Daily Market Highlights

After follow-through support early in the session, continued erosion in Lean Hog futures, along with light trade and declining open interest, helped pressure Cattle futures Thursday, especially Feeder Cattle. Cattle futures did close well off of session lows.

Except for 2¢ higher in away Aug, Live Cattle futures closed an average of 16¢ lower.

Feeder Cattle futures closed an average of 56¢ lower across the front half of the board and then and average of 17¢ lower.

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

Choice boxed beef cutout value was 5¢ higher Thursday afternoon at $203.80/cwt. Select was 48¢ lower at $197.10.      

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Major U.S. financial indices closed mixed Thursday, amid lingering trade worries on one hand, and continued positive quarterly earnings on the other.

The Dow Jones Industrial average closed 7 points lower. The S&P 500 closed 13 points higher. The NASDAQ was up 95 points.

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Pastureland values increased 3% year over year—up $40 per acre—for an average of $1,390 per acre, according to the 2018 Land Values Summary released by the National Agricultural Statistics Service (NASS) yesterday. Increases were steepest in the Southern Plains region—up 5.6%.

At $4,130 per acre, cropland value also increased an averaged of $40 per acre from the previous year. It was up 4.7% in the Southern Plains region.

U.S. farm real estate value, a measurement of the value of all land and buildings on farms, averaged $3,140 per acre for 2018, up $60 per acre (1.9%) from 2017 values.

“Regional changes in the average value of farm real estate ranged from an 8.3% increase in the Southern Plains region to a 1.4% decrease in the Northern Plains region,” say NASS analysts. “The highest farm real estate values were in the Corn Belt region at $6,430 per acre. The Mountain region had the lowest farm real estate value at $1,140 per acre.”

Feeder Cattle futures took another step lower Tuesday, presumably pressured mostly by surging grain prices (see below) and month-end positioning. Live Cattle followed along, to a lesser degree.

Except for 7¢ higher in away Aug, and unchanged in Feb and June, Live Cattle futures closed an average of 38¢ lower (5¢ to 75¢ lower).

Feeder Cattle futures closed an average of $1.76 lower through the front half of the board and then an average of 46¢ lower.

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

Choice boxed beef cutout value was 45¢ lower Tuesday afternoon at $204.27/cwt. Select was 40¢ higher at $198.38.   

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Major U.S. financial indices closed higher Tuesday, about gaining back what was given in the previous session. Support included chatter about global economic powers wanting to figure out how to avoid a trade war. Crude oil futures (WTI-CME) were $1.17 to $1.37 lower through the rest of the year.

The Dow Jones Industrial average closed 108 points higher. The S&P 500 closed 13 points higher. The NASDAQ was up 41 points.

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“This calendar year, calf and yearling prices are projected to be similar to 2016’s and 2017’s. In the fourth quarter of this year, calf prices may average slightly below 2017’s, but substantially above 2016’s,” say analysts with the Livestock Marketing Information Center (LMIC), in the latest Livestock Monitor. “If the general trends of the first half of 2018 persist, as of January 1, 2019, the U.S. cowherd likely will be up well less than 1.0% year over year. That suggests cyclically stronger calf prices are ahead (e.g., calf prices in the fall of 2020). Pre-planning may position a cattle operation to take advantage of this market transition.”

Bottom line, those analysts explain the clearest signal in the current market resides on the supply side of the equation, with the national beef cowherd a good ways down the expansion phase of the current cattle cycle.

The recent mid-year Cattle report from USDA underscored the point with just less than 1% more beef cows year to year, along with 2.1% fewer beef replacement heifers.

“The NASS survey largely confirmed that the national herd is still growing, but importantly, at a moderating pace compared to that of recent years,” LMIC analysts say. “Looking ahead, smaller herd growth rates will translate into the rather modest year-over-year increase in beef production in 2019. If recent cowherd trends persist, 2020 could mark the end of the current U.S. cattle inventory build-up.”

Negotiated cash fed cattle trade ended last week mostly $1 lower on a live basis at $112/cwt. It was $2 lower in the western Corn Belt at $110. Dressed trade was $2-$4 lower at mostly $174-$178.

That helped dampen enthusiasm in Cattle futures Monday, with Feeder Cattle receiving extra pressure from the continued uptick in Corn prices.

Except for 15¢ higher in the back contract, Live Cattle futures closed an average of 46¢ lower.

Feeder Cattle futures closed an average of 86¢ lower.

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

Choice boxed beef cutout value was 42¢ lower Monday afternoon at $204.72/cwt. Select was 29¢ lower at $197.98.      

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Major U.S. financial indices closed lower Monday, pressured once again by sliding tech stocks and trade jitters. Crude oil futures were solidly higher, though.

The Dow Jones Industrial average closed 144 points lower. The S&P 500 closed 16 points lower. The NASDAQ was down 107 points.

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Setting aside current trade disputes, and acknowledging the considerable potential for U.S. beef in China, Derrell Peel, Extension livestock marketing specialist at Oklahoma State University says it will take time, patience and persistence.

Peel spent part of this summer in China teaching and researching.

“Building markets for U.S. beef in China will face several challenges. Price is one of those challenges,” Peel explains, in his weekly market comments. “Beef is expensive in China relative to other meats, even more so than in the U.S.  Although growing beef demand in China is the result of a rapidly growing urban middle-class population, beef remains expensive for many consumers. Imported beef from the U.S. is especially expensive.”

Although beef consumption is growing in China, Peel explains another formidable challenge is the role of beef in Chinese cuisine.

“Chinese cuisine is characterized by hot pot, stir-fry dishes and Chinese barbeque that use small amounts of beef in pieces or thinly sliced, rather than large cuts of beef,” Peel says. “Beef offals are very popular and more affordable for many consumers. For example, Chinese barbeque is not large quantities of brisket or other beef cuts, but is various meat products prepared on skewers.

Consequently, Peel explains highly marbled U.S. beef does not necessarily represent additional quality in many Chinese dishes, which adds to the price gap between U.S. beef and domestic Chinese beef or beef imported from most other countries.

“This is not to say that there isn’t potential for U.S. beef in China. However, it does illustrate that accessing the larger Chinese market is not simply a matter of shipping U.S. steaks to China,” Peel says.

Cattle futures closed narrowly mixed on Friday. Support in the front months appeared to be a product of short covering and month-end position squaring, as much as anything. Pressure included uncertainty regarding the cash market, as well as the continued slide in Lean Hog futures, tied to trade disputes with China and Mexico.

Live Cattle futures closed an average of 58¢ higher in the front four contracts (5¢ higher to $1.10 higher), and then an average of 21¢ lower.

Except for 87¢ higher and 35¢ higher in the front two contracts, Feeder Cattle futures closed an average of 31¢ lower.

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

Choice boxed beef cutout value was 23¢ higher Friday afternoon at $205.14/cwt. Select was unchanged at $198.27. 

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Major U.S. financial indices closed lower Friday, led by tech stocks, including Intel and Twitter. That was despite robust second-quarter GDP of 4.1% reported by the U.S. Bureau of Economic Analysis. GDP was up 2.2% in the first quarter.

The Dow Jones Industrial average closed 76 points lower. The S&P 500 closed 18 points lower. The NASDAQ was down 114 points.

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“Boxed-beef values are sitting at the crossroads, as it appears they have put in a summer low,” say analysts with USDA’s Agricultural Marketing Service. 

If so, it ends nine consecutive weeks of declining Choice boxed beef cutout values.

During that time, Choice boxed beef cutout values declined more than $27/cwt., according to Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments.

“Current prices are still slightly below prices from the same week one year ago, but they have shown considerable strength compared to last year,” Griffith says. “Looking at prices from 2017, the Choice cutout peaked at nearly $251 in the middle of June and collapsed to $191 in the middle of September, which is a loss of $60. Thus, the decline in 2018 has only been 45% of the summer decline in 2017. Historical price data would imply there is still potential for downside price risk in the wholesale beef market. However, if packers can hold current prices or push them higher next week, then the risk may be very small.”

After support early, Cattle futures dropped hard Thursday before paring some of the loss. Technical selling, pushed into overdrive by algo trading could have been part of the slide. Some pointed to pressure on commodities, in general, stemming from fewer month-to-month exports of all U.S. goods in June and the widening trade deficit. The U.S. Commerce Department said yesterday that the nation’s international trade deficit was $3.6 billion more in June than May at $68.3 billion.

Live Cattle futures closed an average of $1.16 lower (97¢ higher to $1.40 lower).

Feeder Cattle futures closed an average of $1.42 lower ($1.17 to $1.60 lower).

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

Choice boxed beef cutout value was 27¢ higher Thursday afternoon at $204.91/cwt. Select was 69¢ higher at $198.27.           

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Major U.S. financial indices closed mixed Thursday. Pressure included a steep slide in Facebook on poor quarterly earnings.

The Dow Jones Industrial average closed 112 points higher. The S&P 500 closed 8 points lower. The NASDAQ was down 80 points.

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David Anderson, Extension livestock economist with Texas A&M, offers some insights to last week’s Cattle on Feed and Cattle inventory reports in the latest issue of In the Cattle Markets.

Noting the 2.01 million head marketed in June by feedlots with 1,000 head or more capacity, Anderson explains, “…the marketings rate is holding up well given the large supplies of cattle. That we are moving these large supplies of cattle is a tribute to good demand from retail and export markets and demand for fed cattle from packers. Continued good movement will be critical to cattle prices over the next six weeks approaching Labor Day.”

The number of cattle marketed last month was 0.85% more than last year. However, according to the Livestock Marketing Information Center, daily average marketing in June (adjusting for one less slaughter day than a year earlier) was 5.7% higher year over year (see graph).

Anderson points out the number of heifers on feed July 1 (4.454 million head) was nearly 8% more than a year earlier. He adds the mid-year Cattle report indicates 2.1% fewer beef replacement heifers, year over year.

“When combined with beef cow and heifer slaughter, the data continues to indicate a drastically slowing rate of herd growth,” Anderson says.

There were 1,249 head offered in the weekly Fed Cattle Exchange Auction Wednesday. None were sold, but one lot of steers from Kansas was passed out at $111/cwt., which was $2 less than last week’s price in the Southern Plains. Likewise, there was too little country trade to establish a market.

Cattle futures traded on both sides of even Wednesday, amid light trade and little direction. Other than spot Live Cattle, most contracts in both pits meandered to marginal gains or losses.

Except for unchanged in Feb, Live Cattle futures closed an average of 38¢ higher (15¢ higher to 97¢ higher in spot Aug).

Except for 7¢ higher in spot Aug and 2¢ higher in Jan, Feeder Cattle futures closed an average of 10¢ lower.

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

Choice boxed beef cutout value was 1¢ lower Wednesday afternoon at $204.64/cwt. Select was 37¢ lower at $197.58.     

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Major U.S. financial indices closed higher Wednesday, with extra support coming late in the session on reports that President Trump garnered trade concessions from the EU, including that bloc agreeing to import more U.S. soybeans.

The Dow Jones Industrial average closed 172 points higher. The S&P 500 closed 25 points higher. The NASDAQ was up 91 points.

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U.S. consumers are increasingly eating and preparing their meals at home, contrary to recent news reports that they are eating at restaurants more based on an uptick in foodservice spending, according to The NPD Group (NPD), a leading global information company.

Through its daily research of U.S. consumers’ eating behaviors, NPD shows that four out of five meals are prepared at home, and although the relationship of in-home prepared meals versus those sourced away from home has been stable for a few years, Americans still prepare more meals at home than they did a decade ago. Last year over 80% of meals were prepared and eaten in home.

Although foodservice spending has been increasing—up 2% in the year ending May 2018—foodservice visits were flat in the period compared to year ago. Foodservice spending is up primarily because the cost of a restaurant meal is increasing faster than the cost of a home-prepared meal, according to NPD. Additionally, a restaurant meal has historically cost more than an in-home meal, typically as much as three times more. So, NPD analysts say restaurant visits, whether onsite, drive-thru, or ordered for delivery, are more indicative of foodservice growth than spending, reports NPD.

While U.S. consumers might not be dining out more, they do turn to foodservice for a shortcut in their in-home meal preparation. Close to half of dinners purchased from a restaurant are consumed at home and a growing number of in-home meals are a blend of dishes prepared and items purchased ready-to-eat from a foodservice establishment. NPD’s recently published Future of Dinner study forecasts that blended meals, which include a restaurant or prepared food, will grow over the next five years.

Cattle futures edged lower Tuesday, apparently pressured more by technical selling and rally fatigue than anything else.

Live Cattle futures closed an average of 33¢ lower.

Feeder Cattle futures closed an average of 49¢ lower.

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

Choice boxed beef cutout value was 17¢ lower Tuesday afternoon at $204.65/cwt. Select was 8¢ lower at $197.95.           

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Major U.S. financial indices closed mostly higher Tuesday, with quarterly earnings beating estimates across a variety of sectors, from Alphabet-Google, to  John Deere, to Eli Lilly.

The Dow Jones Industrial average closed 197 points higher. The S&P 500 closed 13 points higher. The NASDAQ was up 1 point.

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U.S. Secretary of Agriculture Sonny Perdue announced yesterday that the U.S. Department of Agriculture (USDA) will take several actions to assist farmers in response to trade damage from unjustified tariff retaliation.

Specifically, USDA will authorize up to $12 billion in programs, which is in line with the estimated $11 billion impact of the unjustified retaliatory tariffs on U.S. agricultural goods.

“This is a short-term solution to allow President Trump time to work on long-term trade deals to benefit agriculture and the entire U.S. economy,” Secretary Perdue said. “The President promised to have the back of every American farmer and rancher, and he knows the importance of keeping our rural economy strong. Unfortunately, America’s hard-working agricultural producers have been treated unfairly by China’s illegal trading practices and have taken a disproportionate hit when it comes to illegal retaliatory tariffs. USDA will not stand by while our hard-working agricultural producers bear the brunt of unfriendly tariffs enacted by foreign nations. The programs we are announcing today help ensure our nation’s agriculture continues to feed the world and innovate to meet the demand.”

USDA will use the following programs to assist farmers:

The Market Facilitation Program, authorized under The Commodity Credit Corporation (CCC) Charter Act and administered by Farm Service Agency, will provide payments incrementally to producers of soybeans, sorghum, corn, wheat, cotton, dairy, and hogs. This support is aimed at helping farmers manage disrupted markets, deal with surplus commodities, and expand and develop new markets at home and abroad.

USDA will use the CCC Charter Act and other authorities to implement a Food Purchase and Distribution Program through the Agricultural Marketing Service to purchase unexpected surplus of affected commodities such as fruits, nuts, rice, legumes, beef, pork and milk for distribution to food banks and other nutrition programs.

Finally, the CCC will use its Charter Act authority for a Trade Promotion Program administered by the Foreign Agriculture Service in conjunction with the private sector to assist in developing new export markets for our farm products.

When all was said and done last week, negotiated cash fed cattle prices moved higher. Live sales in the Southern Plains and Nebraska were $2.00-$3.50 higher than the previous week at mostly $113/cwt. Dressed trade in Nebraska was $5-$6 higher at $178-$181. Compared to two weeks earlier, live trade in the western Corn Belt was mostly steady at $112. Dressed trade was steady to $3 higher at $178-$180.

Higher cash prices and firmer to stronger wholesale beef values helped Cattle futures move mostly higher to start the week.

Except for 20¢ lower in spot Aug, Live Cattle futures closed an average of 52¢ higher.

Except for 42¢ and 22¢ lower in the front two contracts, Feeder Cattle futures closed an average of $1.00 higher.

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

Choice boxed beef cutout value was 65¢ higher Monday afternoon at $204.82/cwt. Select was $1.03 higher at $198.03.        

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Major U.S. financial indices closed narrowly mixed Monday, with support coming from tech stocks.

The Dow Jones Industrial average closed 13 points lower. The S&P 500 closed 5 points higher. The NASDAQ was up 21 points.

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“The modest increase in beef cows, combined with a smaller inventory of beef replacement heifers, suggests that herd expansion is slowing even more in 2018 after slowing in 2017,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “However, the ratio of July 1 to Jan. 1 beef cow inventory is 102.4, a level that historically implies positive herd expansion in the current year. The ratio is down from 2015 and 2017 levels (no 2016 July Cattle report was issued), again indicating slow expansion for the current year and perhaps a peak in the cow herd inventory in 2019.” 

He’s referencing the mid-year Cattle inventory report issued by USDA Friday, showing 0.03% more beef cows than last year, but 2.13% fewer beef replacement heifers. Friday’s monthly Cattle on Feed report also underscored further increased placement of heifers.

“The July 1 quarterly inventory of heifers in feedlots was up 7.7% from last year, a large enough value to suggest further slowing in heifer retention, but down compared to the double-digit year over year increases of the previous four quarters,” Peel says.

For another week, negotiated cash fed cattle trade remained undeveloped through Friday afternoon. Though way too few to trend, there were a few dressed trades in the western Corn belt Friday at $180, which was steady to $5 higher than the last established market in the region two weeks ago.

Lack of cash direction, and perhaps some defensive positioning ahead of the Cattle on Feed report (see below) applied some pressure to Cattle futures.

Live Cattle futures closed mixed, an average of 26¢ lower across the front half of the board, except for 2¢ higher in spot Aug, and then an average of to 36¢ higher in the back four contracts.

Feeder Cattle futures closed an average of 32¢ lower (5¢ to 77¢ lower).

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 32¢ lower Friday afternoon at $204.17/cwt. Select was 8¢ higher at $197.00. 

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Major U.S. financial indices closed slightly lower Friday, with strong quarterly earnings providing a counterweight to more trade worries.

The Dow Jones Industrial average closed 6 points lower. The S&P 500 closed 2 points lower. The NASDAQ was down 5 points.

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Traders should view Friday’s monthly Cattle on Feed report as neutral, coming in about dead-on with most pre-report estimates.

For feedlots with 1,000 head or more capacity, there were 1.79 million head placed on feed in June, which was 1.30% more than last year. By weight, 41.55% were placed at 699 lbs. or lighter; 42.48% at 700-899 lbs.; 15.90% at weights of 900 lbs. or heavier.

Marketings in June of 2.01 million head were 0.85% more than last year.

Cattle on feed July 1 of 11.28 million head was 4.26% (461,00 head) more than the previous year, and the most for the month since the data series began in 1996. The mix included 2% more steers than last year and 8% more heifers.

USDA also released the mid-year Cattle inventory report Friday. Depending on your leanings, there were no surprises.

All cattle and calves July 1 was estimated at 103.2 million head, which is 0.98% more (+1 million head) than the same time last year.

Beef cows of 32.5 million head are 0.93% more (+300,000 head ) than last year.

Beef replacement heifers of 4.6 million head are 2.13% less (-100,000 head) than last year.

This year’s calf crop is estimated at 36.5 million head, which would be 1.93% more (+691,800 head) than last year.

Negotiated cash fed cattle trade remained undeveloped through Thursday afternoon, which helped encourage Cattle futures to wobble along in sideways fashion.

Except for unchanged in near Oct and 60¢ lower at the back of the board, Live Cattle futures closed narrowly mixed (22¢ lower to 22¢ higher).

Except for unchanged in spot Aug, Feeder Cattle futures closed narrowly mixed (32¢ lower to 20¢ higher).

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

Choice boxed beef cutout value was 31¢ lower Thursday afternoon at $204.39/cwt. Select was 17¢ lower at $196.92.          

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Major U.S. financial indices settled lower Thursday, pressured  by bank stocks.

The Dow Jones Industrial average closed 134 points lower. The S&P 500 closed 11 points lower. The NASDAQ was down 29 points.

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Commercial red meat production so far this year is 4% more than the same period a year ago at 26.3 billion lbs., according to the latest Livestock Slaughter report from USDA.

Accumulated beef production for January through June was 4% more than last year at 13.19 billion lbs. In June, beef production of 2.30 billion lbs. was 1% more than the previous year. Cattle slaughter for the month of 2.88 million head was also 1% more than the previous year. The average live weight was unchanged from the previous year, at 1,321 lbs.

Pork production in June totaled 2.01 billion lbs., 2% less than the previous year. That was with hog slaughter of 9.61 million head, down 3% from June last year. The average live weight was 1 lb. more than the previous year at 280 lbs.

For January through June, pork production was 3% more than last year.