Daily Market Highlights

There were only 428 head offered—all from Kansas—in the weekly Fed Cattle Exchange Auction on Wednesday, but 142 sold for a weighted average price of $112/cwt. That’s $1 higher than country prices in the region last week.

That and surging Cattle futures buoy hopes for stronger negotiated trade yet this week.

Recent stability and firming wholesale beef values helped fuel Cattle futures sharply higher Wednesday. There was also chatter about snugger supplies heading through the fall, based on demand strength.

Live Cattle futures closed an average of $1.62 higher ($1.22 higher at the back of the board to $2.52 higher in spot Aug). The spot contract closed $5 higher week to week.

Feeder Cattle futures closed an average of $2.31 higher ($1.55 higher in the back contract to $3.17 higher in spot Aug).

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

Choice boxed beef cutout value was 41¢ higher Wednesday afternoon at $204.80/cwt. Select was 23¢ higher at $197.09.

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Major U.S. financial indices closed mostly higher Wednesday, supported by positive quarterly earnings in bell-weather banks and industrials.

The Dow Jones Industrial average closed 79 points higher. The S&P 500 closed 6 points higher. The NASDAQ was fractionally lower.

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“Despite firm feeder cattle prices in June and early July, the projected feedlot margin for feeding out a 750-lb. calf that is purchased today appears to have improved, and with lower corn price forecasts for the current and following marketing years, demand for calves for finishing may increase, supporting higher feeder calf prices,” say analysts with USDA’s Economic Research Service, in the latest monthly Livestock, Dairy and Poultry Outlook.

This year’s average feeder cattle price for steers weighing 750-850 lbs. (basis Oklahoma City) is estimated at $141-$144/cwt., compared to last year’s average of $145.08, according to ERS. The July LDPO pegs feeder prices in the third quarter at $140-$144. That’s $6 more on the lower end of the range than the previous month’s estimate and $4 more on the upper end. The fourth-quarter estimate is $136-$144, compared to the previous month’s projections of  $134-$142. First-quarter feeder steer prices next year are projected at $133-$143.

Cattle placed in feedlots earlier than normal through the spring also lends price support.

“Throughout the winter and extending into the summer months, drought conditions have plagued the Great Plains area, squeezing hay and roughage supplies,” say ERS analysts. “During the winter, many calves directed to feedlots might have otherwise stayed on pastures until the spring. This limited the expectation for strong cattle placements in feedlots this spring. However, as the drought expanded into the intermountain region, available summer pastures may have become restricted as well. As a result, some stocker operations may have placed cattle in the second quarter instead of waiting until third quarter. This is likely observed in the year-over-year increase in both volume and percentage of total placements of calves weighing under 600 lbs. in May 2018.”

Cattle futures closed narrowly mixed to lower Tuesday, unable to sustain gains from the previous session. Trade was paltry and the range skinny.

Live Cattle futures closed an average of 21¢ lower, except for unchanged in the back three contracts.

Feeder Cattle futures closed an average of 48¢ lower through the front five contracts (12¢ lower to $1.10 lower) and then 5¢ to 30¢ higher.

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

Choice boxed beef cutout value was 63¢ higher Tuesday afternoon at $204.39/cwt. Select was $1.19 higher at $196.86.  

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Major U.S. financial indices closed higher Tuesday, buoyed by tech stocks and positive quarterly earnings.

The Dow Jones Industrial average closed 55 points higher. The S&P 500 closed 11 points higher. The NASDAQ was up 49 points.

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Given increased fed cattle supplies, Brenda Boetel, Extension agricultural marketing specialist at the University of Wisconsin-River Falls expects year-over-year fed cattle prices for the remainder of the year to be 5-6% less.

“Prior to any trade war, expectations were that finished cattle prices would be approximately 5% lower in 2018 than 2017,” says Boetel, in the latest issue of In the Cattle Markets. “Given the current trade situation, lower wholesale beef prices and large pork production, prices may dip even lower, but the year-over year decreases should not be at the levels seen in the second quarter of 2018.”

For perspective, Boetel says first-quarter fed cattle prices (5-area Direct) were 2.8% above 2017, but second-quarter prices were 12% less.

Cash fed cattle prices softened last week, on light volume with neither packers nor cattle feeders apparently feeling any urgency. Trade volume (5 area direct) was about a third as much as the previous week and half as much as the same week a year earlier. The average live steer price of $110.50/cwt. was $2.13 less than last week; $4.72 less in the beef at $174.05.

After pressure early in Monday’s session, though, traders pushed Live Cattle futures sharply higher, amid thin trade and led by nearby contracts and followed by Feeder Cattle. There was no change in fundamentals. Factors of support likely included continued sings of feedlot currentness, another step through heavy supplies with more success than anticipated, as well as technical buying.

Live Cattle futures closed an average of $1.10 higher (55¢ higher to $2.37 higher in spot Aug).

Feeder Cattle futures closed an average of $1.06 higher (45¢ higher in the back contract to $1.65 higher in spot Aug).

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

Choice boxed beef cutout value was 38¢ lower Monday afternoon at $203.76/cwt. Select was 70¢ lower at $195.67.

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Major U.S. financial indices closed narrowly mixed Monday, on pressure that included lower oil prices and mixed quarterly earnings reports. Crude Oil futures (WTI-CME) were down about $3 for the remainder of the year with the notion that global trade tensions will reduce overall economic activity.

The Dow Jones Industrial average closed 44 points higher. The S&P 500 closed 2 points lower. The NASDAQ was down 20 points.

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Higher acreage for corn and soybeans forecast in last week’s monthly World Agricultural Supply and Demand Estimates should help support cattle prices. Although hay acres increased, too, price impacts are likely to be regional, at least for alfalfa, according to the Livestock Marketing Information Center (LMIC).

For perspective, LMIC analysts say estimated hay acreage increased by more than 1.2 million acres, with alfalfa representing 800,000 acres of the increase.

“Nationally, the bump in alfalfa acres is not expected to have a large impact on prices, but regionally there could be lower prices compared to that of recent years,” LMIC analysts say. “The bulk of acres added in alfalfa are not from high yielding alfalfa states. States with the largest gains came from Montana, South Dakota, North Dakota, and Idaho, which are susceptible to high rates of winterkill and shorter growing seasons. Out of 47 states reporting yields, Montana, South Dakota, and North Dakota are in the bottom 10 for alfalfa yields.”

Negotiated cash fed cattle trade remained mostly undeveloped through Friday afternoon, with no trends from USDA. But, the Texas Cattle Feeders Association reported its members in the Southern Plains trading cattle at $111/cwt., which was $2 less than the previous week.

Cattle futures basically treaded water on Friday, after stronger pressure earlier in the session, with the  lack of cash direction, continued light trade and some apparent positioning ahead of the weekend.

Live Cattle futures closed an average of 35¢ lower.

Except for 30¢ lower in spot Aug and 5¢ lower in Nov, Feeder Cattle futures closed 7¢ to 35¢ higher.

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

Choice boxed beef cutout value was $2.44 lower Friday afternoon at $204.14/cwt. Select was 64¢ lower at $196.37.   

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Major U.S. financial indices held firm to higher Friday, supported by continued strength in quarterly earnings.

The Dow Jones Industrial average closed 94 points higher. The NASDAQ was up 2 points. The S&P 500 closed 3 points higher.

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“Analysis of annual yearling price volatility going back to 1992 shows that price swings this year are on track to be the smallest since 2012,” say analysts with the Livestock Marketing Information Center (LMIC), in the latest Livestock Monitor.

For perspective, yearling steer prices (750-800 lbs., basis Oklahoma City) averaged $145.13/cwt. during the first six months of the year, according to LMIC. That’s $6.45 more than the same time period last year. Steer calves in the same market averaged $176.98 for the first six months, $9.61 more than a year ago.

“Based on monthly average prices, annual price swings from 1992-2002 never topped $20/cwt. Since 2012, annual price swings have been greater than $30/cwt. every year. In 2011 and 2012, the high-to-low price swings were $19.49 and $18.34, respectively,” LMIC analysts say. “Annual price swings greater than $70.00 a year were encountered in 2014 and 2015. During the last 25 years, the most frequent annual price range was $15-$20 (6 years). So far this year, the swing in monthly average prices has been $9.39. The difference in the magnitude of price swings based on weekly versus monthly data makes a statement about how much price volatility has been experienced within some of the months, even though price volatility has been less than in past years.”

Cattle futures bounced back Thursday, about as much and fast as they fell in the previous session, on the same fundamentals. Initial fear—and kneejerk reaction—over the new U.S. tariffs on Chinese imports, fueled by algo trading, provide as apt an explanation as any.

Except for unchanged in the back contract, Live Cattle futures closed an average of 96¢ higher (60¢ to $1.35 higher).

Except for unchanged in April, Feeder Cattle futures closed an average of 97¢ higher (32¢ higher to $1.62higher in spot Aug).

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

Choice boxed beef cutout value was 86¢ lower Thursday afternoon at $206.58/cwt. Select was 13¢ lower at $197.01.

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Major U.S. financial indices closed sharply higher Thursday, erasing losses from the previous session. Rather than ponder the potential trade war with China, investors seemed content to cheer positive quarterly earnings.

The Dow Jones Industrial Average closed 224 points higher. The S&P 500 closed 24 points higher. The NASDAQ closed 107 points higher.

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Beef production for this year was estimated slightly higher in July (27.15 billion lbs.) than the previous month (27.13 billion lbs.) on expectations of increased cow slaughter in the third quarter, according to analysts with USDA’s Economic Research Service (ERS), in the latest monthly World Agricultural Supply and Demand Estimates (WASDE). 

For next year, though, estimated beef production was reduced to 27.69 billion lbs. from 27.72 billon lbs. the previous month. That’s on anticipation of lighter steer and heifer carcasses through the first half of the year.

5-area direct steer prices are projected at $107-$111 in the third quarter and at $108-$116 in the fourth, for an annual price of $114-$117. That’s $1 lower on the top end of the range compared to last month. The annual price for next year is projected at $113-$122, the same as the previous month.

“For 2019, the red meat and poultry production forecast is raised as increases in pork and broiler production more than offsets expected declines in beef production,” ERS analyst say.

There were only four lots—all from Kansas—offered in the weekly Fed Cattle Exchange auction Wednesday. None sold.

Choice 2-4 steers sold for just a touch higher than $111/cwt. at Tama, IA. The same grades brought $108.00-$111.50 at Sioux Falls Regional in South Dakota.

Cattle futures followed outside markets and other commodities—including hogs, soybeans and corn—sharply lower Wednesday, in anticipation of more tariffs from China, following the Trump administration publishing a list of $200 billion worth of Chinese imports that will be subject to 10% tariffs (see below).

Except for 50¢ lower in the back contract, Live Cattle futures closed an average of $1.32 lower (97¢ to $1.60 lower).

Feeder Cattle futures closed an average of $1.50 lower (62¢ to $2.62 lower)

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

Choice boxed beef cutout value was 12¢ higher Wednesday afternoon at $207.44/cwt. Select was $1.25 lower at $197.14.          

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At the end of June, U.S. Agriculture Secretary Sonny Perdue said President Trump instructed him to develop a strategy to support U.S. agriculture producers in the face of retaliatory tariffs. Although no details were provided, odds are increasing for the testing of that strategy.

Late Tuesday night, Robert Lighthizer of the U.S. Trade Representative released a statement saying, that given China’s retaliation to U.S. tariffs, when they were imposed at the end of last week, the President has ordered the U.S Trade Representative to begin the process of imposing tariffs of 10% on an additional $200 billion of Chinese imports…” That’s in addition to the previously announced 25% tariff on $34 billion worth of Chinese imports to the U.S.

As with most commodity markets, the news pressured Major U.S. financial indices sharply lower Wednesday.

The Dow Jones Industrial Average closed 219 points lower. The S&P 500 closed 19 points lower. The NASDAQ closed 42 points lower.

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“Until the trade disputes are resolved, expect cattle and other livestock price volatility to continue,” says Tim Petry, Extension livestock economist at North Dakota State University (NDSU).

In an NDSU Spotlight on Agriculture column published yesterday, Petry explains cattle price volatility in recent months revolves around uncertainty created by several factors.

There’s the drought, for one.

“By the end of June, expanding drought conditions caused about 26% of the U.S. beef cowherd to be in an area experiencing drought,” Petry says. “Last year, only 6% of the beef herd was in drought, with the far northern Plains the hardest hit…Drought conditions pose the threat of forced beef cowherd liquidation and early movement of calves to market. Beef cow slaughter was up more than 12% from last year during the first six months of 2018.”

Those same drought conditions, inducing earlier feedlot placements since last fall, contributed to the seasonal surge in fed cattle supplies this summer.

On the other side of the coin, feed is getting cheaper with a near-perfect start to the growing season for major crops, and with trade concerns pressuring those markets.

“Record highs also create market uncertainty,” Petry says. “U.S. pork, broiler (chicken) and total meat production were all record high in 2017. Those three categories are projected to be record high again in 2018. U.S. beef production likely will follow suit in 2018 with record high production, so record amounts of meat will be available to consume domestically or in the export market. The previous record high beef production occurred in 2002.”

Then throw in the simmering trade issues between the U.S. and what seems like the rest of the world.

“A major reason for increased market volatility in the livestock and grain markets in the last few months revolves around seemingly ever-changing trade negotiations with several important trade countries,” Petry explains. “Positive outcomes with trade agreements are important to the U.S. beef industry so record beef exports, along with robust exports of competing meats, can continue.

Firmer wholesale beef values helped Cattle futures close mostly higher on Tuesday, after follow-through pressure early in the session.

Live Cattle futures closed an average of 72¢ lower through the front three contracts and then unchanged to 50¢ higher.

Feeder Cattle futures closed an average of 41¢ higher.

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

Choice boxed beef cutout value was 40¢ higher Tuesday afternoon at $207.32/cwt. Select was 23¢ lower at $198.39.           

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Major U.S. financial indices closed higher Tuesday, buoyed by strong quarterly earnings, including better than expected results from Dow DuPont and Proctor & Gamble.

The Dow Jones Industrial Average closed 143 points higher. The S&P 500 closed 9 points higher. The NASDAQ closed 3 points higher.

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When all was said and done last week, the 5-area weighed average steer price was $5.76 higher at $112.63/cwt. on a live basis; $8.87 higher in the beef at $178.77.

“The higher prices may not pull closeouts completely out of the red, but it will reduce losses significantly and may make a few cattle profitable,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “This price resurgence does not necessarily mean fed cattle prices have hit their summer low, as the potential to move to the $105 area re-mains feasible. However, higher prices may be shedding some light that moving that low is not as likely as previously thought. The stronger live cattle prices have also strengthened cattle feeders’ outlook which means strong demand for feeder cattle.”

Pressure on grain prices is helping, too.

“The weakening feed market has translated into strengthening calf prices relative to the fed cattle and beef markets,” says Stephen Koontz, agricultural economist at Colorado State University, in the latest issue of In the Cattle Markets. “The overall protein market outlook is much the same as the beginning of summer: there is a lot of protein to come to market through the summer and fall—and no end to the potential trade gymnastics—but the calf market outlook is holding strong largely because of cheapening feed.”

Despite the surge in cash fed cattle prices late week, Cattle futures softened some on Monday, pressured by overall bearishness in commodities, tied to trade concerns. Seasonally limping wholesale beef values added to the negative tone.

Live Cattle futures closed an average of 44¢ lower (12¢ to $1.00 lower).

Except for 12¢ higher in Apr, Feeder Cattle futures closed an average of 44¢ lower (15¢ to 75¢ lower).

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

Choice boxed beef cutout value was $1.11 lower Monday afternoon at $206.92/cwt. Select was 9¢ lower at $198.62.    

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Major U.S. financial indices closed higher Monday, extending gains from the previous session. Support included Friday’s strong employment report, and apparently high hopes heading into quarterly earnings.

The Dow Jones Industrial Average closed 320 points higher. The S&P 500 closed 24 points higher. The NASDAQ closed 67 points higher.

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U.S. beef exports set a new monthly value record in May at $722.1 million, which was 24% more than a year earlier and 4% more than the previous record, according to data released by USDA and compiled by the U.S. Meat Export Federation (USMEF). In terms of volume, May beef exports of 117,871 metric tons (mt) were the sixth most on record.

“Despite the intense competition U.S. beef faces in Japan and Korea, these markets continue to display a terrific appetite for a growing range of cuts,” says Dan Halstrom, USMEF President and CEO. “Beef items that are traditionally popular in Asia continue to perform and other items more suitable for thick-cut steaks and barbecue concepts are gaining more traction, resulting in exceptional growth opportunities. But the enthusiasm for U.S. beef extends well beyond these two leading markets, and that’s how exports have reached this record-breaking pace.”

Export volume to Japan in May was 19% more year over year, with value 22% higher at $196.8 million. Exports to Korea for the month were 46% more in terms of volume and 64% more in value at a record $146.2 million.

Through the first five months of this year, total U.S. beef exports were up 10% in volume to 547,157 mt, while export value was 21% more than last year’s record pace at $3.32 billion.

Beef export value averaged $313.39 per head of fed slaughter in May, up 18% from a year ago. The January-May average was $317.69 per head, also up 18%.

For U.S. pork exports, though, the weight of recent tariffs is beginning to take a toll.

For instance, pork exports to the China/Hong Kong region were 31% less than a year earlier for volume and 25% less for value. According to USMEF, the decline was due in part to the additional 25% tariff increase imposed by China in April.

“Exports to China will face an even steeper challenge in the second half of 2018, as China recently hiked the duty rate on U.S. pork by another 25%,” according to USMEF. “This means U.S. pork cuts and pork variety meat entering China now face a duty rate of 62%, compared to 12% for China’s other suppliers, including the European Union, Brazil and Canada.”

Moreover, Mexico’s retaliatory duties on U.S. pork took effect in June, so these January-May results were not directly impacted.

Apparently, beef packers over-played their hand of bought-ahead cattle last week. Cash fed cattle tore sharply higher on Friday. Live trade was $5-$6 higher in the Southern Plains at mostly $112-$113/cwt. In Nebraska and the western Corn Belt, it was $3-$7 higher at $112-$114. Dressed trade was $5-$11 higher at $175-$180.

Higher cash prices helped Cattle futures surge higher for much of Friday’s session. Futures closed slightly lower, though, likely on profit taking and week-end positioning.

Except for unchanged in spot Aug, Live Cattle futures closed an average of 22¢ lower.

Other than 2¢ and 15¢ higher in the back two contracts, Feeder Cattle futures closed an average of 33¢ lower.

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

Choice boxed beef cutout value was 40¢ lower Friday afternoon at $208.03/cwt. Select was 1¢ higher at $198.71.         

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Major U.S. financial indices closed higher Friday, buoyed by more jobs than expected in the monthly national employment report. Total non-farm employment increased by 213,000 in June, according to the U.S. Bureau of Labor Statistics.

The Dow Jones Industrial Average closed 99 points higher. The S&P 500 closed 23 points higher. The NASDAQ closed 101 points higher.

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“Young bred cow prices have been under more pressure than mid-aged cows this spring. Prices have declined by more than $200 from last spring and have averaged a discount of $40 compared to mid-aged bred cows,” say analysts with the Livestock Marketing Information Center (LMIC), in the most recent Livestock Monitor. “Over the last 15 years, discounts have occurred only about 20% of the time and $40-$45 is as big as the discounts tend to get. The year of the biggest premiums for young bred cows was 2015 (when feeder cattle prices peaked) at $165.”

Regionally, LMIC analysts explain the value of young bred cows in the Northern Plains has been at a premium to those in the Southern Plains for the last six years.

“Prices for young bred cows in Montana markets have held steady with a year ago this spring after declining $100 from 2016 to 2017,” LMIC analysts say. “A $400 premium for Montana young bred cows versus the Oklahoma City market this year rivals the euphoric Montana premium of 2015, even though actual prices are $1,000 lower than three years ago.”

For perspective, the LMIC folks say mid-aged bred cows (1,200-1,300 lbs.) at Oklahoma City averaged $1,082 per head during April and May. That $112 less than the same period last year.

“These prices tend to follow the trend set by feeder cattle prices, but with a bit of a time lag,” explain LMIC analysts. “This spring’s mid-age bred cow price was 6.11 times the price of steers (500-550 lbs.) at Oklahoma City. Last year, the ratio was 6.74, and in 2016 the ratio peaked out at 8.06 for the 2004-2018 interval.”

Cattle futures closed mainly a touch higher Thursday, supported by follow-through buying and expectations for firm to higher cash fed cattle prices this week. Trade and volume continued to be sluggish, though.

Except for 7¢ lower in spot Aug, Live Cattle futures closed an average of 19¢ higher.

Other than 22¢ and 2¢ lower in the front two contracts, and 12¢ lower at the back of the board, Feeder Cattle futures closed an average of 40¢ higher.

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

Choice boxed beef cutout value was $1.83 lower Thursday afternoon at $208.43/cwt. Select was $1.01 lower at $198.70. 

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Major U.S. financial indices closed higher Thursday, boosted by tech stocks and positive economic news. Optimism was capped by worries about the impact of U.S. and China counter-tariffs scheduled to begin Friday.

The Dow Jones Industrial Average closed 181 points higher. The S&P 500 closed 23 points higher. The NASDAQ closed 83 points higher.

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Despite pressure on commodity prices and concerns about trade, producer sentiment crept 2 points higher in June to 143, according to the Purdue University/CME Group Ag Economy Barometer. The barometer is based on a monthly survey of 400 agricultural producers from across the country.

 “In June, we saw a sizeable drop in commodity prices that caught many observers by surprise,” says James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture. “Despite the price decline, producers’ appraisal of current economic conditions improved compared to May. However, it was clear from survey responses that uncertainty regarding the agricultural outlook increased considerably.”

The barometer’s rise was underpinned by an increase in the Index of Current Conditions, which climbed to 138 compared to a reading of 132 a month earlier. The Index of Future Expectations remained nearly unchanged with a reading of 146 in June, 1 point higher than in May.

The June barometer survey asked producers how much their crop acreage changed in 2018 and whether or not they use flexible cash rental leases to rent farmland. As expected, most farmers’ crop acreage did not change in 2018 compared to a year earlier, but the survey revealed that some farms were expanding crop acreage rapidly. For example, 8% of farms increased their crop acreage by more than 10%, and 6% of farms increased their crop acreage by up to 10% in 2018, compared to last year. Among farms in the survey that rent cropland, 36% reported they plan to use a flexible cash rent lease on some of their acreage.

“Flexible cash rent leases provide a way for farm operators to share some risk with land owners, while also providing landowners some of the stability that comes with a cash rental agreement,” Mintert explains. “The increase in volatility in crop agriculture could be stimulating interest in flexible cash rent leases.