Daily Market Highlights

Negotiated cash fed cattle prices lost ground. Live sales were mainly $1-$2 lower at mostly $114-$115/cwt. ($111-$113 in the western Corn Belt). Dressed trade was steady to $3 lower at $177-$180.

Those lower prices were made possible, in part by the sharp erosion in Cattle futures on Friday. Pressure for the board included faltering wholesale beef values, declining open interest and growing chatter that the top may already be in for beef prices this season.

Live Cattle futures closed an average of $1.21 lower (35¢ to $2.07 lower).

Feeder Cattle futures closed an average of $2.04 lower ($1.17 to $2.47 lower).

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

Choice boxed beef cutout value was 87¢ lower Friday afternoon at $215.20/cwt. Select was 39¢ lower at $198.72.

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Major U.S. financial indices closed lower Friday, with weakness widely attributed to concerns about slowing global economic growth.

The Dow Jones Industrial Average closed 201 points lower. The S&P 500 closed 25 points lower. The NASDAQ was down 123 points.

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“When factoring in slaughter and weights, the grading data continues to indicate larger supplies of Prime and Select beef and a little less Choice than a year ago,” says David Anderson, Extension livestock economist at Texas A&M University, in the most recent issue of In the Cattle Markets. “It looks like steer slaughter is starting to pick up a little, so we might expect growing beef supplies in the coming months, especially when considering more cattle on feed than a year ago.”

For perspective, Anderson explains that for the week ending Oct. 20, 70.8% of cattle (presented for grading) graded Choice, compared to 71.6% for the same week a year earlier. There were 8.9% Prime-grading carcasses, which was 7.1% more than a year earlier. Likewise, 17.4% of carcasses graded Select, compared to 15.3% last year.

Although cash fed cattle trade remained undeveloped through Thursday afternoon, and wholesale beef values were sharply lower, Cattle futures eked out slight gains. Some credited part of the support to the lack of bounce in grain prices, following the monthly World Agricultural Supply and Demand Estimates.

Except for 2¢ lower in the back contract, Live Cattle futures closed an average of 44¢ higher.

Except for unchanged in the back contract, Feeder Cattle futures closed an average of 22¢ higher.

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

Choice boxed beef cutout value was $2.15 lower Thursday afternoon at $216.07/cwt. Select was $2.66 lower at $199.11.

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Major U.S. financial indices closed narrowly mixed Thursday. Election-based optimism the previous day was tempered by indications the Federal Reserve will continue to increase interest rates, albeit gradually. They left the rate unchanged for the time being.

According to a statement from the FOMC. “The Committee expects that further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2% objective over the medium term. Risks to the economic outlook appear roughly balanced.”

The Dow Jones Industrial Average closed 10 points higher. The S&P 500 closed 7 points lower. The NASDAQ was down 39 points.

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Estimated beef production for this year was lowered by 30 million lbs. to 26.91 billion lbs., according to the latest monthly World Agricultural Supply and Demand Estimates (WASDE). For next year, beef production was reduced by 100 million lbs. to 27.81 billion lbs.

The estimated fed steer price for the fourth quarter is projected to be $112-$116/cwt., with an annual average for this year of $116.79, 50¢ more than the previous month’s projection. Fed steer prices for next year are estimated at $118-$126 in the first quarter; $118-$128 in the second quarter; $109-$119 in the third.

Negotiated cash fed cattle trade remained undeveloped through Wednesday afternoon. There were just 310 head offered in the weekly Fed Cattle Exchange auction, and no takers.

Despite sharply higher outside markets, Cattle futures continued to erode on Wednesday, led by Feeder Cattle, as traders seem to be concentrating on increased beef supplies down the road, rather than relative snugness through the end of the year.

Other than 67¢ higher in spot Nov, Live Cattle futures closed an average of 40¢ lower.

Other than 5¢ lower in spot Nov, Feeder Cattle futures closed an average of 98¢ lower.

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

Choice boxed beef cutout value was 54¢ lower Wednesday afternoon at $218.22/cwt. Select was $2.89 lower at $201.77.

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Major U.S. financial indices bolted ahead Wednesday, with investors apparently cheering the outcome of the mid-term elections.

The Dow Jones Industrial Average closed 545 points higher. The S&P 500 closed 58 points higher. The NASDAQ was up 194 points.

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Increasing producer optimism about current and future conditions drove the Purdue University-CME Group Ag Economy Barometer sharply higher last month.

Specifically, the October barometer reading of 136 was 22 points higher than September, which was the lowest reading for the survey since 2016.

“We continue to see large month-to-month variations in the barometer readings as a result of swings in major commodity prices and emerging news about trade negotiations with key ag trade partners,” says James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture.

The barometer is based on a survey of 400 agricultural producers from across the country. It’s comprised of two sub-indices: the Index of Current Conditions rose 19 points in October to 115; the Index of Expectations rose 24 points to a reading of 146.

Cattle futures stabilized Tuesday, retaining the previous session’s steep losses, but holding ground. Trade was light with many apparently remaining on the sidelines to see the election results.

Live Cattle futures closed narrowly mixed (37¢ lower to 20¢ higher).

Other than 47¢ and 17¢ higher in the front two contracts, Feeder Cattle futures closed an average of 20¢ lower.

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

Choice boxed beef cutout value was 17¢ higher Tuesday afternoon at $218.76/cwt. Select was $2.31 higher at $204.66.

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Major U.S. financial indices closed higher Tuesday with investors awaiting the outcome of mid-term elections.

The Dow Jones Industrial Average closed 173 points higher. The S&P 500 closed 17 points higher. The NASDAQ was up 47 points.

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“Yearling cattle ready for the feedlot remain in strong demand and will likely do so through the end of the year and into 2019,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments.

As for calves, Griffith says it’s reasonable to assume that prices will decline another 2-3% in November.

“The slaughter cow market further exacerbates the situation,” Griffith explains. “Good-conditioned slaughter cows weighing 1,300 lbs. would have resulted in about $560 per head this week based on weekly auction averages (TN), which is about $120 per head lower than what the same cows averaged in September. These value losses are sometimes phantom losses because many producers do not consider what could have been attained during a different marketing period.”

On the other end of the scale, Griffith points to seasonally higher wholesale beef values, which should provide support to fed cattle.

“Stronger beef prices generally result in packers being willing to pay higher money for finished cattle but they continue to fight with cattle feeders to maintain those strong margins,” Griffith says. “The price increase in wholesale beef was to be expected as holiday buying is underway, but beef demand continues to impress and further support prices.”

Negotiated cash fed cattle trade last week ended up steady to higher in late trade.

Live sales were $1-$2 higher in the Southern Plains at $116/cwt. They were steady to $1 higher in the Northern Plains at $114-$116. Live trade was steady in the Western Corn belt at $113-$114. Dressed trade was fully steady at $180.

Despite that, seasonally higher wholesale beef values and apparently snugger packer inventories, Cattle futures headed hard south on Monday. There were no easy explanations, at least not from a fundamental standpoint. Part of it could have been defensive positioning ahead of Tuesday’s election.

Live Cattle futures closed an average of $1.47 lower, from an average of (62¢ to $1.75 lower).

Feeder Cattle futures closed an average of $2.65 lower ($2.20 to $3.32 lower).

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

Choice boxed beef cutout value was 9¢ higher Monday afternoon at $218.59/cwt. Select was 88¢ higher at $202.35.

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Major U.S. financial indices closed mixed Monday. Financial institutions and some energy companies provided support, while tech stocks, including Apple, applied pressure.

The Dow Jones Industrial Average closed 190 points higher. The S&P 500 closed 15 points higher. The NASDAQ was down 28 points.

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U.S. beef exports continued at a stronger year-over-year pace in September, according to data released by USDA and compiled by the U.S. Meat Export Federation (USMEF).

September beef exports of 110,160 metric tons (mt), were 6% more than a year earlier. Export value was 11% more at $687.1 million.

For January through September, beef exports were just over 1 million mt, up 9% from a year ago, while value surged 18% to $6.2 billion.

“With a full quarter still to be reported, beef export value records are already being surpassed in some markets and global value is on track for $8 billion by year’s end,” says USMEF President and CEO Dan Halstrom.

Beef export value equated to $334.63 per head of fed slaughter in September and $320.85 for January through September, each 16% more than a year ago.

For the first three quarters of 2018, exports accounted for 13.5% of total production (up from 12.8%) and 11.1% for muscle cuts, up one full percentage point from last year.

Among the highlights:

Exports to Korea were up 22% from a year ago in volume (19,116 mt) and were 29% percent higher in value ($143.1 million). January-September exports reached 180,495 mt, up 37% from a year ago, while export value soared 51% to $1.29 billion, already breaking last year’s full-year value record.

September beef exports to leading market Japan were up 4% from a year ago in both volume (28,086 mt) and value ($172.3 million). For the first three quarters of 2018, exports to Japan were up 7% from a year ago in volume (252,871 mt), while value increased 10% to $1.59 billion.

Exports to Mexico were up 1% from a year ago in volume (177,906 mt) and 8% higher in value ($783.1 million). With a strong fourth quarter, exports to Mexico should top $1 billion for the first time since 2015.

Negotiated cash fed cattle trade remained mostly undeveloped through late Friday afternoon, although there continued to be chatter that inventory needs would push packers to the trough before the end of the day. The lack of cash direction helped to hold Cattle futures in check, with Feeder Cattle getting extra pressure from rising corn prices.

Live Cattle futures closed narrowly mixed, from an average of 9¢ lower to an average of 37¢ higher.

Feeder Cattle futures closed an average of 46¢ lower in flea-thin trade.

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

Choice boxed beef cutout value was 5¢ lower Friday afternoon at $218.50/cwt. Select was $2.78 lower at $201.47.

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Major U.S. financial indices closed lower Friday, in volatile trade. Pressure included uncertainty surrounding trade issues. Support included a monthly employment report that beat expectations. Non-farm payroll employment increased by 250,000 in October, according to the U.S. Bureau of Labor Statistics. That left the nation’s unemployment rate at 3.7% for the second consecutive month, the lowest rate since 1969.

“…we have a total of 4.5 million new jobs since November 2016. Jobs were added across all industries. Employment hit a record high of 156,562,000,” says U.S. Secretary of Labor Alexander Acosta.

The Dow Jones Industrial Average closed 109 points lower. The S&P 500 closed 17 points lower. The NASDAQ was down 77 points.

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Early tables from USDA for the Agricultural Projections to 2028 that will be published in February suggest the nation’s beef cowherd will peak in 2021 at 32.00 million head, which would be 111,000 head more than the projected inventory on Jan. 1 of next year of 31.89 million head.

Those same projections estimate feeder steer prices (OKC) next year to average $146.50/cwt., compared to this year’s estimate of $148.20. The 5-area Direct fed steer price for next year is estimated at $117.75, compared to this year’s estimate of $116.29.

For this year, analysts with the Livestock Marketing Information Center (LMIC) noted earlier this week, higher costs—including winter feed, fuel, utilities and interest—along with lower cull cow prices are pressuring cow-calf returns.

“Last year had a positive return over cash costs, due to calf prices that strengthened during the second half of the year,” say LMIC analysts, in the latest Livestock Monitor. They estimate cash returns per cow this year at slightly less than breakeven.

Negotiated cash fed cattle trade for the week began to take shape Thursday, on light to moderate trade and moderate demand in the western Corn Belt. Early live sales were $1 higher at $113-$114/cwt., with dressed sales steady at $180. Although too few to trend, there were a few early live trades in Nebraska at $114, which was steady to $1 lower than last week.

Cattle futures firmed on Thursday, mostly retaining gains from the previous session. Along with increasing whole beef values and the promise of steady to higher cash fed cattle prices, strength was also attributed to lighter carcass weights, as a barometer of marketing currentness. According to USDA’s Actual Slaughter Under Federal Inspection report yesterday, steer carcass weights of 894 lbs. (week ending Oct. 20) were 5 lbs. lighter than the previous week and previous year. Heifer carcass weights of 826 lbs. were 5 lbs. lighter than the previous week and 3 lbs. lighter than the previous year.

Live Cattle futures closed an average of 49¢ higher.

Except for 17¢ lower in spot Nov, Feeder Cattle futures closed an average of 49¢ higher.

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

Choice boxed beef cutout value was $1.62 higher Thursday afternoon at $218.55/cwt. Select was 22¢ higher at $204.25.

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Cash bids for grains and soybeans were higher Thursday.

“Corn shipments are up 76% in 2018-19, still a bullish pace, but sales have dropped off the past few weeks,” said analysts with the Daily National Grain market Summary. They add that sales and shipments of soybeans were bearish last week. As well, wheat exports remain 21% below last year’s pace.

Wheat bids were steady to 8¢ higher. Soybean bids were 30¢ lower to 44¢ higher. Sorghum bids were 6¼¢ higher. Corn bids were 3½¢ to 10½¢ higher.

Corn futures closed mostly 1¢ to 3¢ higher.

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Major U.S. financial indices closed sharply higher again Thursday, buoyed by positive quarterly earnings, as well as a more positive outlook for trade talks with China.

The Dow Jones Industrial Average closed 264 points higher. The S&P 500 closed 28 points higher. The NASDAQ was up 128 points.

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Lower same-store sales and lighter traffic pressured the Restaurant Performance Index (RPI) 0.9% lower to 101.1 in September, according to the National Restaurant Association (NRA).

More specifically, according to the report, “The RPI’s September decline was primarily the result of a pullback in the current situation indicators.” The Current Situation Index—one sub-index comprising the RPI—declined 1.7% in September to 100.6. That index accounts for same-store sales, traffic, labor and capital expenditures.

“In addition, 23% of operators expect economic conditions to worsen in six months–the highest level in two years,” according to NRA.

The other sub-index that informs the RPI is the Future Expectations Index. It was 0.1% lower in September at 101.6. That index measure restaurant operators’ six-month outlook for same-store sales, employees, capital expenditures and business conditions.

Only 209 head were offered in the weekly Fed Cattle Exchange Auction on Wednesday—no takers.

Cattle futures closed higher Wednesday, led by Feeder Cattle. Increasing wholesale beef values continued to provide support, as did increasing open interest and expectations for cash fed cattle prices this week to be at least steady with last week’s higher level.

After $1.95 higher in expiring Oct, Live Cattle futures closed an average of 40¢ higher, except for an average of 14¢ lower in two contracts.

Feeder Cattle futures closed an average of $1.35 higher (97¢ to $2.02 higher).

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

Choice boxed beef cutout value was $1.33 higher Wednesday afternoon at $216.93/cwt. Select was $1.15 higher at $204.03.

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Major U.S. financial indices closed sharply higher Wednesday, for a second consecutive day. Support included better than expected quarterly earnings from the likes of General Motors and Facebook.

The Dow Jones Industrial Average closed 241 points higher. The S&P 500 closed 29 points higher. The NASDAQ was up 144 points.

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African Swine Fever (ASF) could impact U.S. beef markets a couple of ways.

On one hand, and arguably, strength in Lean Hog futures in recent weeks can be attributed at least partly to speculation that the ASF outbreak in China and other countries will mean more international demand for U.S. pork, ultimately.

“The U.S. produces approximately 32% of world pork exports,” explains Brenda Boetel, an Extension economist at the University of Wisconsin-River Falls, in the latest issue of In the Cattle Markets. “U.S. pork export quantities have increased in 2018, although prices have not held up as well. One country where U.S. export quantities have decreased steadily since April 2018 is China. China imports approximately 26% of the world trade, and in September 2018 China increased pork imports by 8.4% over September 2017. Yet, volume of U.S. pork exports to China and Hong Kong are down 9% from 2017. Given the African Swine Fever issues in China, and increasing Chinese demand for pork, one can assume the decrease in U.S. exports to China is related to tariff issues.”

On the other hand, U.S. pork exports could suffer if ASF to occur in this nation.

“Given that the U.S. will produce over 26 billion lbs. of pork in 2018, and over 22% will be exported, an incident of ASF in the U.S. would be challenging with regionalization and devastating without regionalization. Should the U.S. become infected with ASF, the impact on pork prices would be severe even if we can keep some of our export trade with regionalization.”

Regionalization refers to the notion of countries not infected with ASF or some other Foreign Animal Disease, continuing to accept exports from uninfected regions within ‘infected’ countries.

“The incidence of ASF in China has both the potential to increase U.S. pork exports, if we can work out a trade agreement with China to lower tariffs on U.S. pork, while also providing huge risk should ASF make the jump to the US,” Boetel says. “Cattle producers need to pay attention, as significant changes in pork prices will impact beef prices and eventually cattle prices.”

Despite seasonally higher wholesale beef values and last week’s higher cash market, Cattle futures closed lower on Tuesday, led by Feeder Cattle, but still basically paddling sideways.

Live Cattle futures closed mostly an average of 51¢ lower.

Feeder Cattle futures closed an average of $1.39 lower.

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

Choice boxed beef cutout value was $1.52 higher Tuesday afternoon at $215.28/cwt. Select was $1.77 higher at $202.88.

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Major U.S. financial indices closed sharply higher Tuesday, with a rebound in tech stocks and some positive quarterly earnings reports, such as those from Coca-Cola.

The Dow Jones Industrial Average closed 431 points higher. The S&P 500 closed 41 points higher. The NASDAQ was up 111 points.

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“With ample wheat pasture virtually assured at this point, producers may stock wheat pastures a bit heavier than usual, leading to additional stocker demand in the coming weeks,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in is weekly market comments. 

In the meantime, wheat planting and development remain behind the average.

78% of winter wheat is planted, according to the most recent Crop Progress report (week ending Oct. 29), which is 5% less than last year and 7% less than the average. 63% has emerged, which the same as last year, but 4% less than the average. 53% is rated in Good or Excellent condition, which is 2% more than a year earlier.

Overall, pasture and range conditions continue more favorable than last year, as well. 50% was in Good (42%) or Excellent (8%) condition compared to 40% a year earlier. 20% was rated as Poor (13%) or Very Poor (7%), which was 5% less than last year.

As for crops, corn harvest caught up with the average of 63%, which is 11% behind last year.

Soybean harvest remains behind, though, with 72% in the bin, which is 9% less than last year and the average.

Cattle futures settled mainly narrowly mixed on Monday, unable to build on last week’s strong cash markets and the seasonal uptick in wholesale beef values. Though trade was light, some analysts pinned part of the weakness on shifting fund positions, from the long side.

Live Cattle futures closed mostly narrowly mixed (from an average of 73¢ lower in three contracts to an average of 24¢ higher).

Except for 90¢ lower in spot Nov, Feeder Cattle futures closed narrowly mixed (25¢ lower to 15¢ higher).

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

Choice boxed beef cutout value was 29¢ higher Monday afternoon at $213.76/cwt. Select was $2.28 higher at $201.11.

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Major U.S. financial indices closed sharply lower again on Monday, amid a volatile day of trading with pressure from tech stocks and continuing trade worries, relative to China.

The Dow Jones Industrial Average closed 245 points lower. The S&P 500 closed 17 points lower. The NASDAQ was down 116 points

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Higher costs—including winter feed, fuel, utilities and interest—along with lower cull cow prices are pressuring cow-calf returns this year, according to the Livestock Marketing Information Center (LMIC).

“On a per cow basis, cash return for 2018 is expected to be slightly negative (about -$10 per cow),” say LMIC analysts, in the latest Livestock Monitor. “Last year had a positive return over cash costs, due to calf prices that strengthened during the second half of the year. Estimated loss per cow in 2018 was smaller than 2016’s. The preliminary 2019 LMIC forecast is for positive returns over cash costs. That situation may further improve in 2020.”

For context, LMIC emphasizes their annual calculations are for market analysis; they don’t reflect any individual operation.

“The estimates only incorporate cash production costs plus pasture rent. A commercial size herd that weans and sells calves in the fall is assumed,” LMIC analysts explain. “…These estimates are best interpreted in a broad context, focusing on the direction of change.”