018 for an increase of 14%. In 2019, though, fed cattle prices increased by $22 or 22.6%.

What’s more, Anderson points out, “Fed cattle movement ramped up in December with total steer and heifer slaughter up about 5%. It’s worth noting the reopening of the fed cattle plant (Tyson) in early December. That has contributed to packer demand for fed cattle, helping to boost fed cattle prices and slaughter….All cow slaughter was up almost 7%. All of the increase in cow slaughter during the quarter came from beef cows, as dairy slaughter declined from a year ago.”

The five-area direct weighted average fed steer price last week was $124.21/cwt., which was $1.93 more than the previous week. The weighted average price of $198.60 in the beef was $3.38 higher.

Stronger cash prices, the promise of improving wholesale beef values and a return to full trade following the holidays all helped underpin the significant rally in Cattle futures Monday. Stabilizing outside markets were also positive.

Except for $1.70 lower in the back contract, Live Cattle futures closed an average of $1.66 higher (95¢ to $2.55 higher in spot Feb).

Feeder Cattle futures closed an average of $2.92 higher ($2.02 higher at the back to $4.07 higher in spot Jan).

Wholesale beef values were higher on good demand and heavy offerings, according to the Agricultural Marketing Service.

Choice boxed beef cutout value was $1.16 higher Monday afternoon at $209.65/cwt. Select was $1.41 higher at $206.80.

Corn futures closed fractionally lower to 1¢ lower through Sep ’21 and then mostly fractionally higher to 1¢ higher.

Soybean futures closed 2¢ to 3¢ higher.

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Major U.S. financial indices closed higher Monday, regaining some of the previous session’s selloff as reports indicated the U.S. military action in Iran was unlikely to hamper oil production or trade flows.

The Dow Jones Industrial Average closed 68 points higher. The S&P 500 closed 11 points higher. The NASDAQ was up 50 points.

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“The beef supply situation is expected to be more supportive in the coming year, with cyclical herd expansion over and beef production peaking,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “The current status of the cattle cycle will be confirmed in the Cattle inventory report to be released at the end of January. “In general, cattle numbers are expected to be down slightly year over year. Beef production is expected to peak fractionally higher in 2020, with heavier carcass weights offsetting a slight decline in cattle slaughter. Carcass weights finished 2019 above year-earlier levels and will bear watching in the coming year.”

Overall, Peel explains the anticipated increase in U.S. beef exports and reduction in U.S. beef imports should offset a significant portion of increased domestic production.

“The international market situation is somewhat clearer now after trade disruptions and uncertainty strangled many agricultural markets for much of the past two years,” Peel says. “The likely completion of the revised NAFTA agreement (USMCA) in the coming weeks removes a significant source of uncertainty for agricultural markets. A new bilateral trade agreement with Japan will restore a more competitive position for beef and should stop the erosion of U.S. market share, which became very apparent in that important beef export market in the second half of 2019. Though details are currently lacking, the anticipated phase-one trade agreement with China is expected to significantly improve the trade situation for numerous agricultural markets and may allow beef to begin building a meaningful market position in the rapidly growing beef market in China.”

As for challenges that could add market uncertainty and volatility, Peel cites ongoing geopolitical tensions, African Swine Fever, energy prices, currency values and the presidential election.

“In summary, 2020 offers better opportunities for cattle and beef markets, but producers are advised to keep an eye on a host of macro-economic and global factors, as well as evolving cattle market conditions, and proceed with caution,” Peel says.

Negotiated cash fed cattle trade developed on Friday with live sales $2 higher at $124/cwt. in the Southern Plains and Nebraska; $2-$4 higher in the western Corn Belt at $125. Dressed sales were mostly $4 higher in Nebraska at mainly $199 and $3-$4 higher in the western Corn Belt at $198-$199.

Cattle futures softened though, amid lower outside markets fueled by heightened geopolitical tensions (the U.S. military strike in Iran), as well as what appeared to be some liquidation by non-commercial traders in the previous session. There was also some question about how the military action in Iran might affect the scheduled signing of the phase-one trade deal between the U.S. and China. Lean Hogs closed limit-down in spot Feb and near limit-down in the next two contracts.

Except for 35¢ higher in away Apr, Live Cattle futures closed an average of 65¢ lower (7¢ lower to $1.05 lower in spot Feb).

Except for 7¢ higher in in the back contract, Feeder Cattle futures closed an average of 96¢ lower.

Wholesale beef values were steady on Choice and higher on Select with moderate to fairly good demand and heavy offerings, according to the Agricultural Marketing Service.

Choice boxed beef cutout value was 24¢ higher Friday afternoon at $208.49/cwt. Select was $2.76 higher at $205.39.

Grain futures lost ground on the day, between anemic weekly export data, as well as wonderments about the potential fallout from the U.S. defensive action in Iran.

Corn futures closed 3¢ to 5¢ lower through Dec ’20 and then mostly 2¢ lower.

Soybean futures closed 10¢ to 14¢ lower through Sep ’20 and then mostly 3¢ to 5¢ lower.

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Major U.S. financial indices closed strongly lower Friday, pressured by the U.S. air strike in Iran and the subsequent spike in oil prices.

West Texas Intermediate Crude Oil futures on the CME closed $1.58 to $1.87 higher through the front six contracts, but well off of session highs.

Weaker than expected manufacturing data also weighed on markets.

Although the overall economy grew for the 128th consecutive month, economic activity in the manufacturing sector contracted in December, according to the latest Manufacturing ISM® Report On Business®.

“The December PMI® registered 47.2%, a decrease of 0.9 percentage point from the November reading of 48.1%. This is the PMI’s lowest reading since June 2009, when it registered 46.3%,” says Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee. “…Global trade remains the most significant cross-industry issue, but there are signs that several industry sectors will improve as a result of the phase-one trade agreement between the U.S. and China. Among the six big industry sectors, Food, Beverage & Tobacco Products remains the strongest, while Transportation Equipment is the weakest. Overall, sentiment this month is marginally positive regarding near-term growth.”

The Dow Jones Industrial Average closed 233 points lower. The S&P 500 closed 23 points lower. The NASDAQ was down 71 points.

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Although the impact of African Swine Fever (AFS) on domestic animal protein prices was slow to materialize, it began to show up by the end of the year.

“As a large share of beef from Australia and New Zealand go to China, it is forcing a reduction in the quantity of manufacturing beef to the U.S.,” explained RaboResearch Food and Agribusiness analysts, in that organizations November quarterly report. “As a result, prices of Australian and New Zealand 90% trimmings delivered to the U.S. currently hold a $54/cwt. premium (USD) to domestic trimmings. This is forcing U.S. quick service burger restaurants to look for domestic alternatives for supplies, supporting U.S. cattle and beef prices. This situation is not expected to be quickly resolved and will be an interesting market development to watch in the coming year.”

Until ASF, China produced about half of the world’s pork supply.

“By the end of 2020, China’s total swine herd is forecast to decline to 275 million head, down nearly 40% since the beginning of 2018, before the crisis began,” according to Livestock and Poultry: World Markets and Trade from USDA’s Foreign Agricultural Service (FAS). “Many producers have exited the industry and others are reluctant to restock due to ongoing disease risk. Pork production is forecast 25% lower in 2020 due to a sharply lower swine herd. Lower domestic supplies will boost demand for foreign pork, resulting in record imports. However, consumers will feel the pinch of lower pork supplies, with a 32% decline in per capita pork consumption over two years.”

Negotiated cash fed cattle trade remained undeveloped through Thursday afternoon. There were a few early live sales in the western Corn Belt at $125/cwt., but too few to trend. Prices in that region last week were at $121-$123.

Cattle futures mostly edged lower, with the heaviest trade since the middle of last month.

Except for $3.00 lower in newly minted away Jun, Live Cattle futures closed an average of 22¢ lower.

Except for 25¢ higher in Oct, Feeder Cattle futures closed an average of 26¢ lower.

Wholesale beef values were lower on Choice and firm on Select with light to moderate demand and offerings, according to the Agricultural Marketing Service.

Choice boxed beef cutout value was $1.17 lower Thursday afternoon at $208.25/cwt. Select was 51¢ higher at $202.63.

Corn futures closed 1¢ to 3¢ higher.

Soybean futures closed mostly 2¢ to 3¢ higher

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Major U.S. financial indices closed sharply higher Thursday, with more optimism regarding China—this time, the move by that country to effectively interject more cash into its economy, via the lowering of reserve cash requirements for its banks.

The Dow Jones Industrial Average closed 330 points higher. The S&P 500 closed 27 points higher. The NASDAQ was up 119 points.

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“Consumer strength the world over has prevented further slowing in the global economy. Without that strength, several European countries and Japan would most likely have fallen into recession by now,” says Dan Kowalski, vice president of CoBank’s Knowledge Exchange Division (CKED), in that organization’s 2020 Outlook. “The powerhouse economies of Europe, Japan, and China depend heavily on manufacturing and exports, and have been hit exceptionally hard as global trade growth has plumbed decade lows.

“We expect business investment and exports in all three economies to continue slowing through early 2020. Europe’s growth will be weighed down by risks of a no-deal Brexit, along with the potential for U.S. automobile tariff tensions to resurface. Japan will try to keep consumers spending and prevent economic contraction despite another increase in its national sales tax, this time from 8% to 10%. China will make good on its goal to double the size of its economy between 2010 and 2020, but it will do so while growing at its slowest pace since 1990. Its GDP growth will fall below 6% as Beijing attempts to balance the need for credit while containing financial risks.”

The International Monetary Fund (IMF), in October’s quarterly World Economic Outlook, projected global economic growth at 3.0% for 2019 and at 3.4% for 2020.

“The risks to this baseline outlook are significant,” explained IMF analysts. “…should stress fail to dissipate in a few key emerging market and developing economies that are currently underperforming or experiencing severe strains, global growth in 2020 would fall short of the baseline. Further escalation of trade tensions and associated increases in policy uncertainty could weaken growth relative to the baseline projection.”

As expected, negotiated cash fed cattle trade remained undeveloped through Tuesday afternoon.

Cattle futures closed mostly narrowly lower, amid light holiday trade.

Except for 2¢ to 60¢ higher in three contracts, Live Cattle futures closed an average of 26¢ lower.

Except for 2¢ higher in Sep, Feeder Cattle futures closed an average of 13¢ lower.

Wholesale beef values were steady on Choice and lower on Select with light to moderate demand and heavy offerings, according to the Agricultural Marketing Service.

Choice boxed beef cutout value was 24¢ lower Tuesday afternoon at $209.42/cwt. Select was $3.29 lower at $202.12.

Corn futures closed fractionally lower to 1¢ lower.

Soybean futures closed 1¢ to 3¢ higher (mostly 1¢ higher).

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Major U.S. financial indices closed higher Tuesday, recovering about half of the previous session’s losses.

The Dow Jones Industrial Average closed 76 points higher. The S&P 500 closed 9 points higher. The NASDAQ was up 26 points.

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“The U.S. economy will enter 2020 decisively split, powered by a resilient and confident consumer, but hamstrung by a risk-averse business sector that has stopped investing,” say analysts with CoBank Knowledge Exchange Division (CKED), in that organization’s 2020 outlook. “And now that the stimulus effects from the 2017 tax reform and the 2018 spending bill have faded, the expansion will show its age, losing steam in the coming year.”

Depending on which data you assess, domestic economic growth, as measured by Gross National Product (GNP) will continue to grow at a slow pace in 2020.

As an example, in its forecast for the U.S. economy, the Conference Board pegs real annual GDP at 2.0% in 2020, compared to expectations of 2.3% in 2019.

However, according to the Federal Reserve Bank of St. Louis, “The consensus of professional forecasters is that real GDP growth will dip below 2% in 2020.

Real GDP growth in 2020 could rise above 2% if the economy’s headwinds—trade disputes and slowing global growth—were to diminish.”

Hopefully part of those headwinds will lose some force with the announced phase-one trade deal between the U.S. and China.

The 5-area direct weighted average price for steers last week was $122.28/cwt. on a live basis and $195.22 in the beef. Week to week, that was $1.92 higher and $3.37 higher, respectively.

Cattle futures hovered on either side of even Monday, amid light holiday trade.

Live Cattle futures closed narrowly mixed, from an average of 16¢ lower to an average of 24¢ higher (60¢ higher in nearly spent spot Dec).

Feeder Cattle futures closed narrowly mixed, from an average of 25¢ lower across the front half of the board to an average of 37¢ higher.

Wholesale beef values were firm to higher on good demand and heavy offerings, according to the Agricultural Marketing Service.

Choice boxed beef cutout value was 70¢ higher Monday afternoon at $209.66/cwt. Select was 84¢ higher at $205.41.

Corn futures closed fractionally lower to 1¢ lower through Mar ’21 and then mostly fractionally higher.

Soybean futures closed 8¢ to 11¢ higher through Sep ’20 and then mostly 3¢ to 5¢ higher. Presumably, support included more positive chatter about the Phase-one U.S.-China trade deal being signed as early as next week.

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Major U.S. financial indices closed lower Monday, with little news and likely year-end profit taking and positioning.

The Dow Jones Industrial Average closed 183 points lower. The S&P 500 closed 18 points lower. The NASDAQ was down 60 points.

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Between a likely smaller calf crop and slightly less per capita domestic beef availability, the Livestock Marketing Information Center (LMIC) projects cash fed cattle prices in 2020 to be 1-4% higher than this year, with most of the gains coming in the second half of the year.

“A smaller forecasted spring-born 2020 calf crop and a normal summer growing season sets the stage for next year’s fall-weaned calves to price near to slightly above 2017’s prices,” LMIC analysts say.

That gibes with early-release tables from USDA’s Long-Term Agricultural Projections (to-2029), which will be published in February.

USDA projects the annual average 5-area direct fed steer price in 2020 at $116.00/cwt., compared to $115.50 this year. The price in 2021 is forecast at $120.93.

Likewise, USDA projects the annual feeder steer price in 2020 (basis Oklahoma City) at $141.00, compared to $140.50 this year. The average price in 2021 is forecast at $151.11.

Negotiated cash fed cattle trade was yet to be fully developed through Friday afternoon, but early prices were higher. The Texas Cattle Feeders Association reported its members trading at $122/cwt., which was $2 higher than the previous week. Likewise, AMS reported live sales in Kansas at $122, which was $2 higher than the prior week. In Nebraska, dressed sales were mostly $3 higher at mostly $196. Although too few to trend, early dressed sales in the western Corn Belt were $3-$4 higher at $195-$196.

Stronger cash undertones helped Cattle futures maintain most of the gains from the previous session.

Except for 10¢ lower in near Feb and unchanged in Jun, Live Cattle futures closed an average of 16¢ higher.

Except for 10¢ higher in spot Jan, Feeder Cattle futures closed an average of 22¢ lower.

Wholesale beef values were weak to lower on light demand and moderate offerings, according to the Agricultural Marketing Service.

Choice boxed beef cutout value was $1.19 lower Friday afternoon at $208.96/cwt. Select was 68¢ lower at $204.57.

Corn futures closed 1¢ higher through Sep ’20 and then mostly unchanged to fractionally lower.

Soybean futures closed 2¢ to 8¢ lower through Jan ’21 and then fractionally lower.

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Major U.S. financial indices closed narrowly mixed Friday, with limited market news.

The Dow Jones Industrial Average closed 23 points higher. The S&P 500 closed fractionally higher. The NASDAQ was down 15 points.

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Lower calf and feeder cattle prices, along with strengthening fed cattle prices appear to be improving economic returns to the feedlot, according to the most recent Historical and Projected Kansas Feedlot Net Returns. Keep in mind that projections are on a cash to cash basis, without accounting for any price risk management, carcass premiums, etc.

Projections for fed steer and heifer net returnssold in October were -$145.12 and -$82.95 per head, respectively. Losses declined in November to -$69.79 for steers and -$22.21 for heifers.

For the next nine months, though, projections are for steers to be in the black six months, from $52.39 per head in May to $149.67 in December. Negative net returns range from -26¢ in July to -$24.87 in April.

Similarly, fed heifers are projected  to return $23.43 (April) to $125.36 (December) per head for the next six months, followed by negative returns of -$2.21 (July) to -$21.37 (August).

Hopes grew Thursday for higher weekly cash fed cattle prices as Cattle futures, especially Feeder Cattle, climbed higher, apparently on the backs of non-commercial traders’ continued positioning ahead of support that could come with a U.S.-China trade deal. The next round of winter predicted to hit cattle feeding areas later this week was likely also supportive.

Live Cattle futures closed an average of 71¢ higher.

Feeder Cattle futures closed an average of $1.49 higher.

Wholesale beef values were lower on Choice and firm on Select with light to moderate demand and heavy offerings, according to the Agricultural Marketing Service.

Choice boxed beef cutout value was $1.42 lower Thursday afternoon at $210.15/cwt. Select was 61¢ higher at $205.25.

Corn futures closed mostly fractionally higher to 1¢ higher.

Soybean futures closed mostly 1¢ higher.

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Major U.S. financial indices closed higher Thursday with mounting optimism about the phase-one trade deal between the U.S. and China, as well as reports of strong holiday retail sales.

The Dow Jones Industrial Average closed 105 points higher. The S&P 500 closed 16 points higher. The NASDAQ was up 69 points.

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Frozen beef supplies continue to trend lower year over year, according to USDA’s latest monthly Cold Storage report.

Total beef in cold storage Nov. 30 was 480.38 million lbs., which was 3% more than the previous month but 7% less than a year earlier.

Total frozen pork supplies were record large for the month of November at 574.86 million lbs., which was 6% less than the previous month but 13% more than a year earlier.

Total red meat supplies in freezers were 2% less than the previous month, but 2% more than the prior year.

Total frozen poultry supplies were 10% less than the previous month, but 1% more than last year.

Merry Christmas to All!

Cattle futures edged mostly higher amid light holiday trade Tuesday.

Except for unchanged in Jun, Live Cattle futures closed an average of 18¢ higher.

Except for 5¢ lower in Mar and Oct, Feeder Cattle futures closed an average of 12¢ higher.

Corn futures closed mostly fractionally lower to 1¢ lower.

Soybean futures closed 2¢ to 3¢ higher.

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Major U.S. financial indices closed little changed in Tuesday’s holiday-shortened session.

The Dow Jones Industrial Average closed 36 points lower. The S&P 500 closed fractionally lower. The NASDAQ was up 7 points.

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While domestic beef demand remains relatively flat over recent times, Elliott Dennis, livestock marketing economist at the University of Nebraska—Lincoln says export demand for U.S. beef increased 100% since 2010, compared to a 50% increase in export demand for other U.S. animal proteins.

 “As export demand for U.S. beef grows, this signals to expand production with a yield and quality grade product that each individual country demands. Likewise, certain countries demand/require the livestock, and cattle in particular, be raised, treated, and housed in certain ways,” Dennis explains, in the most recent issue of In the Cattle Markets. “For example, the E.U requires hormone-free beef. Other countries, such as China, require similar regulations. For cattle to be ‘export eligible’ they need to meet certain requirements, many of which arguably have little to do with the meat quality (i.e. yield and quality grade), flavor, and tenderness. Just as the industry has adjusted to meet domestic consumers demand for marbled products, so the industry could adopt similar practices to make more cattle export eligible.”

Although premiums vary by month, Dennis explains they’re around $20/cwt. for non hormone treated cattle (NHTC—never treated with hormones) and $25 for all natural (never treated with hormones or antibiotics).

“Now, whether it is profitable to chase NHTC and All Natural premiums depends on each operation’s structure, strategy, and available resources,” Dennis says. “Other protein industries faced similar issues and opportunities and have responded. The pork industry changed in a dramatic fashion this past year by removing all ractopamine (i.e. hormone) from pork production making hogs now China export eligible. Granted, China is facing African Swine Fever (ASF) and massive shortage of pork, but the premiums and market share opportunity was large enough to switch production practices. The change in the beef industry will not be as dramatic as the pork industry for a variety of reasons, but moving forward, some change in production practices is likely if the industry is going to keep up with export demand that has been sharply increasing over the last 10 years.”

Week to week on Monday, the 5-area direct average steer price was $120.36/cwt. on a live basis, which was $1.19 higher than the previous week. In the beef, the average steer price was $3.85 higher at $191.85.

More placements than expected in Friday’s monthly Cattle on Feed report (see below) pressured Cattle futures to start the week; that and sluggish holiday trade.

Live Cattle futures closed narrowly mixed but mostly lower, from 35¢ lower to 17¢ higher.

Feeder Cattle futures closed an average of 52¢ lower.

Wholesale beef values were higher to sharply higher on light to moderate demand and light offerings, according to the Agricultural Marketing Service.

Choice boxed beef cutout value was $1.87 higher Monday afternoon at $211.57/cwt. Select was $3.61 higher at $204.64. The Choice-Select spread was the narrowest since March at $6.93.

Corn futures closed fractionally higher to 1¢ higher.

Soybean futures closed mostly 2¢ to 4¢ higher through Jly ’21 and then mostly 1¢ lower.

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Major U.S. financial indices closed higher Monday, supported by reports that China will implement reduced temporary import tariffs on a range of U.S. goods, including frozen pork. Apparently, the announcement has to do with sagging economic growth in that country, rather than the recently announced phase-one trade agreement between the two nations.

The Dow Jones Industrial Average closed 96 points higher. The S&P 500 closed 2 points higher. The NASDAQ was up 20 points.

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“Higher placements the last three months have rebuilt feedlot inventories going into 2020,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “Feedlots will be a bit front loaded in the first quarter of the new year and marketings are expected strong against the April Live Cattle futures contract. Of course, weather often impacts cattle performance and the timing of feedlot production this time of the year and may affect feedlot marketings through the winter.”

According to Friday’s monthly Cattle on Feed report, November placements in feedlots with 1,000 head or more capacity were 2.09 million head, which was 4.86% more than the prior year.

Peel notes placements weighing less than 600 lbs. were 12.7% more year over year, likely reflecting a delay in the fall calf run, combined with slow development of wheat pasture in the Southern Plains. 

“Placements were sharply higher year over year in South Dakota (160%), Colorado (132%) and Oklahoma (112%),” Peel says. Placements in Texas were 3% higher; 4% higher in Iowa.

The 12.03 million head on feed inventory Dec. 1 were 2.49% more than a year earlier. According to Peel, the annual average feedlot inventory this year was 11.62 million head, the largest 12-month moving average since the current data series began in 1996.