Daily Market Highlights

Cattle futures edged higher again Thursday, with even lighter trade and less open interest than in the previous session. Support for the day included Lean Hog futures—limit up in the front months, on possible resumption of trade talks with China.

Except for unchanged in spot Aug and 17¢ lower in the back contract, Live Cattle futures closed an average of 37¢ higher.

Feeder Cattle futures closed an average of 68¢ higher (7¢ higher at the back of the board to $1.22 higher in spot Aug).

Boxed beef cutout values were lower 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 85¢ lower Thursday afternoon at $209.10/cwt. Select was 85¢ higher at $201.46.

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Major U.S. financial indices, especially the DJIA climbed higher Thursday on the reports that the U.S. and China agreed to resume trade talks. Strong quarterly earnings also provided support.

The Dow Jones Industrial average closed 396 points higher. The S&P 500 closed 22 points higher. The NASDAQ was up 32 points.

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“The strength in prices (feeder) may be supported by moderate feed costs and the prospect of higher fed cattle prices in 2019,” say analysts with USDA’s Economic Research Service (ERS), in the latest Livestock, Dairy and Poultry Outlook. “The feeder steer price forecasts for the third quarter and fourth quarter of 2018 were revised higher from last month to $147-$151/cwt. and $143-$151. The 2019 full-year price forecast was raised to $138-$150/cwt.”

Fed cattle price estimates were unchanged from the previous month at $115-$117 for 2018 and $113-$122 for 2019.

“Fed cattle marketings appear to be a reflection of meatpackers managing slaughter cattle volumes, and feedlots responding to potentially better margins in the near future,” say ERS analysts. “This will likely keep pressure on fed steer prices in third-quarter 2018.”

Choice 2-4 steers brought $112.16 to $112.83/cwt. at Tama Iowa Wednesday. At Sioux Falls Regional in South Dakota, however, they sold steady to $1 lower than the previous week at $108.50-$109.50. That was the upper end of the range paid a day earlier in Nebraska on light trade.

There were 488 head offered in the weekly Fed Cattle Exchange Auction—none sold.

Cattle futures edged higher Wednesday, amid extremely light trade and declining open interest—range-bound with no conviction one way or the other.

Live Cattle futures closed an average of 29¢ higher.

Feeder Cattle futures closed an average of 45¢ higher.

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

Choice boxed beef cutout value was 31¢ higher Wednesday afternoon at $209.95/cwt. Select was 66¢ lower at $200.61.

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Major U.S. financial indices gave back more than the previous session’s gains on Wednesday. Pressures included tech stocks and lingering concerns about the financial crisis in Turkey.

The Dow Jones Industrial average closed 137 points lower. The S&P 500 closed 21 points lower. The NASDAQ was down 96 points.

Live Cattle futures closed a touch higher Tuesday, supported by stronger wholesale beef values. Feeder Cattle futures mostly leaked lower, perhaps helped along by the surge in grain markets. However, trade was extremely light in both pits.

Live Cattle futures closed an average of 36¢ higher.

Except for an average of 25¢ higher in the front two contracts, Feeder Cattle futures closed an average of 32¢ lower (5¢ to 80¢ lower).

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

Choice boxed beef cutout value was $1.21 higher Tuesday afternoon at $209.64/cwt. Select was $1.61 higher at $201.27.

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Major U.S. financial indices closed higher Tuesday, supported by a rebound in Turkey’s currency, quelling some concerns about that nation’s economy, at least for a day. Tech stocks and robust quarterly earnings from the likes of Home Depot added support.

The Dow Jones Industrial average closed 112 points higher. The S&P 500 closed 18 points higher. The NASDAQ was up 51 points.

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With Labor Day approaching—the last beef-boosting holiday for several months—Stephen Koontz, agricultural economist at Colorado State University sees little potential for cattle and beef price improvement. That has mostly to do with bountiful supplies.

In the latest issue of In the Cattle Markets, Koontz notes the seasonal increase in beef volume, as well as increased cow slaughter due to drought.

“Events in substitute meat markets and trade demand also appear unlikely to provide substantial relief for beef prices,” Koontz says. “Pork production will be up a solid 5% this coming fourth quarter, with consumption up a likely 2.5%. Poultry production and consumption are forecasted to be up moderately but the main word to focus on is, ‘up’ from the prior year.

“Beef exports have been solid through the summer. If they continue through the fall, then this could result in about an additional 40 million lbs. per month removed from the domestic markets this year compared to last. This is a little less than 2% of typical monthly production during fourth-quarter months. Forecasts of beef production during the fourth quarter are to be up better than 3%.”

Last week’s 5-area direct fed steer price was $2.00 lower on a live basis at $110.98/cwt. and $2.23 lower dressed at $175.73.

Softer cash prices helped pressure Cattle futures closed lower Monday, especially nearby contracts, while stronger wholesale beef values offered support.

Live Cattle futures closed an average of $1.08 lower through the front three contracts and then an average of 48¢ lower.

Feeder Cattle futures closed an average of $1.16 lower in the front two contracts and then an average of 43¢ lower.

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

Choice boxed beef cutout value was $1.82 higher Monday afternoon at $208.43/cwt. Select was $1.89 higher at $199.66.  

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Major U.S. financial indices closed lower Monday, pressured once again by Turkey’s financial crisis and fears or rippling economic turbulence.

The Dow Jones Industrial average closed 125 points lower. The S&P 500 closed 11 points lower. The NASDAQ was down 19 points.

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Stocker demand will be the key to calf prices this fall, says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. He points out forage conditions will determine the degree to which stockers can demand calves, while economic conditions will dictate their willingness to do so. That could be the difference between seasonal declines in calf prices or steeper reductions based on more cattle numbers.

“Prices for feeder cattle typically decline seasonally for all weight classes after August,” Peel explains. “Calves and stockers up to 600 lbs. (which peak in March) typically have a seasonal low price in October, while heavier feeder cattle decline from an August peak lower through the end of the year. On average, feeder cattle prices decline 4-5% from August to lows in the fourth quarter.”

All indications are that more cattle will be available through the fall this year than last. For instance, Peel points to the mid-year Cattle report indicating a calf crop this year nearly 2% more than in 2017 and estimated feeder supplies 0.5% larger.

That’s why the importance of price-supporting stocker will be magnified this year. So far, value of gain suggests stocker operators have economic incentive to buy calves.

Peel ran the numbers for Oklahoma the first week of August and came up with a value of gain of $1.19/lb. for adding 319 lbs. to a steer calf weighing 465 lbs. and purchased at $171.59/cwt. and then selling at 774 lbs. for $150.65.

“Value of gain for added feeder cattle weight is largely a reflection of feedlot demand for feeder cattle of various weights,” Peel says. “A value of gain at this level indicates relatively less feedlot demand for lightweight feeders and is an economic signal for increased stocker production. If feeder cattle prices maintain a similar price relationship into the fall and forage conditions are good, fall feeder markets may follow seasonal price patterns rather closely.”

Negotiated cash fed prices were mainly $2-$3 lower last week on a live basis at mostly $110-$111/cwt. Dressed prices were generally $3-$4 lower at $174-$176.

Cattle futures steadied Friday, helped along by light trade volume and sharply lower cash grain prices, tied to the monthly World Agricultural Supply and Demand Estimates.

Live Cattle futures closed narrowly mixed (12¢ lower to 20¢ higher).

Except for unchanged in Jan, Feeder Cattle futures closed an average of 27¢ higher.

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

Choice boxed beef cutout value was 55¢ higher Friday afternoon at $206.61/cwt. Select was 32¢ lower at $197.77. 

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Major U.S. financial indices closed sharply lower Friday, with global markets rattled by the blooming financial crisis in Turkey.

The Dow Jones Industrial average closed 196 points lower. The S&P 500 closed 20 points lower. The NASDAQ was down 52 points.

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Beef production for this year was reduced 56 million lbs. from the previous month’s forecast to 27.09 billion lbs. in August World Agricultural Supply and Demand Estimates (ERS) released Friday.

“The decline in beef production largely reflects a slower pace of marketings in the third quarter,” say analysts with USDA’s Economic Research Service (ERS). “Cow slaughter is raised, but recent carcass weight data and a larger proportion of cows in the slaughter mix led to a reduction in expected carcass weights during the second half of the year.”

Fed steer prices (5-area Direct) were unchanged at the midpoint, though. The third-quarter price is forecast at $107-$111/cwt. Estimates for the fourth quarter are $109-$115; $116-$126 for the first quarter next year.

Total red meat and poultry production for this year was raised 27 million lbs. to 103.12 billion lbs. based on increased broiler production.

Corn prices should continue on the lower end of the scale.

“Corn production is forecast at 14.6 billion bu., down less than 1% from last year. Based on conditions as of August 1, yields are expected to average 178.4 bu./acre, up 1.8 bu. from 2017,” said analysts with the National Agricultural Statistics Service (NASS), in the monthly Crop Production report. “If realized, this will be the highest yield on record for the United States. Area harvested for grain is forecast at 81.8 million acres, unchanged from the June forecast, but down 1% from 2017.”

The season-average corn price received by producers is down 20¢ at the midpoint at a range of $3.10 to $4.10/bu.

Apparently, negotiated cash fed cattle trade will continue the trend of recent weeks: move-ahead one week with strong volume and then retreat the next.

Fed cattle sold mainly $3-$4 lower on a dressed basis yesterday at $174-$175/cwt. in Nebraska and the western Corn Belt; a few up to $179 in both regions for the week. Live trade in the western Corn Belt was mostly $2 lower at $109-$112.

Cattle futures started out sharply lower, but were able to pare some of the losses by session’s end. The notion of lower cash prices could have been part of the pressure. Likewise, chatter about the unwinding of hog and cattle spreads may have played a role. More than anything, though, it had the feel of one of those piling-on algo-trading days.

Live Cattle futures closed an average of $1.69 lower through the front three contracts and then an average of 42¢ lower.

Feeder Cattle futures closed an average of $1.02 lower (72¢ to $1.30 lower).

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

Choice boxed beef cutout value was 33¢ higher Thursday afternoon at $206.06/cwt. Select was 77¢ lower at $198.09.    

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Major U.S. financial indices closed mixed Thursday, once again supported by tech stocks and capped by trade worries.

The Dow Jones Industrial average closed 74 points lower. The S&P 500 closed 4 points lower. The NASDAQ was up 3 points.

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Most bankers in the Eighth Federal Reserve District expect farm income to continue to decline in the third quarter, based on the second-quarter survey of 24 agricultural banks in the region.

“Bankers have reported lower comparative income levels since the fourth quarter of 2013, reaching a low point in the second quarter of 2016,” according to the Agricultural Finance Monitor published by the Federal Reserve Bank of St. Louis. “This correlates with an extended period of depressed prices for commodities.”

The Eighth District includes all or parts of seven Midwest and Mid-South states: Arkansas, Illinois, Indiana, Kentucky, Mississippi, Missouri and Tennessee.

The outlook varies across and within regions, of course.

“Farm income in our region is not as volatile as it is in row crop areas. We are mostly contract poultry and animal production. Independent cattle producers make up the balance of our agriculture production; those prices are off the highs but have stabilized,” says an Arkansas lender.

Similarly, a Missouri lender explained demand for recreational and low-income producing properties is increasing, as buyer confidence grows in the economy.

Quality farmland values in the district declined 3.5% in the second quarter but cash rents increased by 0.4% compared with a year ago.

Conversely, ranchland or pastureland values increased 1.6% relative to a year ago, while cash rents declined by 9%. The drop in cash rents for ranchland or pastureland was the largest percentage drop recorded since the fourth quarter of 2016.

Only 464 head—four lots from Kansas—were offered in the weekly Fed Cattle Exchange Auction Wednesday. None sold, but two lots were passed out at $112/cwt.

Country trade remained undeveloped, although there were a handful of cash trades in Nebraska, but too few to trend. A few traded live at $112/cwt. and a few in the beef at $179.

After early follow-through pressure, especially for Feeder Cattle, Cattle futures firmed, closing mostly marginally higher.

Except for 25¢ and 27¢ lower in two contracts, Live Cattle futures closed an average of 10¢ higher.

Except for 12¢ lower in March, Feeder Cattle futures closed an average of 38¢ higher (5¢ to $1.02 higher).

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

Choice boxed beef cutout value was 24¢ higher Wednesday afternoon at $205.73/cwt. Select was 35¢ higher at $198.86.       

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Major U.S. financial indices closed mixed Wednesday, supported by tech stocks and capped by trade war angst. Crude Oil futures (WTI-CME) were also sharply lower.

The Dow Jones Industrial average closed 45 points lower. The S&P 500 closed fractionally lower. The NASDAQ was up 4 points.

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Low commodity prices and worries about trade helped drive the Purdue University-CME Group Ag Economy Barometer 26 points lower in July to 117.

“This summer we’ve seen tariffs placed on imports of U.S. ag products by China and Mexico that are impacting producers’ bottom line,” says James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture. “This month, we asked producers whether they expect to see their net income decline as a result of trade war conflicts. Over two-thirds of respondents indicated they expect to see lower income because of trade conflicts, with over 70% of them expecting a net income decline of 10% or more.”

Sharp declines were also recorded for the Index of Current Conditions, which fell from 138 to 99, and the Index of Future Expectations, which fell from 146 to 126 in July. The Ag Economy barometer is based on a monthly survey of 400 agricultural producers from across the country.

“Commodity prices dropped sharply in June and July, and there is real concern among producers that those prices will remain low and, possibly, fall even further,” Mintert says.

Approximately 4 out of 10 producers responding to the July survey believe it’s likely that near Dec corn futures will trade below $3.25/bu. and that near Nov soybean futures will trade below $8/bu., between mid-July and this fall.

“Prices in that range would result in a significant cash flow squeeze for many farm operators,” Mintert explains. “While prices at those levels would cover variable production expenses, it would leave some farmers falling far short of covering fixed and overhead expenses.”

Cattle futures took a solid step lower Tuesday, led by Feeder Cattle, apparently mostly due to heavier trade and continued profit taking. However, prices at the close remained in the long-established, sideways channel.

Live Cattle futures closed an average of $1.07 lower (32¢ lower in spot Aug to $1.55 lower).

Feeder Cattle futures closed an average of $1.91 lower (62¢ to $3.12 lower).

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

Choice boxed beef cutout value was 19¢ lower Tuesday afternoon at $205.49/cwt. Select was 18¢ higher at $198.51.

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Major U.S. financial indices continued higher Tuesday, driven by quarterly earnings reports that continue more positive than expected.

The Dow Jones Industrial average closed 126 points higher. The S&P 500 closed 8 points higher. The NASDAQ was up 23 points.

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U.S. beef exports continue on a record pace, according to the latest data released by USDA and compiled by the U.S. Meat Export Federation (USMEF).

June beef exports of 115,718 metric tons (mt), including variety meats, were 6% more than the previous year. The value of June beef exports was 19% more year over year at $722.1 million, just slightly less than the new record set the previous month.

Beef exports for the first half of this year are also record large in both volume and value. Export volume for the first two quarters was 9% more than the same period last year at 662,875 mt. Export value was up 21% at just over $4 billion.  In previous years, export value never topped the $4 billion mark before August.

“It’s remarkable to think that as recently as 2010, beef exports for the entire year totaled $4 billion, and now that milestone has been reached in just six months,” says Dan Halstrom, USMEF president and CEO. “This should be a source of great pride for the beef industry, which has remained committed to expanding exports even when facing numerous obstacles. And with global demand hitting on all cylinders, there is plenty of room for further growth.”

Beef export value averaged $313.56 per head of fed slaughter in June, up 19% from a year ago. The first-half average was $316.94 per head, up 18%.

U.S. pork exports, though, are beginning to sag beneath the weight of trade issues.

Export volume trended lower the past two months, mainly due to lower exports to the China/Hong Kong region. June pork exports were 4.5% less than a year earlier and 3% less for value at $510.4 million. Due to strength before then, U.S. pork exports are 2% more in volume for the first six months of the year—compared to the same period last year—and 5% more in value at $3.36 billion.

“Pork exports–and especially variety meats–face a very challenging environment in China/Hong Kong due not only to retaliatory duties but also because of increasing domestic production in China,” Halstrom explains. “On the positive side, exports are achieving solid growth in most other markets and reached new heights in destinations such as Korea and Latin America.”

When last week’s tally was complete, negotiated cash fed cattle trade was mostly $1-$2 higher at $112 to $114/cwt. Dressed trade was mostly steady to $4 higher at mostly $178.

Cattle futures were a touch lower Monday, presumably on profit taking and retrenching in light of recent strength, stronger cash prices and firmer wholesale beef values.

Except for unchanged in the back two contracts, Live Cattle futures closed an average of 28¢ lower.

Feeder Cattle futures closed an average of 83¢ lower (65¢ to $1.17 lower).

At $149.74, the CME Feeder Cattle Index closed at the highest level since January.

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

Choice boxed beef cutout value was 93¢ higher Monday afternoon at $205.68/cwt. Select was $1.24 higher at $198.33.      

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Major U.S. financial indices continued higher Monday, buoyed by more positive quarterly earnings reports from the likes of Berkshire Hathaway and Tyson Foods.

The Dow Jones Industrial average closed 39 points higher. The S&P 500 closed 10 points higher. The NASDAQ was up 47 points.

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“Agricultural markets are caught in a whirlwind of trade disruptions. Direct market shocks will lead to ripple effects and are likely to affect most agricultural markets worldwide in the coming months,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “In some cases, global market shares may be affected in the short run and possibly long term as well.”

In order to anticipate how markets may be impacted, Peel suggests considering global supply and demand profiles. Among those he highlights, based on current USDA estimates:

Beef—the U.S. produces 20% of the global beef supply. Brazil is second largest at 15.7%, followed by the European Union at 12.5% and China at 11.6%.

Brazil accounts for 19.3% of global beef exports, followed by India (18.1%), Australia (15.4%) and the U.S. (13.1 percent).

The U.S. is the world’s largest beef importer (16.6%), followed by China (14.4%), Japan (10.0%), Hong Kong (7.0%) and South Korea (6.7%).

Pork—China is the largest pork producer, accounting for 48.2% of the global supply. The European Union is next at 21.2%, followed by the U.S. at 10.7%.

The EU accounts for 34.8% of global pork exports, followed by the U.S. (32.1%) and Canada (16.2%).

China is the largest pork importer (19.2%), followed by Japan (18.9%) and Mexico (15.1%).

Corn—The U.S. produces 35.9% of the world’s corn. China accounts for 20.9%, followed by Brazil (8.1%) and the EU (6.0%).

The U.S. exports 40.5% of total global corn exports, ahead of Brazil (17.3%), Argentina (15.9%) and the Ukraine (13.0%).

The European Union (12.3%) and Mexico (11.1%) are the two largest corn importers.

Soybeans—The U.S. and Brazil each produce 35.5% of the global soybean supply, followed by Argentina at 11.0%. China accounts for 62.9% of global soybean imports, followed by the European Union (9.1%) and Mexico (3.0%).

Weekly negotiated cash fed cattle trade was late again on Friday, but at prices reportedly $1-$2 higher than the previous week on a live basis at $113-$114/cwt. and as much as $4 high in the beef at $178.

Notions of stronger cash prices and technical buying helped Cattle futures close solidly higher.

Live Cattle futures closed an average of $1.29 higher (82¢ to $2.07 higher).

Feeder Cattle futures closed an average of $1.41 higher. 

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

Choice boxed beef cutout value was 95¢ higher Friday afternoon at $204.75/cwt. Select was 1¢ lower at $197.09.      

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Major U.S. financial indices closed higher Friday.

The Dow Jones Industrial average closed 136 points higher. The S&P 500 closed 13 points higher. The NASDAQ was up 9 points.

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“Amidst trade tariff and retaliation tariff cycles, one of the big takeaways in cold storage is how little pork inventories changed,” say analysts with the Livestock Marketing Information Center (LMIC), in the most recent Livestock Monitor.  “Total pork in cold storage remained unchanged in the month of June compared to the previous year and was below the prior month by 10%. Of the 12 categories of pork tracked, bellies and trimmings were the only two categories to show worrisome year-over-year gains, up 130% and 38%, respectively.  Although bellies are still building back from historically low levels of the prior year, both cuts also declined relative to May inventories, providing some comfort that the market is continuing to work through large pork supplies and changing trade landscapes.”

As reported previously in Cattle Current, total pounds of beef in freezers June 30 were 3% less than the previous month, but 8% more than the same time a year earlier, according to USDA’s July Cold Storage report.

Total red meat supplies in freezers were down 7% from the previous, month but up 5% from last year.

Total frozen poultry supplies were 3% more than the previous month and 6% more than the previous year.

“As much as trade is weighing in the current market, the most recent cold storage and trade data does not reflect the full weight of what has happened or will happen in the export markets,” LMIC analysts say. “Poultry products did make the list of retaliatory actions by China. The U.S. exports very little poultry meat to China, but about 25% of total poultry meat exports go to Mexico. Larger production is the majority of what is driving the current levels in cold storage, but that could change in the coming months for poultry and pork.”