Daily Market Highlights

Negotiated cash fed cattle trade for the week was mainly steady to weak with live sales at $111/cwt. in the Northern and Southern Plains; mostly $2 lower in the western Corn Belt at $108. Dressed sales were $1 lower at $174.

Firming grain prices helped pressure Feeder Cattle futures sharply lower Friday. In turn, Live Cattle closed lower to a much lesser degree.

Live Cattle futures closed an average of 55¢ lower.

Feeder Cattle futures closed an average of $1.63 lower ($1.27 to $2.12 lower).

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

Choice boxed beef cutout value was 20¢ higher Friday afternoon at $202.71/cwt. Select was 21¢ lower at $192.28.

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Gains in Asian and European shares overnight helped plug the recent sell-off as major U.S. financial indices closed higher Friday.

The Dow Jones Industrial Average closed 287 points higher. The S&P 500 closed 38 points higher. The NASDAQ was up 167 points.

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Strong growth in both the U.S. and global economies will support increased demand in domestic and export markets through the end of the year. However, according to the latest Quarterly Rural Economic Review (QRER) from CoBank’s Knowledge Exchange Division (KED), U.S. competitiveness is currently constrained by trade uncertainties and the elevated value of the U.S. dollar, further placing pressure on the agricultural economy as output in most industries rises.

“Agricultural markets are being squeezed as prices remain weak,” says Dan Kowalski, vice president of CoBank’s Knowledge Exchange Division. “While recently negotiated trade deals show some upside for agriculture, global demand for output from the U.S. agriculture sector is being outpaced by current U.S. production.”

CoBank’s latest QRER indicates that any significant farm price improvements over last year’s prices will be limited, particularly with record U.S. yields for many of the major crop commodities adding to available supply levels. Meanwhile, the animal protein and dairy sectors continue to benefit from strong domestic demand and the promise of better access to Mexico and Canada, but will need more export market growth to absorb their current pace of output and expansion.

Negotiated cash fed cattle trade was steady in the Southern Plains Thursday at $111/cwt. It was steady to weak in the North at $108 in the western Corn Belt, $110.50-$111.50 in Nebraska and $111 in Colorado. Dressed trade was steady to $1 lower at $174.

Other than some support at the front of the board, Cattle futures continued to trend lower Thursday.

Except for 55¢ and 30¢ higher in the front two contracts, Live Cattle futures closed an average of 15¢ lower.

Except for 82¢ higher and 57¢ higher in the front two contracts, Feeder Cattle futures closed an average of 60¢ lower.

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

Choice boxed beef cutout value was 40¢ higher Thursday afternoon at $202.51/cwt. Select was 72¢ higher at $192.49.

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Worries about rising interest rates continued to fuel the plunge in major U.S. financial indices Thursday.

The Dow Jones Industrial Average closed 545 points lower. That’s a decline of 1,376 points in the last two sessions. The S&P 500 closed 57 points lower (151 points lower in the last two days). The NASDAQ was down 92 points (407 points lower in the last two sessions).

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“The forecast for 2018 total red meat and poultry production is lowered from last month,” say analysts with USDA’s Economic Research Service (ERS), in the latest monthly World Agricultural Supply and Demand Estimates (WASDE). “Beef production is reduced from the previous month, largely due to lower expected fourth-quarter fed cattle slaughter. Carcass weights are forecast lower on a higher expected proportion of cows in the slaughter mix.”

Beef projection for this year was projected 150 million lbs. less than the previous month at 26.94 billion lbs. Next year’s beef production is estimated to be 970 million lbs. more than this year at 27.91 billion lbs.

The fourth-quarter fed steer price (5-area direct) is estimated at $110-$114/cwt. Next year: $117-$125 in the first quarter; $118-$128 in the second; $109-$119 in the third.

“For 2019, the total red meat and poultry production forecast is raised from the previous month as higher expected beef production more than offsets lowered forecasts for pork and broiler production,” say ERS analysts. “Beef production is raised from last month as larger placements in late 2018 and early 2019 are marketed during 2019. However, carcass weights are lowered for the early part of the year.”

Red meat and poultry production this year was estimated 477 million lbs. less at 102.61 billion lbs. Red meat and poultry production next year was estimated to be 3.2 billion lbs. more than this year at 105.85 billion lbs.

Negotiated cash fed cattle trade remained mostly undeveloped through Wednesday afternoon.

There were a few early dressed sales in the western Corn Belt for steady to $1 lower than last week at $174/cwt. A few live sales there were at $109-$111, but too few to trend.

There were 1,246 head offered in the weekly Fed Cattle Exchange auction Wednesday, and no sales.

A steep plunge on Wall Street helped pressure Cattle futures lower Wednesday.

Live Cattle futures closed an average of 60¢ lower (32¢ to $1.27 lower in spot Oct).

Feeder Cattle futures closed an average of $1.16 lower.

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

Choice boxed beef cutout value was 74¢ lower Wednesday afternoon at $202.11/cwt. Select was 95¢ lower at $191.77

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Major U.S. financial indices closed steeply lower Wednesday amid a massive sell-off led by tech stocks and fears about rising interest rates.

The Dow Jones Industrial Average closed 831 points lower. The S&P 500 closed 94 points lower. The NASDAQ was down 315 points.

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Overall, pasture and range conditions improved again, according to the latest weekly Crop Progress report (week ending Oct. 9). Among states with 35% or more of pasture and range rated as Poor or Very Poor the previous week, conditions improved or stayed the same everywhere, except in Colorado and Idaho.

Nationally, 48% of pasture and range is in Good (40%) or Excellent (8%) condition, 1% more than a week earlier and 7% more than a year earlier. 22% is rated as Poor (14%) or Very Poor (8%), which is 1% less than a week earlier and 3% less than last year.

States with 35% or more pasture and range rated as Poor or Very Poor in the recent report include: Arizona (68%), California (60%), Colorado (62%), Idaho (43%), New Mexico (45%), Oregon (73%), Utah (63%) and Washington (56%). 

Crop progress and harvest continues at a positive pace.

93% of the corn crop is mature, which is 13% more than last year and 10% more than the average. 34% is harvested, which is 13% more than last year and 8% more than average.

91% of soybeans are dropping leaves, which is 3% more than last year and 6% ahead of the average. 32% are harvested, which is 2% less than last year and 4% less than the average.

73% of sorghum is mature, which is 5% more than last and 1% more than average. 39% is harvested, which is 4% more than last year but 3% less than the average.

57% of winter wheat is planted, which is 11% more than last year and 3% more than the average. 30% has emerged, which is 7% more than last year and 2% more than the average.

Cattle futures softened Tuesday as wholesale beef values continue to languish ahead of the expected seasonal uptick.

Live Cattle futures closed an average of 69¢ lower.

Feeder Cattle futures closed an average of $1.02 lower.

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

Choice boxed beef cutout value was 36¢ lower Tuesday afternoon at $202.85/cwt. Select was 91¢ higher at $192.72.

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Major U.S. financial indices closed mostly lower Tuesday as benchmark Treasury Note yields climbed to the highest level in several years, continuing recent investor angst about rising interest rates.

The Dow Jones Industrial Average closed 56 points lower. The S&P 500 closed 4 points lower. The NASDAQ was up 2 points.

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U.S. beef exports topped $750 million in August for the first time, according to data released by USDA and compiled by the U.S. Meat Export Federation (USMEF).

Specifically, August beef export value was $751.7 million, which was 11% more than the previous year, easily exceeding the previous record of $722.1 million reached in May 2018. In terms of volume, August beef exports were 7% more than the previous year at 119,850 metric tons (mt).

For January through August, beef exports totaled 899,300 mt, up 9% from a year ago, while value climbed 18% to $5.51 billion.

“U.S. beef exports continue to achieve tremendous growth, not only in our mainstay Asian markets but in the Western Hemisphere as well,” says Dan Halstrom, USMEF President and CEO. “USMEF is excited about the recent market access developments achieved by the Office of the U.S. Trade Representative (USTR) and USDA, with favorable terms being preserved in Mexico, Canada and South Korea and trade talks getting underway with Japan. A trade agreement with Japan would bring opportunities for even greater expansion as U.S. beef becomes more affordable for Japanese consumers and is back on a level playing field with Australian beef.”

Beef export value averaged $320.92 per head of fed slaughter in August, up 11% from a year ago. The January-August average was $318.66 per head, up 16%. Through August, beef exports accounted for 13.5% of total U.S. beef production, which was 0.7% more than the previous year.

Conversely, U.S. pork exports were pressured by retaliatory tariffs in China and Mexico. August pork export volume was down 1% from last year at 182,372 mt, while export value fell 3% to $494.1 million.

China’s duty rate on pork muscle cuts and variety meat increased from 12% to 37% in April and from 37% to 62% in July. Mexico’s duty rate on pork muscle cuts increased from 0% to 10% in June and then jumped to 20% in July (pork variety meats continue to enter Mexico duty-free). Beginning in June, Mexico also imposed a 15% duty on sausages and a 20% duty on some prepared or preserved hams and shoulders.

“Pork exports have posted an impressive performance in 2018, but the retaliatory duties are a clearly a significant obstacle,” Halstrom explains. “The fact that U.S. trade officials were able to secure duty-free access for U.S. red meat in the new U.S.-Mexico-Canada Agreement is critically important, and we are hopeful that duty-free access for U.S. pork entering Mexico will be restored soon. Tariff relief in China may not come as quickly, but USMEF continues to work with industry partners to keep as much product as possible moving to China while also working aggressively to expand exports in other key markets, including Korea, Central and South America, the ASEAN region and Australia.”

Keep in mind that U.S. beef still faces retaliatory duties in China and Canada. China’s duty rate increased from 12% to 37% in July, with the higher rate applying to all eligible products. Canada’s 10% duty, which also took effect in July, applies to cooked/prepared beef products. All other U.S. beef still enters Canada duty-free.

Negotiated cash fed cattle trade last week was mainly steady at $110-$112/cwt. on a live basis and at $174-$175 in the beef.

Despite continued early pressure in equity markets—tied to worries about rising interest rates—Cattle futures managed to eke out gains to start the week.

Other than 2¢ lower in the back contract, Live Cattle futures closed an average of 24¢ higher.

Except for 10¢ lower in spot Oct and unchanged in the back contract, Feeder Cattle futures closed an average of 19¢ higher.

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

Choice boxed beef cutout value was 4¢ lower Monday afternoon at $203.21/cwt. Select was 7¢ lower at $191.81.

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Major U.S. financial indices closed mixed Monday after stronger pressure early in the session, tied to continued worries over rising interest rates. Bond markets were closed Monday, perhaps providing a reprieve.

The Dow Jones Industrial Average closed 39 points higher. The S&P 500 closed 1 point lower. The NASDAQ was down 52 points.

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Restaurant sales and traffic increased in August (latest data available), according to the National Restaurant Association’s (NRA) most recent Restaurant Performance Index (RPI), which is comprised of two sub-indices: Current Situation Index (CSI) and the Expectations Index (EI).

The August RPI rose 1% from the prior month to 102.0 in August, driven mostly by more optimism surrounding current conditions. The CSI was 1.6% higher month to month at 102.3, the highest level since December of last year. That index accounts for same-store sales, traffic, labor and capital expenditures. August was the seventh consecutive month the CSI was above 100. According to NRA, measures above 100 indicate expansionary industry indicators.

“Restaurant operators reported a net increase in same-store sales for the 10th consecutive month, with customer traffic also turning positive in August,” according to the NRA report.

The Expectations Index in August was 0.4% more than the previous month at 101.7. It measures restaurant operators’ six-month outlook for same-store sales, employees, capital expenditures and business conditions.

Negotiated cash fed cattle trade was mainly steady through late Friday afternoon at $110-$112/cwt. on a live basis and at $174-$175 in the beef. Trade remained undeveloped in the Southern Plains.

Steady cash and surging Lean Hog futures helped cap pressure in Cattle futures.

Other than narrowly mixed through the front four contracts, Live Cattle futures closed an average of 36¢ higher.

Except for 12¢ lower in Jan, Feeder Cattle futures closed an average of 45¢ 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 61¢ lower Friday afternoon at $203.25/cwt. Select was 24¢ lower at $191.74.

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Major U.S. financial indices closed sharply lower again Friday, pressured by higher interest rates and fewer jobs than expected in the monthly employment report.

Total non-farm employment increased by 134,000 in September as the nation’s unemployment rate decline 0.2% to 3.7%. Average hourly earnings are 73¢ higher (+28%) over the year to $27.24/hour.

The Dow Jones Industrial Average closed 180 points lower. The S&P 500 closed 16 points lower. The NASDAQ was down 91 points.

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The United States-Mexico-Canada Agreement (USMCA) announced last week offers added market certainty, but leaves some tariffs in place.

“Canada and Mexico are the first and third largest export markets for U.S. agriculture, accounting for more than a quarter of all U.S. agriculture exports,” said Dan Kowalski, vice president of CoBank’s Knowledge Exchange Division (KED). “This agreement will advance the ball for some sectors, but for others, the deal represents a return to the status quo. Market access gains will be modest, but we expect the increased certainty to boost domestic and cross-border investment. However, Canada and Mexico still have tariffs in place that affect the U.S. dairy, pork and beef sectors. U.S. agriculture will have much more to celebrate when those barriers are removed.”

A new KED report—From NAFTA to USMCA—breaks down the impacts of the new agreement on U.S. agriculture by sector, and assesses the issues facing those sectors going forward.

“In many respects, the new North American free trade pact will look very similar to the old one,” according to the KED report. “It will lead to significant change in the auto industry, but changes to other industries will be marginal, including agriculture. While modest, the vast majority of impacts to agriculture will be positive. Access to the Canadian dairy and animal protein sectors will improve, and more importantly, the risk of NAFTA being dismantled will be eliminated.

This will clear the way for domestic investment that is dependent on cross-border demand, as well as cross-border investment by firms that are active in two or all three of the markets.

“The modest benefits that U.S. agriculture will gain from USMCA, however, will continue to be overshadowed by the remaining retaliatory tariffs imposed by Mexico and Canada. The impact of Mexico’s tariffs on cheese and pork, and Canada’s tariffs on prepared beef, far outweigh the benefits laid out in USMCA. Therefore, an agreement on steel and aluminum trade, whenever it is struck, will offer much more for U.S. agriculture to celebrate.”

Lower outside markets helped push Feeder Cattle futures lower Thursday; mixed for Live Cattle. However, futures closed off of session lows, helped along by increasing odds that negotiated cash fed cattle prices will be steady to higher this week.

Although trade remained undeveloped through late Thursday afternoon, and there were too few to trend, some early dressed sales in Nebraska traded at $175/cwt., which was $1 higher than the bulk of last week’s trade.

Live Cattle futures closed narrowly mixed (30¢ lower to 42¢ higher).

Feeder Cattle futures closed an average of 85¢ lower.

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

Choice boxed beef cutout value was 56¢ lower Thursday afternoon at $203.86/cwt. Select was 32¢ lower at $191.98.

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Major U.S. financial indices closed sharply lower Thursday, pressured by investors fretting over higher interest rates.

The Dow Jones Industrial Average closed 200 points lower. The S&P 500 closed 23 points lower. The NASDAQ was down 145 points.

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“As history has taught us, open markets and science-based trade are the key ingredients for export success in the U.S. beef industry,” says Kevin Kester, a fifth-generation rancher from Parkfield, CA, who serves as president of the National Cattlemen’s Beef Association (NCBA). “Once passed, the new U.S.-Mexico-Canada Agreement will build on over two decades of unrestricted, science-based, duty free trade for U.S. beef in North America. The results have been outstanding: Today the U.S. exports around $2 billion worth of beef to Canada and Mexico each year.”

In a recent op-ed, Kester goes on to explain, “Similarly, KORUS reduced tariffs on U.S. beef exports and removed many trade restrictions. Our sales have skyrocketed under KORUS. Global retail giant Costco, who previously sourced Australian beef for their stores in South Korea, is now importing every single ounce of their chilled beef from the United States. Some aspects of previous trade agreements were in serious need of modernization, but the established framework for beef trade works remarkably well.”

Negotiated cash fed cattle trade remained undeveloped through Wednesday afternoon.

There were 358 head offered in the weekly Fed Cattle Exchange Auction: no sales  but one P.O. at $111/cwt.

Cattle futures closed lower Wednesday on apparent technical correction, profit taking and an overall lack of interest, but remained narrowly mixed week to week.

Live Cattle futures closed an average of 78¢ lower (47¢ to $1.07 lower).

Feeder Cattle futures closed an average of 94¢ 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 47¢ lower Wednesday afternoon at $204.42/cwt. Select was $1.68 lower at $192.30.

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Major U.S. financial indices edged higher Wednesday, capped in part by increasing interest rates.

The Dow Jones Industrial Average closed 54 points higher. The S&P 500 closed 5 points higher. The NASDAQ was up 25 points.

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Although Quality Grade Choice and Prime beef continues at the sustained higher level of recent years, David Anderson, Extension livestock economist at Texas A&M University points out the recent, relative decline is adding support to Choice prices.

“Choice beef production over the last four weeks is about 3.2% below a year ago. The effect of fewer carcasses grading Choice is compounded by fewer steers and relatively more heifers in the slaughter mix,” Anderson says, in the most recent issue of In the Cattle Markets. “Fed steer weights are about the same as a year ago while heifers are reflecting heavier weights. This lack of Choice beef is showing up in prices with the Choice cutout at about $204/cwt. compared to about $192 a year ago.”

For broader perspective on beef quality trends over time, Anderson explains that of the carcasses graded in September of 1997, 2% were Prime, 51% were Choice and 37% were Select. In September this year, nearly 8% were Prime, 70% Choice and 18% Select.

“Federally inspected beef production over the last month is up 1.1% over the same period last year. During the same period fed steer slaughter is down almost 2%, while heifer and cow slaughter are 4.4% and 7% higher than a year ago, respectively,” Anderson says. “So, all the increase in beef production in recent weeks is coming from heifers and cull cows. It’s worth a reminder that cull cow beef goes to a different (but related) market than beef from fed steers and heifers.  Cull cow beef most often goes to ground beef.”

After some early pressure, Cattle futures firmed and closed a touch higher Tuesday.

Except for 12¢ lower in the back contract, Live Cattle futures closed an average of 29¢ higher.

Feeder Cattle futures closed an average of 60¢ higher.

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

Choice boxed beef cutout value was 19¢ lower Tuesday afternoon at $204.89/cwt. Select was 65¢ lower at $193.98.

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Major U.S. financial indices closed mixed Tuesday with the DJIA continuing to receive support from the announced United States-Mexico-Canada Agreement.

The Dow Jones Industrial Average closed 122 points higher. The S&P 500 closed 1 point lower. The NASDAQ was down 37 points.

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Agricultural producer sentiment dropped to its lowest level since October 2016 as producers expressed concern over worsening farm financial conditions, according to the latest Purdue University/CME Group Ag Economy Barometer. That barometer is based on a monthly survey of 400 agricultural producers from across the country.

The September barometer reading of 114 declined 15 points from the previous month. As for the sub-indices that comprise the Barometer, the Index of Future Expectations declined 10 points and the Index of Current Conditions dropped 25 points.

“The barometer readings have been unusually volatile over the past few months,” says James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture. “Concerns about the ongoing impact of trade conflicts, and especially China’s tariffs on imports of U.S. ag products, continue to reverberate throughout the U.S. agricultural sector.”

Producers indicated that financial conditions on their farms deteriorated significantly as 2018 unfolded and their expectations for the future also weakened. In September, 54% of farmers surveyed said their farm’s financial condition was worse than a year earlier, up from 38% who felt that way in June. The September survey also indicated that 33% of producers expect their farm’s financial condition to be worse a year from now, up 15 points compared to responses received to the same question in June.

News that Canada will join the U.S. and Mexico and a new North American trade agreement—the United States-Mexico-Canada Agreement (USMCA)— fueled optimism in commodity and equity markets to start the week.

Between the news, firmer wholesale beef values and last week’s steady negotiated cash fed cattle trade, Cattle futures moved higher.

Live Cattle futures closed an average of 34¢ higher.

Feeder Cattle futures closed an average of $1.24 higher (47¢ to $1.52 higher).

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

Choice boxed beef cutout value was $1.20 higher Monday afternoon at $205.08/cwt. Select was $1.19 higher at $194.63.

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Major U.S. financial indices mostly surged higher Monday with the late weekend news about the United States-Mexico-Canada Agreement (see below). CME Crude Oil futures (WTI) closed $2.05 to $2.19/bbl. higher through the next 12 months. Spot Nov closed $6.62 higher than two weeks ago at $75.30.

The Dow Jones Industrial Average closed 192 points higher. The S&P 500 closed 10 points higher. The NASDAQ was down 9 points.

Regarding announcement of a United States-Mexico-Canada Agreement (USMCA), U.S. Secretary of Agriculture Sonny Perdue issued the following statement:

“The new USMCA deal is important for our economy as a whole, including the agricultural sector, which counts Canada and Mexico in our top three trading partners. I have long said that I believe our country is located in the best neighborhood on Earth – North America – with valuable allies to our north and south. We have secured greater access to these vital markets and will maintain and improve the highly productive integrated agricultural relationship we have as nations. Notably, as one of the President’s top goals, this deal eliminates Canada’s unfair ‘Class 7’ milk pricing scheme, cracks open additional access to U.S. dairy into Canada, and imposes new disciplines on Canada’s supply management system. The agreement also preserves and expands critical access for U.S. poultry and egg producers and addresses Canada’s discriminatory wheat grading process to help U.S. wheat growers along the border become more competitive.”

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“Numerous factors will affect the likelihood of a seasonal stocker calf price low in the next month,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “Supplies will grow as feeder volumes increase to a seasonal peak by early to mid-November. With the larger 2018 calf crop, the fall run of calves is expected to exceed last year. However, demand for wheat pasture stockers may partially or totally offset increased stocker calf supplies. 

“I really don’t expect much more increase in stocker prices, but additional increases are possible in the next couple of weeks. As we move through October into November, feeder prices are likely to stabilize or perhaps move lower, but the seasonal low may be quite muted.”