Daily Market Highlights

Cattle futures closed marginally mixed but mostly higher Monday, supported by last week’s friendly Cattle on Feed report and a recent bump in wholesale beef values.

Live Cattle futures closed an average of 21¢ lower through the front four contracts and then unchanged to 5¢ higher.  

Other than 22¢ lower in spot Jan, Feeder Cattle futures closed an average of 24¢ higher.

Corn futures closed mostly 1¢ to 2¢ lower.

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

Choice boxed beef cutout value was 60¢ higher Monday afternoon at $214.45/cwt. Select was $1.28 higher at $199.79.

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Major U.S. financial indices rallied higher on Monday, supported by a rebound in key tech stocks like Apple and Amazon. Retail stocks and higher oil prices also provided support.

West Texas Intermediate futures (CME) closed $1.05 to $1.21 higher through the front 12 contracts.

The Dow Jones Industrial Average closed 354 points higher. The S&P 500 closed 40 points higher. The NASDAQ was up 142 points.

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“The beef cow herd likely increased less than 1% year over year in 2018 to a projected Jan. 1, 2019 level of about 31.9 million head,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “This may be the cyclical peak in herd inventory or very close to it. From the 2014 low of 29.1 million head, this cyclical expansion has increased the beef cow herd by 2.8 million head or 9.6% over five years. The last full cyclical herd expansion occurred in 1990-1996 resulting in an 8.8% herd expansion in six years.”

Moreover, Peel explains beef cowherd dynamics are finally returning to normal, following the unprecedented market forces that drove volatility during the past decade. That included the drought-induced herd liquidation of 2011-2013 that took more cows out of production than would otherwise be expected, followed by the recent rapid expansion.

For instance, Peel says heifer retention projected at 19.3% this year and 18-18.5% are nearing the previous 30-year average of 17.6%. It was as low as 16.6% in 2011 and as high as 21% in 2016.

Similarly, Peel points to the steer-to-heifer ratio of the slaughter mix, which averaged 1.71 during the past 30 years. He explains the ratio increased to 2.14 in 2016, the highest since the early 1970s. It was 1.95 last year and is projected at 1.83 this year.

Finally, at its current rate, Peel says cow slaughter this year will be around 9.7%, close to the long-term average.

Negotiated cash fed cattle trade for the week ended up mostly $2-$3 higher on a live basis at $116-$117/cwt. ($113-$114 in the western Corn Belt), and $2-$7 higher in the beef at $180-$185.

Cattle futures continued higher on Friday, amid light holiday trade and continued support from the friendly Cattle on Feed report and stronger cash fed cattle prices.

Live Cattle futures closed an average of 37¢ higher (7¢ to 70¢ higher).  

Except for unchanged to 20¢ lower in the back three contracts, Feeder Cattle futures closed an average of 83¢ higher.

Corn futures closed mostly 1¢ to 2¢ lower.

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

Choice boxed beef cutout value was 16¢ higher Friday afternoon at $213.85/cwt. Select was 25¢ higher at $198.51.

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Major U.S. financial indices closed lower on Friday, weighed down by trade concerns and the continuing slide of oil prices. West Texas Intermediate (CME) closed $3.84 to $4.21 lower through the next 12 contracts. Week to week, they closed an average of $6.33 lower through the front six contracts.

The Dow Jones Industrial Average closed 178 points lower. The S&P 500 closed 17 points lower. The NASDAQ was down 33 points.

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Total pounds of beef in freezers Oct. 31 were up 2% from the previous month and up 2% from the previous year, according to the latest Cold Storage report from USDA.

Frozen pork supplies were 3% less than the previous month and 5% less than last year.

Total red meat supplies in freezers were down 1% from the previous month and down 1% from last year.

Total frozen poultry supplies were down 9% from the previous month, but up 4% from a year ago.

Between late Tuesday and yesterday, negotiated cash fed cattle trade kicked off at higher money. Live trade was $2.50 higher in the Texas Panhandle at $116.50/cwt. and $1-$2 higher in the western Corn Belt at $113-$114. Dressed trade in the North was $2-$4 higher at $180.

Incidentally, there were 459 head offered in the weekly Fed Cattle Exchange auction and no takers.

Cattle futures closed higher on Wednesday, buoyed by stronger cash fed cattle and a much friendlier Cattle on Feed report than many expected (see below).

Live Cattle futures closed an average of 76¢ higher. 

Feeder Cattle futures closed an average of $1.21 higher.

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

Choice boxed beef cutout value was 40¢ lower Wednesday afternoon at $213.69/cwt. Select was 17¢ lower at $198.26.

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Although closing even to a little higher Wednesday, Major U.S. financial indices were unable to sustain early positive momentum, amid light holiday trade.

The Dow Jones Industrial Average closed fractionally lower. The S&P 500 closed 8 points higher. The NASDAQ was up 63 points.

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Cattle Markets got a boost from Wednesday’s monthly Cattle on Feed report with fewer cattle placed in October than most expected (feedlots with 1,000 head or more capacity). There were 2.25 million head placed in October, which was 6.06% less than last year. Analyst estimates ahead of the report were for an increase of 1% more.

As for placement weights: 51.82% went on feed weighing less than 700 lbs.; 36.17% weighing 700-899 lbs.; 12.00% weighing 900 lbs. or more.

Cattle marketings in October were a touch more than expected at 1.89 million head, which was 4.78% more than last year.

Cattle on feed Nov. 1 of 11.69 million head were 3.18% more than last year, about 1% less than many expected.

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

Cattle futures closed mixed (Live Cattle) to a touch lower (Feeder Cattle) on Tuesday, pressured by sharply lower outside markets and light trade volume, as much as anything. There was also wait-and-see for Wednesday’s monthly Cattle on Feed report (see below).

Live Cattle futures closed 45¢ lower to 20¢ higher.

Feeder Cattle futures closed an average of 18¢ lower.

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

Choice boxed beef cutout value was 70¢ higher Tuesday afternoon at $214.09/cwt. Select was 14¢ lower at $198.43.

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Major U.S. financial indices fell hard on Tuesday, pressured by everything from tech stocks, to retail, to another plunge in crude oil prices. The underlying concern appears to be notions of slower global economic growth, tied to both trade issues and higher interest rates.

Futures prices for West Texas Intermediate Crude (CME) declined $3.72 to $3.85 over the next 12 months. Spot Jan closed at $53.43, which was $10 lower than where it started the month.

The Dow Jones Industrial Average closed 551 points lower. The S&P 500 closed 48 points lower. The NASDAQ was down 119 points.

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Judging by various estimates and surveys, most analysts expect the monthly Cattle on Feed report on Wednesday (12 p.m. EST) to show higher October placements and marketings, as well as more cattle on feed Nov. 1 than a year ago.

For instance, analysts at Allendale, Inc. expect placements to be 4.3% higher at 2.496 million head, the most for the month in eight years. They estimate marketings 3.4% more at 1.862 million head, the most for the month in 11 years. Finally, they project cattle on feed Nov. 1 to be 11.961 million head, which would be 5.6% more than last year, the most for the month in 12 years, and the second largest since the data series began in 1996.

You can also find other pre-report estimates that are a few points less bearish on placements.

Negotiated cash fed cattle sales were mainly steady last week on a live basis at $114/cwt. ($112 in the western Corn Belt). Dressed trade was $1-$2 lower at $176-$178.

Except for the back half of Live Cattle, futures prices on Monday eked out minimal gains following pressure early in the session.

Live Cattle futures closed an average of 40¢ higher through the front five contracts, and then unchanged to 35¢ lower.

Feeder Cattle futures closed an average of 38¢ higher, amid extremely thin trade. 

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

Choice boxed beef cutout value was 48¢ higher Monday afternoon at $213.39/cwt. Select was $1 higher at $198.57.

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Major U.S. financial indices closed sharply lower Monday with tech stocks leading the sell-off.

Pressure also came from declining builder confidence, as measured by the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). The index was 8 points lower month to month in November, pressured by concerns about affordability—home prices and interest rates.

The Dow Jones Industrial Average closed 395 points lower. The S&P 500 closed 45 points lower. The NASDAQ was down 219 points.

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“Beef markets have largely been a case of ‘so far, so good’ in 2018. I’m cautiously optimistic that this will continue in 2019 but the risks to beef demand will be higher in the coming year,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. 

Although slowing, Peel explains beef production next year is forecast to be 1.5-2.0% higher at a record 27.5 billion lbs., following the estimated 3.3% increase this year to 27.0 billion lbs.

“Through 2018, total beef production has increased 14.2% (3.4 billion lbs.) since the recent 2015 low,” Peel says. “Strong beef demand has supported prices and margins at all levels of the beef and cattle industry as beef production expanded. Continued strong beef demand will be critical in 2019 as beef production pushes to new record levels.”

Among the challenges to beef demand, Peel cites:

Record poultry and pork production

“Thus far, beef has maintained good demand relative to pork and poultry, as indicated by the fact that beef retail prices are at near record ratios compared to retail pork and poultry prices,” Peel says.

Likewise, Peel explains beef imports are about steady with last year, while U.S. beef exports are 13.3% higher.

Domestic and global economic conditions

“The U.S. economy has supported beef demand thus far, but recent stock market volatility highlights fragile macroeconomic conditions going forward,” Peel says.  “Rising interest rates and growing budget deficits will add to inflationary pressures and contribute to a stronger dollar. A rising dollar could add to export headwinds in the coming months.”

Trade issues

“The uncertain global trade situation continues to hang over beef and other agricultural markets,” Peel explains. “There is general agreement that trade disruptions will likely reduce U.S. and global macroeconomic growth in 2019.  While the beef industry has avoided most of the direct tariff impacts thus far, indirect tariff impacts will continue to grow unless the trade situation is resolved very soon. Consumers will see growing tariff impacts that may impact consumer spending and beef demand…Tariff-driven price increases could push consumers to cheap and abundant pork and poultry at the expense of beef demand.”

Negotiated cash fed cattle trade remained largely undeveloped through late Friday afternoon, at least in term of trades reported to USDA. Although too few to trend, early prices in Nebraska and the western Corn Belt were unevenly steady to a touch softer than the previous week. Early dressed sales were at $178/cwt. in both regions. Early live sales in the western Corn Belt were at $111.50-$112.00.

Late Friday, the Texas Cattle Feeders Association reported its members trading at $114, just a touch lower than the previous week’s weighted average.

Live Cattle futures mainly paddled sideways on Friday as traders awaited direction from the cash market. Feeder Cattle softened a bit, amid anemic trade volume.

Live Cattle futures closed mostly higher, from an average of 26¢ lower to an average of 45¢ higher.

Other than $1.32 lower in spot Jan and 15¢ lower in the back two contracts, Feeder Cattle futures closed an average of 69¢ lower.

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

Choice boxed beef cutout value was 64¢ lower Friday afternoon at $212.91/cwt. Select was 01¢ lower at $197.57.

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Cash bids were mixed for grains and soybeans Friday.

“Export sales for the week ending Nov. 8 were all within trade expectations,” said analysts with the Daily National Grain Market Summary. “Corn sales totaled 35.1 million bu., which was at the highest end of the range. Soybean sales totaled 17.3 million bu., which was on the low end of estimates.

Wheat bids were 3½¢ lower to 2¾¢ higher. Soybean bids were ½¢ lower to 3½¢ higher. Sorghum bids were 5¢ lower. Corn bids were 2¾¢ to 3¢ lower.

Corn futures closed mostly fractionally lower to 2¢ lower.

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Major U.S. financial indices closed mixed Friday, pressured by tech stocks, but buoyed by hopes regarding trade talks with China.

The Dow Jones Industrial Average closed 123 points higher. The S&P 500 closed 6 points higher. The NASDAQ was down 11 points.

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If the most recent USDA Farm Labor report is in the ballpark, job competition is helping to push farm wages higher.

“Farm operators paid their hired workers an average wage of $14.47 per hour during the October 2018 reference week (Oct. 7-13), up 8% from the October 2017 reference week,” according to the report from the National Agricultural Statistics Service (NASS). “Field workers received an average of $13.74 per hour, an increase of 7%. Livestock workers earned $13.38 per hour, up 9%. The field and livestock worker combined wage rate, at $13.64 per hour, was up 8% from the 2017 reference week. Hired laborers worked an average of 41.5 hours during the October 2018 reference week, down slightly from the hours worked during the October 2017 reference week.”

According to NASS, farm and ranch operators hired (directly) 784,000 workers during the October reference week, which was 7% less than a year earlier.

Negotiated cash fed cattle trade remained undeveloped through Thursday afternoon.

Cattle futures gained a little ground, with some attributing part of the strength to rumors that Japan will remove its age restriction on U.S. beef—implemented in the wake of BSE discovered here in 2003.

Other than 20¢ lower in the back contract, Live Cattle futures closed an average of 27¢ higher.

Other than 35¢ lower in expiring Nov, Feeder Cattle futures closed an average of 85¢ higher.

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

Choice boxed beef cutout value was 39¢ higher Thursday afternoon at $213.55/cwt. Select was 40¢ higher at $197.58.

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Major U.S. financial indices closed higher Thursday, buoyed by tech stocks and reports that the U.S. and China were inching closer on trade talks.

The Dow Jones Industrial Average closed 208 points higher. The S&P 500 closed 28 points higher. The NASDAQ was up 122 points.

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The estimated number of cattle outside feedlots Oct. 1—cattle available to place on feed— was 30.1 million head, just 0.6% more than a year earlier, according to the most recent monthly Livestock, Dairy and Poultry Outlook.

“Winter forage seems to be in better condition than last year, which could provide a home for these calves to stock over the winter. While this may be a positive sign for feeder calf prices in the coming months, limiting factors are the record numbers of cattle already on feed at the beginning of October and expectations of higher feed prices,” say analysts with USDA’s Economic Research Service (ERS). “In addition, cattle are staying on feed longer than last year.”

The estimated percentage of cattle on feed for more than 150 days in October was around 17%, which was approximately 3% more than last year; slightly above the average for 2013-2017, but less than in 2016.

“The higher number of cattle already in feedlots may limit the competition from feedlots for ownership of these calves, and higher feed prices may limit feedlot management’s willingness to pay higher prices for calves,” say ERS analysts.

ERS left the projected fourth-quarter feeder steer price unchanged from the previous month at $151-$155/cwt. The 2019 annual price forecast was lowered to $140-$151 on slightly higher anticipated feed costs and continued large feedlot numbers.

Negotiated cash fed cattle trade remained undeveloped through Wednesday afternoon. If some of the fed cattle auctions—and a smattering of country sales—are any indication, though, steady money may be a hopeful stretch this week.

For instance, Choice 2-3 steers brought $110.00-$111.25/cwt. at Sioux Falls Regional in South Dakota. Choice 3-4 steers brought $109.00-$111.60.

Although too few to trend, there were some early live country sales in the western Corn Belt at $110, which was $1-$3 lower than last week’s trade in the region.

There were only 620 head offered in the weekly Fed Cattle Exchange auction Wednesday, and no takers.

As for Cattle futures, adjusting to the previous session’s rally seemed to be the main business.

Other than unchanged in June, Live Cattle futures closed an average of 35¢ lower.

After unchanged in the front two contracts, Feeder Cattle futures closed an average of 54¢ lower.

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

Choice boxed beef cutout value was 92¢ lower Wednesday afternoon at $213.16/cwt. Select was $1.80 lower at $197.18.

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Major U.S. financial indices closed lower on Wednesday, with pressure from tech stocks, led by Apple—tied to reports of softer iPhone sales. Banking shares also declined.

The Dow Jones Industrial Average closed 205 points lower. The S&P 500 closed 20 points lower. The NASDAQ was down 64 points.

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Culling decisions and the timing of them could be more complex for some this year, given the state of cull cow prices, says Josh Maples, Extension economist at Mississippi State University.

For price examples, Maples says average cull cow prices reported by AMS were about 12% lower year over year in South Dakota (July-October). Prices at San Angelo, Texas were 18% lower. They were 17% lower in Kentucky.

“While prices have been low already, we are now in the time of year when we typically expect lower cull prices,” Maples explains, in the latest issue of In the Cattle Markets. “Cow slaughter is seasonally higher during the last three months of the year as producers make culling decisions prior to winter. Combined with winter usually being a slower ground beef-demand time of the year, there usually is not much cull market strength until we get closer to Spring.”

For perspective, total cow slaughter this year is averaging 18.9% of total cattle slaughter, compared to a long-term average of 17.7% of total slaughter, according to Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments.

“Total cow slaughter is up 7.3% year to date with beef cow slaughter up 10.5% year over year as beef cow culling returns to long-term average levels,” Peel says.

“Dairy cow slaughter is currently up 4.3% year over year.”

Using NASS data, analysts with the Livestock Marketing Information Center (LMIC) say the average dairy cow price for the quarter ending Oct. 1 was $1,230. That’s $380 less (-24%) year over year. In the latest Livestock Monitor, they explain the NASS data reflect only cows sold to be used as dairy herd replacements.

Add it all up and Maples says deciding whether to sell cull beef cows now or carry them through the winter could be less straightforward than usual, at least for some.

“Culling, even at current prices, will still make sense for many (probably even most) producers once the cost of carrying a cow through the winter is considered,” Maples says. “But, for producers with relatively low marginal wintering costs, this is at least a year to crunch the numbers.”

Cattle futures got some spark Tuesday—especially Feeder Cattle— credited in part to oversold conditions.

Other than unchanged in the back contract, Live Cattle futures closed an average of 57¢ higher.

Except for 60¢ higher in spot Nov, Feeder Cattle futures closed an average of $2.12 higher ($1.32 to $3.15 higher).

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

Choice boxed beef cutout value was $1.47 lower Tuesday afternoon at $214.08/cwt. Select was $1.41 lower at $198.98.

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Major U.S. financial indices tried but failed on Tuesday to regain steep losses from the previous session. Along with tech stocks, the continuing decline in crude oil prices continued to weigh on the market.

West Texas Intermediate Crude Oil futures (CME) closed $4.02 to $4.24 lower through next November. Spot Dec closed at $55.69. It was $71.18 a month ago; $76.24 about six weeks ago. At least part of the recent slide in prices has to do with increased production by OPEC countries and the softer outlook for global economic growth.

The Dow Jones Industrial Average closed 100 points lower. The S&P 500 closed 4 points lower. The NASDAQ was just a tick to the positive side.

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Consumer spending for food and beverages (purchased for off-premises consumption—mainly grocery stores) increased 2.8% and 4.0% in the spring and summer quarters, respectively, according to analysts with the Livestock Marketing Information Center (LMIC).

Those increases fall into the middle range of growth for this sector during the last two years,” say LMIC analysts, in the latest Livestock Monitor. “Meanwhile, the spending category of ‘food services and accommodations’ jumped 8.1% and 6.9% during the spring and summer quarters, capturing the preference for away-from-home meals (e.g., restaurants).”

For overall context, the LMIC folks explain the net value of goods and service produced by the U.S. economy increased by an annual rate of 3.5% in the summer quarter and by 4.2% in the spring quarter.

“Wholesale market measures of beef demand were consistent with trends in consumer spending choices,” LMIC analysts say. “The Choice beef cutout this summer was up 3% from a year ago, even as beef supplies from steers and heifers increased by 0.5%. More product selling at a higher price is the essence of favorable demand. Impressive export growth also played a role in this situation.”

Bottom picking and a rally in Lean Hog futures were credited with some of the support that helped Cattle futures regain some stability in the wake of Friday’s sharp decline.

Other than an average of 27¢ higher in the front two contracts and 50¢ higher at the back, Live Cattle futures closed an average of 11¢ lower.

Except for 15¢ higher in the back contract, Feeder Cattle futures closed an average of 65¢ lower.

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

Choice boxed beef cutout value was 35¢ higher Monday afternoon at $215.55/cwt. Select was $1.67 higher at $200.39.

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Major U.S. financial indices closed sharply lower Monday, pressured by tech stocks—led by Apple— and continued worries about global economic growth and trade.

The Dow Jones Industrial Average closed 602 points lower. The S&P 500 closed 54 points lower. The NASDAQ was down 206 points.

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“Steer slaughter continues to run below year-ago levels so far this year. This despite the fact that the quarterly feedlot inventories have shown more steers on feed in 2018 compared to last year,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “For the year to date, steer slaughter is about 1% below last year, but in the last four weeks has averaged very close to year-ago levels. Steer slaughter has averaged 51.6% of total cattle slaughter so far this year, down from 52.9% of total cattle slaughter in 2017. As heifer and cow slaughter return to normal levels, steer slaughter will move closer to the long-term average of 50.6% of total slaughter.”

So far this year, Peel says heifer slaughter is averaging about 7% more than last year, but has been only 1.5% more over the past four weeks.

“Heifer slaughter thus far in 2018 has averaged 27.8% of total cattle slaughter, up from 27.2% in 2017,” according to Peel. “As heifer retention continues to slow, heifer slaughter will approach the long-term average of just under 30% of total cattle slaughter.”