Daily Market Highlights

Though too few to trend, early live sales in the western Corn Belt so far this week are at $106.00-$108.50/cwt. with early dressed sales at $170. Prices in that region last week were at $108-$109 and $172-$174, respectively.

Although indications pointed toward lower cash fed cattle prices, Cattle futures firmed on Thursday as traders prepare for the end of the week and month.

Live Cattle futures closed an average of 64¢ higher.

Except for 15¢ lower in expiring spot Aug, Feeder Cattle futures closed an average of 79¢ higher.

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

Choice boxed beef cutout value was 95¢ lower Thursday afternoon at $211.73/cwt. Select was $1.34 lower at $202.21.

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Major U.S. financial indices closed lower Thursday, reportedly pressured by concerns about looming U.S. tariffs on additional Chinese imports, as well as angst about whether Canada will join the recently announced trade pact between the U.S. and Mexico.

The Dow Jones Industrial Average closed 137 points lower. The S&P 500 closed 12 points lower. The NASDAQ was down 21 points.

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Although the latest monthly USDA Cold Storage report noted a 12% increase in year-over-year frozen beef supplies, David Anderson, Extension livestock economist at Texas A&M University points out most of the increase (89%) was boneless beef, versus beef cuts.

“It seems likely that the increase in boneless beef stored supplies is related to increases in cull cow slaughter and beef imports. The small growth in cuts would suggest that beef demand is keeping up with large beef supplies,” Anderson explains, in the latest issue of In the Cattle Markets.

If fat cattle auctions are any indication, negotiated cash fed cattle prices are shaping up to be lower this week.

For instance, fed steers and heifers traded $2-$3 lower at Sioux Falls Regional in South Dakota where Ch 2-4 steers brought $105.60-$107.25/cwt.

Likewise, Choice steers were $2.00-$2.25 lower at Tama, IA, bringing $107.25-$108.36

There were 751 head offered in the weekly Fed Cattle Exchange auction Wednesday, but no takers.

Cattle futures were lightly traded again Wednesday, closing mostly narrowly mixed, with no apparent impact from the USDA announcement about a confirmed case of atypical BSE. It was found in a 6-year-old mixed-breed beef cow in Florida. The animal never entered slaughter channels and never presented a risk to the food supply, or to human health in the United States. Atypical BSE generally occurs in older cattle, usually 8 years of age or older. It seems to arise rarely and spontaneously in all cattle populations.

Except for $1.37 higher in nearly spent spot Aug, Live Cattle futures closed an average of 19¢ higher across the front half of the board and then an average of 26¢ lower.

Feeder Cattle futures closed an average of 17¢ lower across the front half of the board, and then an average of 84¢ lower.

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

Choice boxed beef cutout value was 28¢ higher Wednesday afternoon at $212.68/cwt. Select was 73¢ lower at $203.55.

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Major U.S. financial indices closed higher again Wednesday, led by rallying tech stocks, including Amazon and Apple. Reports that Canada is rejoining the NAFTA talks also provided support.

The Dow Jones Industrial Average closed 60 points higher. The S&P 500 closed 16 points higher. The NASDAQ was up 79 points.

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One downside to the nation’s strong economy and purportedly higher average wages is that it’s making it tougher to hire agricultural workers, which was already a vexing challenge.

According to a new study from CoBank’s Knowledge Exchange Division, manual laborers are chasing higher wages offered in industries like transportation, construction, hospitality and mining, forcing agriculture employers to increase wages at a faster rate to compete.

“Wages have historically been higher in these other industries compared to most farm labor,” says Ben Laine, a senior economist with CoBank. “The difference now is that these jobs are much more widely available and are more in line with the background of workers coming from Mexico.”

The shrinking number of migrant workers from Mexico also exacerbates the scarcity of farm labor. In addition to immigration controls like tightening borders and increased immigration enforcement, birthrates in Mexico are falling and populations are moving toward urban areas, leaving fewer people with agricultural backgrounds who would be interested in U.S. farm work.

The CoBank study, Help Wanted, is broken into two sections: Wage Inflation and Worker Scarcity; U.S. Agribusiness Experience Hiring Headaches.

“Labor accounts for a significant share of overall operational costs for many types of farms, particularly specialty crops and dairies,” Laine says. “In 2016, labor costs on all farms made up about 10% of gross income while in the specialty crop sector, that share was closer to 27%.” 

Cattle futures broke hard from the outset Tuesday, following the previous session’s strong rally. Apparent short covering by the end lifted futures well off of session lows. Overall, it was the same continued light trade and lack of open interest mired in a months-old range.

Live Cattle futures closed an average of 70¢ lower (40¢ to $1.05 lower).

Feeder Cattle futures closed an average of 88¢ lower.

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 $1.10 lower Tuesday afternoon at $212.53/cwt. Select was 44¢ lower at $204.41.

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Major U.S. financial indices edged higher Tuesday, following the previous session’s steep gains. Continued support seemed mostly due to optimism from Monday’s announced trade deal between the U.S. and Mexico.

The Dow Jones Industrial Average closed 14 points higher. The S&P 500 closed fractionally higher. The NASDAQ was up 12 points.

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It might be time to order new earflaps, if the 2019 Farmers’ Almanac (FA) winter forecast is close to reality.

“Contrary to some stories floating around on the internet, our time-tested, long-range formula is pointing towards a very long, cold, and snow-filled winter,” says FA editor, Peter Geiger. FA long-range forecasts are based on a mathematical and astronomical formula developed in 1818.

The Farmers’ Almanac forecasts the coldest weather of this winter season to pour south from Canada and blow into the Northeast, New England, Great Lakes, Ohio Valley, and Southeast during mid-February. Above-normal snowfall is predicted for the Great Lakes states, Midwest, and central and northern New England. The Pacific Northwest and Mid-Atlantic regions of the country are also forecast to have an abundance of snow and wet/icy conditions this winter.

Logic suggested follow-through selling in Cattle futures to start the week, given Friday’s Cattle on Feed report showing about 2% more feedlot placement in July than expected. Instead, they roared higher, helped along by news that the U.S. and Mexico reach a new trade agreement (see below).

Besides which, Derrell Peel, Extension livestock marketing specialist at Oklahoma State University points out in his weekly market comments, feedlots remain current in marketing, despite the increased cattle numbers.

Live Cattle futures closed an average of $2.04 higher (95¢ to $2.60 higher).

Feeder Cattle futures closed an average of $2.58 higher ($1.02 to $3.60 higher).

The weighted average fed steer price (5-area Direct) was $1.22 lower last week on a live basis at $108.77/cwt. It was 32¢ lower in the beef at $172.94.

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

Choice boxed beef cutout value was 31¢ higher Monday afternoon at $213.63/cwt. Select was $1.03 higher at $204.85.

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The U.S. and Mexico reached a free trade agreement Monday, which should bolster the price outlook for some commodities and could smooth the way for trade talks with Canada.

“After a year of tough negotiations, the United States and Mexico reached a trade agreement that is fair and reciprocal and will strengthen both nations’ economies,” according to a statement from U.S. Vice President Mike Pence. “The U.S.–Mexico Trade Agreement is a win for American ranchers, manufacturers, and auto workers. Our nations have agreed to new rules that will maintain duty free access for agricultural goods on both sides of the border. In addition, we have agreed to eliminate non-tariff barriers and take other steps to encourage more agriculture trade between our two countries. Unlike any previous bilateral trade deal, this agreement includes the strongest labor standards, and these requirements are fully enforceable. The President and our entire Administration are grateful to President Peña Nieto and his negotiating team for their good faith efforts to get this deal done. Today is a win for the American people and we look forward to working with members of Congress in both parties to swiftly approve this new trade agreement.”

“This is nothing short of a great victory for farmers and ranchers, because locking in our access to Mexican markets is critical to supporting farm income and strengthening rural communities. Mexico has historically been a great customer and partner and we are happy to have this resolved for our agricultural producers,” said U.S. Agriculture Secretary Sonny Perdue. “We now hope that Canada will see the need to settle all of the outstanding issues between our two nations as well, and restore us to a true North American Free Trade Agreement.”

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Major U.S. financial indices jumped higher Monday, with news of the trade deal between the U.S. and Mexico.

The Dow Jones Industrial average closed 259 points higher. The S&P 500 closed 22 points higher. The NASDAQ was up 71 points.

Negotiated cash fed cattle trade was $1-$2 lower last week at $108/cwt. (western Corn Belt) to $109.50. Dressed trade was steady to $2 lower at $171-$174.

Softer cash fed cattle prices, the lack of open interest and anxiety about Friday’s monthly Cattle on Feed report (see below) pressured Cattle futures sharply lower to end the week.

Except for 57¢ and 7¢ lower in the back two contracts, Live Cattle futures closed an average of $1.51 lower.

Except for 17¢ higher in soon-spent spot Aug and 95¢ lower in the back contract, Feeder Cattle futures closed an average of $1.71 lower.

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

Choice boxed beef cutout value was $1.05 lower Thursday afternoon at $213.32/cwt. Select was 17¢ lower at $203.82.

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Major U.S. financial indices closed higher Friday, amid broad economic optimism.

The Dow Jones Industrial average closed 133 points higher. The S&P 500 closed 17 points higher. The NASDAQ was up 67 points.

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USDA’s monthly Cattle on Feed report will likely be viewed as bearish by the trade with more placements than many expected and the most cattle on feed Aug. 1 since the data series began in 1996.

Placements in July—in feedlots with 1,000 head or more capacity—were 1.74 million head, which was 7.86% more (+127,000 head) than the previous year. That’s about 2% more than popular expectations. In terms of weight distribution, 40.19% went on feed weighing 699 lbs. or less; 44.89% weighing 700-899 lbs.; 14.93% weighing more than 900 lbs.

Marketings in July of 1.87 million head were 4.99% more (+89,000 head) than last year.

Cattle on feed Aug. 1 of 11.09 million head were 4.61% more (+489,000 head) than last year.

At $109/cwt. Thursday, negotiated cash fed cattle trade in the Southern Plains was $1.50 lower than the previous week, amid moderate trade and light to moderate demand. Live trade in other regions this week was generally steady to $1 lower at $108-$110, but mostly $109.00-$109.50. Dressed sales were steady to $1 either side of even at $172-$174.

Cattle futures closed narrowly mixed to lower Thursday, pressured by softer cash prices and perhaps some positioning ahead of Friday’s monthly Cattle on Feed report. Trade continued sluggish and open interest continued to decline.

Live Cattle futures closed an average of 35¢ lower.

Feeder Cattle futures closed 25¢ lower to 32¢ higher.

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

Choice boxed beef cutout value was 33¢ higher Thursday afternoon at $214.37/cwt. Select was 2¢ higher at $203.99.

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Major U.S. financial indices closed lower Thursday, pressured by trade worries and White House legal issues.

The Dow Jones Industrial average closed 76 points lower. The S&P 500 closed 4 points lower. The NASDAQ was down 10 points.

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Unsurprisingly, given drought-forced cattle movement, there’s plenty of range in expectations for Friday’s monthly Cattle on Feed report. Depending on the analyst or survey considered, July placements will be 5-8% more than the prior year, July marketings will be from 2% less to 5% more and the Aug. 1 cattle on feed number will be 4-5% more.

For instance, according to Allendale, Inc., “July Placements are expected to be 8.7% over last year at 1.756 million head. This is the largest July placement in six years. It would also mark three months in a row of higher than last year placements. High placements have been seen despite profitability concerns.”

Allendale anticipates a July marketing total of 1.2% less than the previous year for a total of 1.763 million. The firm expects total cattle on feed Aug. 1 of 11.224 million head, which would be 5.8% more than last year and a record high since the current data-series began in 1996.

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U.S. beef production, was 6% more than the previous July at 2.23 billion lbs., according to the monthly USDA Livestock Slaughter report released Thursday. Total cattle slaughter of 2.77 million head was also 6% higher. The average live weight was 3 lbs. lighter at 1,330 lbs. Keep in mind, there was one more workday this July. Accumulated beef production for January through July was 4% more than the same period last year at 15.42 billion lbs.

Likewise, pork production was 6% more year over year at 1.99 billion lbs. Hog slaughter totaled 9.60 million head, up 6% from July 2017. The average live weight was unchanged from the previous year, at 277 lbs.

In July, U.S. commercial red meat production was 6% more than the previous year at 4.24 billion lbs. For January through July, commercial red meat production was 4% more at 30.5 billion lbs.

There were only 359 head offered—two lots of Kansas heifers—in the weekly Fed Cattle Exchange Auction, but 280 head sold for a weighted average price of $109.50 (delivery at 1-9 days). That’s 50¢ lower than most of the country trade in the region last week.

“Packers are buying cattle in the country at $109.00-$109.50 and were not willing to push any higher than that at the auction,” said the AMS reporter on hand at Sioux Falls Regional Livestock in South Dakota. Choice 2-4 steers brought $108-$109.25 at the auction with estimated dressed cost of $173-$175, some to $176.

Likewise, Ch 2-4 steers brought $109.41-$110.44 at Tama Livestock Auction in Iowa.

Though too few to trend, USDA reported country trade in the region at $108-$110, which was steady to $1 lower than the previous week. Trade in the Northern Plains continued 50¢ to $1.00 lower at $109.00-$109.50.

Although closing above session lows, Cattle futures sagged lower from the outset Wednesday. Commodities had a rough day, in general. Some chalked pressure up to lower outside markets and uncertainty surrounding trade. Others suspect it was mostly algo-trading in the driver’s seat.

Live Cattle futures closed an average of $1.25 lower (67¢ to $1.57 lower).

Except for 47¢ lower in spot Aug, Feeder Cattle futures closed an average of $2.03 lower.

Wholesale beef values were firm 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 47¢ higher Wednesday afternoon at $214.04/cwt. Select was 11¢ lower at $203.97.

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Major U.S. financial indices closed mixed Wednesday with continued strong quarterly earnings providing a counterweight to concerns about the President’s legal troubles.

The Dow Jones Industrial average closed 88 points lower. The S&P 500 closed 1 point lower. The NASDAQ was up 29 points.

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Projected feedlot returns continue on the negative side (cash to cash basis) through the rest of the year, but are significantly more robust than expectations just a few months ago, according to the August Historical and Projected Kansas Feedlot Net Returns.

For instance, projected steer closeouts increase from an estimated -$109.31 per head in July ($82.95/cwt. FCOG*) to -$10.31 in December ($83.94 FCOG).

Likewise, projected heifer closeouts increase from an estimated -$79.18 in July ($88.80 FCOG) to -$11.75 in December ($90.46 FCOG).

“Returns for August-October improved from last month, mainly reflecting increased fed cattle price expectations,” says Glynn Tonsor, agricultural economist at Kansas State University, author of the report.

*Feeding Cost of Gain

Cattle futures closed narrowly mixed to slightly lower Tuesday amid sluggish action and participation as the trade awaits direction from the cash market.

Wholesale beef values were weaker 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 41¢ lower Tuesday afternoon at $213.57/cwt. Select was $1.79 higher at $204.08.

Except for 2¢ to 20¢ higher in the front three contracts, Live Cattle futures closed an average of 28¢ lower.

Feeder Cattle futures closed an average of 39¢ lower.

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Major U.S. financial indices continued to rise Tuesday amid positive economic news, higher crude oil prices and chatter about the longest bull market in history.

The Dow Jones Industrial average closed 63 points higher. The S&P 500 closed 5 points higher. The NASDAQ was up 38 points.

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“Looking at the rest of 2018, feeder prices are expected to be a little lower than during the same period of 2017,” says Josh Maples, Extension livestock economist at Mississippi State University, in the latest issue of In the Cattle Markets. “We typically see seasonal feeder price declines heading into September and October, and the large supplies of calves this year provide some reasoning for that seasonal pattern to hold this year. Looking beyond 2018, the slower herd growth numbers begin to paint a brighter price picture for 2019 and 2020. If the strong domestic economy maintains or grows and exports continue to gain steam, it is not difficult to project higher prices in the Fall of 2019 compared to fall 2018.”

In the meantime, Maples says increasing beef production will pressure prices. He explains beef production increased 6.4% in 2016 and 3.8% last year.

“Current forecasts suggest about a 4% increase in 2018, and 1.5% in 2019,” Maples says. “Put it all together and that would be about a 16% increase in beef production in just four years. This would be the fastest four-year growth since 1973-1977. The increases are slowing, though. All signs are pointing to slower herd expansion in 2018 and 2019. With respect to the cattle cycle, recent cowherd trends suggest 2020 could potentially mark the end of the current U.S. cattle inventory build-up. It is important to note that this would not be the end of a cycle, just the increasing segment of the cycle.”

Negotiated cash fed cattle trade ended up mostly 50¢ to $1 lower last week at mostly $110/cwt. Dressed sales were $1-$3 lower at mostly $173. The weekly 5-area fed steer price was $1.07 lower week to week on Monday at $109.91 live.

Cattle futures edged lower, but firmed after early-session pressure from last week’s softer cash fed cattle prices. Support included sharply higher wholesale beef prices, reaching their highest levels since June.

Choice boxed beef cutout value was $2.60 higher Monday afternoon at $213.98/cwt. Select was $1.37 higher at $202.29.

Except for unchanged to 7¢ higher in the middle of the board, Live Cattle futures closed an average of 21¢ lower.

Except for 2¢ higher in the back contract, Feeder Cattle futures closed an average of 44¢ lower (5¢ lower to $1.32 lower).

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Major U.S. financial indices extended gains Monday, with a decline in Treasury yields and higher hopes that trade issues between the U.S. and a number of countries will find resolution.

Mergers and acquisition news were also supportive, including news that Tyson Foods will purchase Keystone Foods—a major meat supplier to leading Quick Service restaurants—from Marfrig Global Foods for $2.16 billion.

According to Tom Hayes, president and CEO of Tyson Foods, “…Keystone provides a significant foundation for international growth with its in-country operations, sales and distribution network in high growth markets in the Asia Pacific region, as well as exports to key markets in Europe, the Middle East and Africa.

The Dow Jones Industrial average closed 89 points higher. The S&P 500 closed 6 points higher. The NASDAQ was up 4 points.

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African Swine Fever (AFS) is threatening China’s swine industry, the world’s largest hog population. Three cases have been confirmed so far—in three provinces with a fourth implicated—according to the Swine Health Information Center (SHIC). The first was confirmed Aug. 3 and the latest Aug. 20.

AFS is a highly contagious hemorrhagic disease that affects pigs of all ages, according to the World Organization for Animal Health Organization (WHO).

“With high virulence forms of the virus, ASF is characterized by high fever, loss of appetite, haemorrhages in the skin and internal organs, and death in 2-10 days on average. Mortality rates may be as high as 100%,” according to a WHO fact sheet.

Although some pork production systems in China are similar to those in the U.S., SHIC explains much of domestic consumption in China comes from small production units—family or neighborhood—with pigs fed human food scraps.

“The swine industry has never seen an ASF outbreak in such a production landscape, and control measures are untested,” according to the SHIC Monitoring Report. “The Chinese industry has had difficulties in controlling FMD (Foot and Mouth Disease) and CSF (Classical Swine Fever), and has relied heavily on the use of vaccines. As a vaccine is not available for ASF, the industry is thus reliant on heightened biosecurity, rapid diagnosis, complete isolation, and then elimination of infected pigs and contaminated materials.”

Negotiated cash fed cattle sales were at $109.00-$110.50/cwt. in Nebraska through Friday afternoon. That was steady to $2 less than previous week. Dressed trade was at mostly $173, which was $2 less than the prior week. Elsewhere, trade remained undeveloped for the week, based on USDA reports.

Despite that, Cattle futures gained ground, supported by extended gains in Lean Hog futures and strengthening wholesale beef values.

Live Cattle futures closed an average of 97¢ higher (47¢ higher at the back of the board to $1.60 higher in near Oct).

Feeder Cattle futures closed an average of $1.13 higher (67¢ higher to $1.70 higher).

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

Choice boxed beef cutout value was $2.28 higher Friday afternoon at $211.38/cwt. Select was 54¢ lower at $200.92.

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Major U.S. financial indices extended gains from the previous session, buoyed by reports that President Trump and Chinese leader Xi Jinping are working on plans to discuss trade issues.

The Dow Jones Industrial average closed 110 points higher. The S&P 500 closed 9 points higher. The NASDAQ was up 9 points.

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“In the recent past, price movements in the cattle markets and most agricultural commodity markets, for that matter, have been attributed to weather events, trade issues or some other newsworthy disgruntlement,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “However, the softening that is taking place in today’s market seems to have more to do with the seasonal price patterns established through supply and demand factors.”

Although prices for feeders and fed cattle continue higher than many expected, Griffith points out feeder cattle prices typically peak in August and then soften heading into fall.

“Softer prices on calves and feeder cattle this week may be a sign that the market is beginning its seasonal decline, which is fully evident in the slaughter cow market,” Griffith says. “Calves and slaughter cows tend to take a larger hit in the fall than do feeder cattle. There are sure to be producers who try to time the market during the fall months, which may result in $10 to $15 more per head on a certain week, but the strategy of trying to time the market when prices are heading lower does little to improve profitability.”