Daily Market Highlights

Negotiated cash fed cattle trade remained undeveloped through Thursday afternoon.

Cattle futures closed mainly narrowly mixed with pressure in the front months,

likely on positioning and perhaps some defensiveness ahead of tomorrow’s Cattle on Feed (COF) report. That will be the Jan. 25 report, due to the government shutdown. The COF originally slotted for Feb. 22 is scheduled to be released Mar. 8. In between, the Cattle inventory report, which should have been published Jan. 31 is scheduled for release Feb. 28.

Amid growing open interest, Live Cattle futures closed an average of 46¢ lower through the front three contracts (7¢ to 70¢ lower) and then an average of 11¢ higher.

Feeder Cattle futures closed an average of 44¢ lower through the front three contracts (12¢ to 65¢ lower) and then an average of 17¢ higher.

Corn futures closed 3¢ to 4¢ higher across the front half of the board, and then mostly 1¢ to 2¢ higher, amid chatter that China is poised to buy more U.S. corn and soybeans than previously thought. 

Soybean futures closed 4¢ to 8¢ higher across the front half, and then mostly 3¢ higher. 

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

Choice boxed beef cutout value was $1.58 higher Thursday afternoon at $218.07/cwt. Select was 9¢ lower at $211.41. 

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Major U.S. financial indices closed lower Thursday, pressured by various closely watched economic indicators pointing to slower economic growth, building on caution expressed in the Federal Reserve minutes released Wednesday.

For instance, the IHS Markit Flash U.S. Manufacturing Purchasing Manager Index dropped to a 17-month low for February at 53.7. It was 54.9 in January.

Likewise, the Conference Board Leading Economic Index® (LEI) for the U.S. declined 0.1% in January to 111.3

“In January, the strengths in the financial components were offset by the weaknesses in the labor market components,” says Ataman Ozyildirim, Director of Economic Research at The Conference Board. “The US LEI has now been flat essentially since October 2018. The Conference Board forecasts that U.S. GDP growth will likely decelerate to about 2% by the end of 2019.”

The Dow Jones Industrial Average closed 103 points lower. The S&P 500 closed 9 points lower. The NASDAQ was down 29 points.

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Expectations for U.S. beef imports this year increased by $100 million to $7.7 billion, in the latest Outlook for U.S. Agricultural Trade from USDA’s Economic Research Service (ERS).

“Livestock, dairy, and poultry export forecasts are raised $300 million to $30.4 billion, largely as gains in beef, pork, poultry, dairy, and other products offset declines for hides, skins, and furs,” ERS analysts say. “The beef forecast is raised on sustained demand despite stronger prices.”

On the other side of the ledger, forecast beef import value was also increased by $100 million, based on stronger than expected prices.

For context, ERS analysts explain, per capita world GDP growth of 1.9% last year was the heftiest since the post-financial crisis rebound in 2010-11. 

“World GDP growth is expected to slow slightly to 1.6% in 2019, due in part to global trade tensions, but there is some optimism regarding future dialogue between China and the United States,” say ERS analysts. “There is more uncertainty than normal regarding U.S. economic conditions due to a lag in the release of economic indicators after the Government shutdown, such as U.S. Gross Domestic Product for the fourth quarter and U.S. International Trade in Goods and Services for December 2018. However, U.S. per capita GDP was estimated to have grown at above trend at 2.2% in 2018 and is forecast to remain the same in 2019, with continued optimism regarding the current economic landscape, especially given the strong labor market and low inflation.”

Negotiated cash fed cattle trade remained undeveloped through Wednesday afternoon, but there were several suggestions for steady to higher trade. 

For instance, Ch 2-4 steers traded at mostly $125-$128/cwt. at Sioux Falls in South Dakota.

As well, there were no takers, but three Kansas lots passed out at $125—steady with last week’s country trade—in the weekly Fed Cattle Exchange auction (785 head). 

Cattle futures edged higher, too, especially Live Cattle, which closed an average of 46¢ higher, except for unchanged in the back two contracts.

Except for an average of 17¢ lower in the back two contracts, Feeder Cattle futures closed an average of 11¢ higher. 

Corn futures closed mostly 1¢ to 2¢ higher. 

Soybean futures closed 1¢ to mostly 2¢ higher.

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

Choice boxed beef cutout value was 78¢ lower Wednesday afternoon at $216.49/cwt. Select was $2.04 lower at $211.50. 

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Major U.S. financial indices continued to leak higher Wednesday, supported by release of last month’s minutes from the Federal Open Market Committee, which underscored patience relative to future increases in interest rates.

“Participants noted that some risks to the downside had increased, including the possibilities of a sharper-than-expected slowdown in global economic growth, particularly in China and Europe, a rapid waning of fiscal policy stimulus, or a further tightening of financial market conditions,” according to the minutes. “…a few participants expressed concern that longer-run inflation expectations may be lower than levels consistent with the Committee’s 2% inflation objective… Participants pointed to a variety of considerations that supported a patient approach to monetary policy at this juncture…”

The Dow Jones Industrial Average closed 63 points higher. The S&P 500 closed 4 points higher. The NASDAQ was up 2 points.

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U.S. consumers paid higher year-to-year prices for beef last year, but less for pork and poultry, underscoring consumer demand.

According to USDA’s Economic Research Service (ERS), the retail Choice beef value last year was 0.25% more than the previous year at $5.92/lb. Pork retail value was 1% less than a year earlier at $3.74/lb. Composite broiler retail value was 0.15% less at an average of $1.87.

Between less cattle slaughter and lighter carcass weights, ERS’s latest projection for beef production last year is 26.9 billion lbs. For this year, it’s projected at 27.6 billion lbs.

Steady cash prices last week, and declining carcass weights pointing to the potential for higher fed cattle prices this week, helped lift Cattle futures Tuesday. Some also attributed part of the support to traders fleeing the meltdown in Lean Hog futures.

Live Cattle futures closed an average of $1.26 higher in the front two contracts and then an average of 33¢ higher.

Feeder Cattle futures closed an average of 58¢ higher (42¢ higher to $1.15 higher in spot Mar).

Corn futures closed 1¢ to 5¢ lower through Sep ’20 and then fractionally lower. 

Soybean futures closed 6¢ to 7¢ lower through Jan ‘20, then 3¢ to 5¢ lower.

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

Choice boxed beef cutout value was 12¢ lower Tuesday afternoon at $217.27/cwt. Select was 54¢ higher at $213.54. 

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Major U.S. financial indices recovered from early pressure to close slightly higher Tuesday. Support included strong quarterly earnings from Walmart, as well as further indications that trade talks with China continue to be positive.

The Dow Jones Industrial Average closed 8 points higher. The S&P 500 closed 4 points higher. The NASDAQ was up 14 points.

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“With continued large supplies of cattle in feedlots and a slower expected pace of placements in early 2019, feeder steer prices in first-half 2019 were lowered, bringing the annual price forecast down to $140-$149/cwt, with a midpoint price of $144.50/cwt.,” say analysts with USDA’s Economic Research Service (ERS), in the February Livestock, Dairy and Poultry Outlook (LDPO)—the first since December, due to the government shutdown.

At least part of the pressure stems from unrealized expectations for improved Southern Plains winter wheat pasture last fall to absorb increased seasonal supplies of cattle. Instead, wet weather since last fall delayed and restricted planting. Winter wheat planted area for harvest this year is 4% less than last year and second lowest on record (31.3 million acres), according to the Winter Wheat and Canola Seedings report. 

“Based on weekly data from the National Feeder and Stocker Cattle Summary, there were about 1% more calves sold in 2018 than in 2017. This was particularly true in fourth-quarter 2018, where about 7% more calves were sold than for the same period in 2017,” ERS analysts say. “However, in late 2018, feedlots’ pace of marketings slowed more than expected. The large numbers of cattle in feedlots may have stymied feeder calf prices.”

The fourth-quarter 2018 feeder steer price was $147.90/cwt. for an annual price of $146.93. 

For this year, the recent LDPO pegs feeder steers prices (basis Oklahoma City) at $140-$144/cwt. in the first quarter; $141-$149 in the second; $144-$154 in the third quarter; $138-$148 in the fourth.

Negotiated cash fed cattle trade ended up mainly steady on a live basis last week at $125/cwt. in the Southern Plains and Nebraska; unevenly steady in the western Corn Belt at $124-$126. Dressed trade was steady in Nebraska at $200 and steady to $1 lower in the western Corn Belt at $199-200.

Futures and equity markets were closed Monday, in observance of President’s Day. As well, many AMS reports were not issued. 

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Estimated net returns for feedlot steer closeouts were slightly negative for January, but increase or remain near breakeven for the next several months, according to the Historical and Projected Kansas Feedlot Net Returns from Kansas State University (KSU).

January closeouts for steers were estimated at -$2.34 per head. Estimated returns are +$74.69 per head this month and +$117.39 in March, with estimated feeding cost of gain (FCOG) of $86.03 and $85.14, respectively. 

Keep in mind, estimates are on a cash-to-cash basis and assume no price risk management.

“The main change in January estimates from last month’s projections is a nearly $5 lower fed cattle basis,” explains Glynn Tonsor, KSU agricultural economist.

For April through August, estimated steer closeouts range from -$41.02 to +$39.09. Estimated FCOG is $83.50 to $86.27/cwt.

Similarly, projected closeouts for heifers in January was -$26.63 per head. Heifer returns are projected at +$47.43 this month and at +$71.49 in March with FCOG of $91.55 and $92.73/cwt. Through August, projected net heifer returns range from -$97.17 in April to +$14.15 in May. Estimated FCOG is $91.36 to $95.33/cwt.

Negotiated cash fed cattle trade remained undeveloped through Friday afternoon. A few live trades were reported in the western Corn Belt at $124-$127/cwt., but too few to trend.

Cattle futures softened, especially front-month Feeder Cattle. According to various chatter, part of the pressure for Feeder Cattle was attributed to thoughts that grain prices will pop, at least in the short term, when the U.S. and China resolve trade issues. 

Except for 50¢ higher in spot Feb, Live Cattle futures closed an average of 21¢ lower. 

Feeder Cattle futures closed an average of $1.28 lower through the front three contracts and then an average of 64¢ lower.

Corn futures closed fractionally mixed. 

Soybean futures closed 3¢ to 4¢ higher, following the steep declines in the previous session.

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

Choice boxed beef cutout value was 78¢ higher Friday afternoon at $216.85/cwt. Select was 58¢ higher at $210.99. 

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Major U.S. financial indices closed sharply higher Friday. Support included Congress passing and President Trump signing legislation to fund the government and avoid another shutdown. There was also growing optimism that the U.S. and China were close to striking a trade deal.

The Dow Jones Industrial Average closed 443 points higher. The S&P 500 closed 29 points higher. The NASDAQ was up 45 points.

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“The big story in cattle markets the past few weeks has been the increase in slaughter cow prices,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “Cow-calf producers have been concerned about low slaughter cow prices since the middle of October when prices in Tennessee dipped into the mid $40s and proceeded to the low $40 level for November and December. In the past four weeks, Tennessee slaughter cow prices have increased $10/cwt. and are now at their highest level since the first week of August. The $10 increase the past month is essentially $120 to $140 more per head. The seasonal tendency would say there is still room for slaughter cow prices to increase, which means they could reach $60/cwt., resulting in $60 to $70 more per head than the current week’s value.”

At the organization’s recent Outlook Seminar, CattleFax projected additional downside price risk to cull cow prices this year.

“Years of expansion and poor operating margins in the dairy sector are generating more cull cows, which weighs on the markets,” explained CattleFax analyst, Kevin Good. “The additional supply and the limited packing capacity for non-fed cattle will result in a market which averages approximately $55/cwt. during 2019, with a spring high near $60/cwt. and a fall low in the lower $40s.”

Negotiated cash fed cattle trade remained undeveloped through Thursday afternoon. A few live trades were reported in the western Corn Belt at $124/cwt., but too few to trend.

Cattle futures leaked mostly slightly higher, apparently tied to expectations of further cash support for fed cattle. Lower grain prices also provided support to Feeder Cattle.

Except for 5¢ and 17¢ lower in Dec and away Feb, respectively, Live Cattle futures closed an average of 29¢ higher. 

Feeder Cattle futures closed an average of 39¢ higher (5¢ to 60¢ higher).

Corn futures closed 2¢ to 4¢ lower through Sep ’20 and then mostly 1¢ lower. 

Soybean futures closed 10¢ to 13¢ lower through Jul ‘20, and then 8¢ to 9¢ lower, amid chatter about fewer year-over-year exports to China and early expectations for the next domestic crop weighing on stocks. 

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

Choice boxed beef cutout value was 37¢ lower Thursday afternoon at $216.07/cwt. Select was $1.60 lower at $210.41. 

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Major U.S. financial indices closed mixed Thursday. Pressure included a month-to-month decline in retail sales of 1.2% in December, according to the U.S. Commerce Department. 

The Dow Jones Industrial Average closed 103 points lower. The S&P 500 closed 7 points lower. The NASDAQ was up 6 points.

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Despite expectations of falling land values over the past few surveys, quality farmland values rose 3.4% in the fourth quarter from a year earlier, according to the latest Agricultural Finance Monitor published by the Federal Reserve Bank of St. Louis.

Ranchland or pastureland values increased by 6.5% in the fourth quarter after increasing 1.5% in the third quarter. Cash rents for quality farmland rose 2.9% in the fourth quarter, following a 2% gain in the third quarter. Cash rents for ranchland or pastureland rose by 1.3%, after increasing by 0.8% in the third quarter.

At the same time, lenders continue to report declines in farm income relative to a year earlier. The current index value marks the 20th consecutive quarter with a value below 100. Results above 100 indicate proportionately more bankers report higher income compared with the same quarter a year ago, while results lower than 100 indicate proportionately more bankers report lower income from a year earlier.

The fourth-quarter index value for farm income was 41. Expectations for farm income in the first quarter of 2019 were slightly more optimistic with an index value of 48. 

The survey was conducted from Dec. 15-31 last year. The results are based on responses from 22 agricultural banks within the boundaries of the Eighth Federal Reserve District, which includes all or parts of: Arkansas, Illinois, Indiana, Kentucky, Mississippi, Missouri and Tennessee.

Negotiated cash fed cattle trade remained undeveloped through Wednesday afternoon, but packer interest seemed to pick up, at least on a token basis. Although too few transactions to trend, a few western Corn Belt trades were reported at $123-$124/cwt. on a live basis and at $199-$200 in the beef.

There were 785 head offered in the weekly Fed Cattle Exchange auction. There were no sales, but three lots passed out at $125/cwt.

Cattle futures closed lower, amid likely overall position squaring and beneath the umbrella of uncertainty regarding if and when a trade deal will be completed with China. Aside from light trade, recently firmer grain prices added drag to Feeder Cattle.

Live Cattle futures closed an average of 47¢ lower. 

Feeder Cattle futures closed an average of 74¢ lower. 

Corn futures closed mostly fractionally mixed. 

Soybean futures closed mostly 1¢ lower, following the previous session’s strong gains. 

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

Choice boxed beef cutout value was 72¢ lower Wednesday afternoon at $216.44/cwt. Select was 99¢ lower at $212.01. 

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Major U.S. financial indices closed higher Wednesday, with optimism over a tentative plan that would avoid another government shutdown, as well as reports that the U.S. may be flexible in its Mar. 1 deadline with China as the two nations toward a trade deal.

The Dow Jones Industrial Average closed 117 points higher. The S&P 500 closed 8 points higher. The NASDAQ was up 5 points.

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Aggressive herd expansion for the past five years—and expectations of continued minimal expansion for another year or two—will continue to provide cyclical price risk, explained Kevin Good, CattleFax analyst, at that organization’s recent Outlook Seminar.

Along the way, Good noted that growing supplies of cattle will shift leverage to the feeding sector from cow-calf producers and stocker operators.

“Cattle producers, on average, will receive a smaller percentage of the retail beef dollar as larger cattle supplies increase price pressure across all segments of the industry,” Good said. “Retail beef prices will likely see some inflation in 2019, but larger beef, pork and poultry production will be price limiting.”

CattleFax projects the all-fresh retail beef price to average $5.73/lb. this year, up 6¢ from last year, with the composite carcass cutout value increasing $4 to average $216/cwt.

There was no cash fed cattle trade to speak of through Tuesday afternoon, as expected.

Cattle futures closed mainly narrowly mixed, amid likely profit taking and position squaring, buoyed by sharply higher outside markets.

After $1.00 lower in spot Feb, Live Cattle futures an average of 19¢ lower to an average of 11¢ higher. 

Feeder Cattle futures closed from 27¢ lower to 30¢ higher. 

Grain futures closed mainly higher on speculation that the U.S. and China will reach a resolution on trade sooner rather than later.

Corn futures closed 4¢ to 5¢ higher through Jul ’20 and then mostly 1¢ to 2¢ higher. 

Soybean futures closed mostly 10¢ to 12¢ higher. 

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

Choice boxed beef cutout value was 28¢ higher Tuesday afternoon at $217.16/cwt. Select was 86¢ lower at $213.00. 

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Major U.S. financial indices closed sharply higher Tuesday, with investors cheering a tentative plan that would avoid another government shutdown.

The Dow Jones Industrial Average closed 372 points higher. The S&P 500 closed 34 points higher. The NASDAQ was up 106 points.

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Hay stocks Dec. 1 were 5.4 million tons less than the previous year (-6.4%) according to USDA’s February Crop Production report issued last week. The decline is accentuated in areas like the Southern Plains, where stocks are down a combined 16.0% in Arkansas, Kansas, Missouri, Oklahoma and Texas, according to Derrell Peel, Extension livestock marketing specialist at Oklahoma State University.

Since then, Peel says there’s little doubt winter storms chewed further into stocks.

“Around Oklahoma, anecdotal reports suggest that some producers are concerned about having adequate hay supplies for the winter and are finding, in many cases, that hay is in tight hands and, if available to purchase at all, is increasingly expensive,” Peel explains, in his most recent market comments. 

If Art Douglas, professor emeritus at Creighton University is correct, El Niño conditions should provide above-normal precipitation to these areas through the summer.

“La Niña conditions are unlikely in the next eight months as the equatorial current shows only slow cooling,” Douglas explained during the recent 2019 CattleFax Outlook Seminar. “The residual warmth along the equator will lead to a wetter summer in the southern half of the U.S., while warm waters off the coast of Mexico will favor an active monsoon season in the Southwest.”

Negotiated cash fed cattle trade ended up last week $1 higher on a live basis at $125/cwt. in the Southern Plains and $1.00-$1.50 higher in the north at $124.50-$126.00. Dressed sales were up to $3 higher at $200. 

Cattle futures trickled higher Monday, after narrow mixed trade early, supported by last week’s cash trade and stronger wholesale beef values.

Live Cattle futures closed 42¢ higher. 

Except for 50¢ lower in the back contract, Feeder Cattle futures closed an average of 64¢ higher. 

Corn futures closed mostly fractionally lower to 1¢ lower.

Soybean futures closed 6¢ to 9¢ lower. 

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

Choice boxed beef cutout value was $1.53 higher Monday afternoon at $216.88/cwt. Select was $2.69 higher at $213.86. 

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Major U.S. financial indices closed narrowly mixed again on Monday, with lingering worries about the lack of resolution to trade issues between the U.S. and China.

The Dow Jones Industrial Average closed 53 points lower. The S&P 500 closed 1 point higher. The NASDAQ was up 9 points.

Indices are sharply higher in early trade today on signs the government may have a plan in place to avoid another shutdown.

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“The wet winter weather in entre cattle feeding region, from the upper Midwest and all the way south through the Southern Plains will hold weights down and likely create some variability in finishing times,” says Stephen Koontz, agricultural economist at Colorado State University, in the latest issue of In the Cattle Markets. “Regardless, beef and slaughter prices are holding strong through this first two-month window into the year.”

On the other side of the fence, Koontz points out steer calves (500-600 lbs.) are trading $5-$15/cwt. lower than a year earlier while feeder weights (700-800 lbs.) are selling for about $10 less.

“The current feeder cattle cash and futures prices and the deferred Live Cattle futures prices suggest strong concerns about the coming summer,” Koontz says. “We are starting the year expecting big supplies of beef through the summer and it will take surprise good news for optimism. The solid domestic demand and demand due to international trade in protein is, for me, much less of a given this year.”