Daily Market Highlights

Cattle futures bounced higher Tuesday, perhaps helped along by continuing indications that cattle feeders remain current in marketing as supplies increase. Given light negotiated fed cattle trade the last two weeks, there was also the notion that packers likely need to be more aggressive buyers this week.

Live Cattle futures closed an average of $1.59 higher ($1.00 to $2.47 higher in spot Jun).

Feeder Cattle futures closed an average of $1.71 higher (from $1.27 higher in spot Aug to $2.00 higher).

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

Choice boxed beef cutout value was 1¢ higher in the afternoon at $227.58/cwt. Select was 40¢ lower at $205.85.

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Major U.S. financial indices closed mostly narrowly mixed on Tuesday, buoyed by tech stocks for the second consecutive day. Pressure included lingering trade worries.

The Dow Jones Industrial Average closed 13 points lower. The S&P 500 closed 1 point higher. The NASDAQ was up 31 points, closing at a record high.

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Agricultural producer sentiment rose last month to its highest level since January 2017, according to the Purdue University/CME Group Ag Economy Barometer—a sentiment index derived from a monthly survey of 400 agricultural producers across the U.S.

“Over the last month there’s been a relaxation in international trade tensions with China, and that seems to be playing a role in how producers are viewing their financial future,” says James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture.

The May barometer reading of 141 was 16 points higher than April. The Index of Current Conditions increased to 132 during May, 9 points higher than in April, while the Index of Future Expectations climbed to 145, up 19 points compared to a month earlier, making it the highest future expectations reading since February 2017.

Despite the improvement in sentiment, only 27% of respondents said now is a good time to make large farm investments.

Cattle futures moved lower again Monday, amid up-and-down, choppy trade. Declining open interest suggests current uncertainty is keeping some folks off the field.

Except for 10¢ higher in the back contract, Live Cattle futures closed an average of 55¢ lower (15¢ lower in spot Jun to $1.17 lower).

Feeder Cattle futures closed an average of 73¢ lower (from 30¢ lower at the back of the board to $1.47 lower in spot Aug).

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

Choice boxed beef cutout value was 4¢ higher in the afternoon at $227.57/cwt. Select was $1.45 higher at $206.25.

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Major U.S. financial indices closed higher on Monday, with follow-through buying from Friday’s rally and boosted by tech stocks, including Apple and Amazon. The tech-based NASDAQ closed up 52 points and at a record high. The Dow Jones Industrial Average closed 178 points higher. The S&P 500 closed 12 points higher.

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Notwithstanding simmering trade tensions and current trade negotiations, U.S. beef exports in 2019 are forecast at 3.15 billion pounds, a new record volume, according to last months Livestock, Dairy and Poultry Outlook. That would be 3.8% more than estimated for this year.

U.S. beef exports increased 12% from year-earlier levels in the first quarter of this year, according to USDA’s Economic Research Service (ERS).

“Global meat and poultry demand continues to fuel the growth in U.S. production (see below), driven, in part, by economic expansion in the developing world,” say ERS analysts (Jones, Haley and Melton) in a recent Amber Waves article. “While U.S. meat and poultry imports have remained fairly stable since 2000, U.S. exports of the same goods have grown at an average of 4% per year. An increase in global demand has likely contributed to favorable conditions for U.S. exports. As a result, net exports have increased by an average of 7.2% since 2000 and are expected to increase a further 5% in 2018, or more than 600 million lbs.”  

Negotiated cash fed cattle trade for the week ended up steady to either side of steady with extremely light trade.

There were some live sales at $111/cwt. in Nebraska, compared to $109.00-$110.50 the previous week. A few sold in the beef at $177, compared to $176-$180 the previous week. Scattered sales in the Southern Plains were generally steady at $110. In the western Corn Belt, dressed sales were mostly $2-$4 lower than the previous week at $178.

Cattle futures meandered lower.

Except for 2¢ higher in away Jun, Live Cattle futures closed an average of 54¢ lower (15¢ lower in spot Jun to $1.12 lower).

Feeder Cattle futures closed an average of 60¢ lower (22¢ lower at the back of the board to $1.07 lower in spot Aug).

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

Choice boxed beef cutout value was 67¢ lower in the afternoon at $227.53/cwt. Select was 33¢ higher at $204.80.

“Beef demand seems to be hitting on all cylinders with retailers featuring beef, which is promising. With the large supply of fed cattle, demand is exceeding expectations,” say AMS analysts. “The actual federally inspected cattle slaughter for week ending May 19 totaled 667,613, the largest weekly cattle slaughter since August 2011. Steer and heifer slaughter was also running at a pretty good clip for that week as near 540,000 were harvested, the largest total for those classifications since June 2011.” 

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Major U.S. financial indices rebounded Friday from steep losses in the previous session. Support included a monthly employment report that was stronger than expected. Total non-farm payroll employment increased by 223,000 in May, according to the U.S. Bureau of Labor Statistics. The unemployment rate edged lower to 3.8%.

The Dow Jones Industrial Average closed 219 points higher. The S&P 500 closed 29 points higher. The NASDAQ closed 112 points higher.

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“Today’s consumer is a ‘pro-sumer,’ which means they are going to co-create their story and it’s about ‘Brand Me,’” explains Jeff Fromm, a partner at Barkley, a company that assists with establishing and enhancing brands and helping businesses identify emerging consumer trends. Fromm says consumers expect to have a seat at the table. If you’ve heard in the past that it’s just about being transparent, he says, our research suggests that’s going to get you a ‘C’ on your report card. In ‘Tomorrowland,’ you’re going to have to offer proof that the story you are living is real – which is a step beyond transparency.”

Fromm—the best-selling author of books that include Marketing to Millennials, Millennials with Kids and Marketing to Gen Z—spoke to an international audience at last week’s World Meat Congress in Dallas.

He explained that food has become more than just a category of products consumers buy and enjoy – it is also a means of expression.

“Today’s modern consumer expresses themselves through food,” Fromm says. “Discretionary purchases on food have increased at a dramatic rate, at a time when discretionary purchases on fashion haven’t. So they are trading ‘fashion’ for ‘food’ as a way to express themselves.”

Fromm emphasized that Farmers and ranchers, and those in meat processing and merchandising, absolutely must better connect with consumers by sharing details of the story behind their products.

Cattle futures weakened Thursday, following the previous day’s rally. Month-end positioning and lack of direction from undeveloped cash fed cattle trade seemed to be primary drivers. Reaction to the latest U.S. tariffs on NAFTA partners appeared muted until more is known about potential retaliation (more below).

After $1.07 lower in spot Jun, Live Cattle futures closed an average of 50¢ lower (30¢ to 70¢ lower).

Feeder Cattle futures closed an average of 56¢ lower—(from 22¢ lower at the back of the board to $1.15 lower in spot Aug).

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

Choice boxed beef cutout value was 48¢ lower in the afternoon at $228.20/cwt. Select was 9¢ higher at $204.47.

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Major U.S. financial indices closed sharply lower Thursday after President Trump implemented a 25% tariff on steel imports and a 10% tariff on aluminum imports from NAFTA partners, Canada and Mexico, as well as the EU.

Those nation’s responded swiftly.

“Mexico intends to impose tariffs on some U.S. pork cuts and pork products,” according to a statement from the U.S. Meat Export Federation (USMEF). “Full details – such as the tariff rate and the exact products to which the tariffs could apply – are not entirely clear at this time…In 2017, Mexico was the largest volume market for U.S. pork exports at more than 800,000 metric tons, valued at $1.51 billion.”

“In response to these measures, Canada intends to impose tariffs on imports of steel, aluminum and other products from the United States—representing the total value of 2017 Canadian exports affected by the U.S. measures,” said Chrystia Freeland, Canadian Minister of Foreign Affairs. “That is $16.6 billion. We are imposing dollar-for-dollar tariffs for every dollar levied against Canadians by the United States.”

“The EU will use the possibility under WTO rules to rebalance the situation by targeting a list of US products with additional duties,” said EU Commissioner for Trade, Cecilia Malmström. “The level of tariffs to be applied will reflect the damage caused by the new U.S. trade restrictions on EU products.” 

Whether or not U.S. beef ends up being a direct target of retaliation, the situation adds a new layer of market uncertainty, including the impact on current NAFTA negotiations.

The Dow Jones Industrial Average closed 251 points lower. The S&P 500 closed 18 points lower. The NASDAQ closed 20 points lower.

Buyers stormed into Cattle futures early in yesterday’s session, though, pushing prices limit and near-limit higher in front-month Live contracts. There’s no definitive reason for the aggressive surge, but psychology surely got a lift from the weekly National Comprehensive Boxed Beef Cutout report indicating retailers intend to be aggressive in featuring and marketing beef. There were 7,589 loads reported for the week ending May 25—the most since the first week of September—with 6,072 loads for delivery up to 21 days. Perhaps there’s some compensatory gain to be had from latent and pent up grilling demand.

Live Cattle futures closed an average of $2.06 higher—an average of $2.97 higher in the front three contracts. 

Feeder Cattle futures closed an average of $2.98 higher. 

There were only 449 head offered in the weekly Fed Cattle Exchange auction—all from Kansas—but 225 head sold: two lots of heifers and one lot of steers for a weighted average price of $110/cwt. for delivery at 1-9 days. That price mirrored last week’s country trade in that region.

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

Choice boxed beef cutout value was $1.12 higher in the afternoon at $228.68/cwt. Select was 73¢ higher at $204.38.

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Major U.S. financial indices closed sharply higher Wednesday, basically erasing steep losses from the previous session and for similar but opposite reasons. In this case, the Euro recovered some lost ground as fears about Italy exiting the EU subsided for the day. Crude oil prices bounced back, on speculation the OPEC countries and Russia will not raise production.

The Dow Jones Industrial Average closed 306 points higher. The S&P 500 closed 34 points higher. The NASDAQ closed 65 points higher.

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“Feeder cattle prices are in the process of making a spring low. Prices have been pressured by forced early movement of cattle due to weather, escalating feed costs and weakness in deferred Live Cattle futures,” according to Rabobank’s Beef Quarterly for the second quarter. “Prices are expected to make a seasonal low, and the early forced placements of calves has reduced available supplies of cattle outside feedyards, which should be price supportive for summer and the second half of the year.”

Dry conditions continue as a primary market driver and wildcard.

Analysts with RaboResearch explain 34% of the U.S. cowherd resides in eight states currently amid Extreme or Exceptional drought; 70% of the cows are in 20 states under some level of measurable drought stress.

“The increased usage of hay for feeding—-following dry conditions and a moderate to severe winter—is driving hay prices higher, making forced feeding more expensive,” explain RaboResearch analysts. “…cow slaughter is already higher than previous years and the likelihood of some degree of forced liquidation during the coming grazing season is very high.”

Pasture conditions improved for the second consecutive week, according to the latest weekly Crop Progress report (week ending May 27).

49% of pasture and range is in Good (42%) or Excellent (7%) condition, compared to 63% last year. 17% is rated as Poor (12%) or Very Poor (5%) compared to 10% last year.

Sluggish negotiated cash fed cattle trade last week ended up lower across a broad range. Live sales were $4-$7 lower in Kansas at $110; $3.00-$3.50 lower in Nebraska at $109.00-$111.50; $2-$3 lower in Colorado at mostly $110; $2-$4 lower in the western Corn Belt at $110-$114. Likewise, dressed trade was $4-$5 lower in Nebraska at $176-$178; $2-$4 lower in the western Corn Belt at $180-$182.

More than anything, it seemed to be significantly lower outside markets (see below) that weighed on cattle futures Tuesday, increasing uncertainty and putting a halt to follow-through support early in the session.

Live Cattle futures closed an average of 79¢ lower (52¢ lower to $1.52 lower in spot Jun).

Feeder Cattle futures closed from 27¢ higher to 40¢ lower. 

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

Choice boxed beef cutout value was 13¢ higher in the afternoon at $227.56/cwt. Select was 97¢ lower at $203.65.

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Major U.S. financial indices closed sharply lower Tuesday, but off of session lows. Political turmoil in Italy was the primary source of pressure as investors fretted that upheaval in the third largest EU economy (GDP) could lead to that nation exiting the EU and the Euro, perhaps unraveling both. Never mind wonderments about Italy’s enormous debt. Softer crude oil prices added to the angst.

The Dow Jones Industrial Average closed 391 points lower. The S&P 500 closed 31 points lower. The NASDAQ closed 37 points lower.

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“The recent trend of declines in animal placed into feedlots suggests that the number of animals in feedlots will decline seasonally until September,” say analysts with the Livestock Marketing Information Center (LMIC), in the latest Livestock Monitor. “Importantly, the percentage increase compared to 2017’s is projected to continue dropping through the summer months. This year, the seasonal drop could be larger than normal. By Sept. 1, the number of cattle on feed could be only 1% to 3% above 2017’s.”

As noted in the last Cattle Current, according to Friday’s monthly Cattle on Feed report, total cattle on feed May 1—feedlots with 1,000 head or more capacity—of 11.558 million head were 5.09% more than the previous year. That’s the second most cattle on feed May 1 since the series began in 1996, according to the National Agricultural Statistics Service.

“Year-over-year increases in the on-feed count have been in place since early 2016; the percentage increase surged beginning in late 2017 as a result of more animals placed into feedlots, largely due to drought,” LMIC analysts explain. “Many of those lightweight animals have been in feedlots for 8-10 months. In the last two months that picture has been changing, with head placed significantly below a year ago.”

Placements in April were 8.28% less than a year earlier. In March, placements were 9.26% less. That was the first year-over-year decline for placements since February 0f 2017.

“The marketings of fed cattle throughout most of 2017 were strong, especially when compared to 2016’s,” LMIC analysts say. “Daily average marketings have remained above year-ago levels every month so far this year. Typically, the biggest months for fed cattle marketed are May and June; that is expected to be the situation again this year.”

Other than a few live trades reported in Nebraska at $109/cwt.—too few to trend—negotiated cash fed cattle trade remained undeveloped through late Friday afternoon.

Cattle futures found some traction late in the session, though, perhaps tied to confirmation of fewer year-over-year feedlot placements. The monthly Cattle on Feed report (see below), came out during trading hours. Overall, trade was sluggish ahead of the holiday weekend.

Other than 25¢ and 2¢ higher at either end of the board, Live Cattle futures closed an average of 58¢ higher.

Feeder Cattle futures closed an average of $1.28 higher. 

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

Choice boxed beef cutout value was $1.57 lower in the afternoon at $227.43/cwt. Select was 31¢ lower at $204.62.

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Major U.S. financial indices closed mostly lower Friday, pressured by softer oil prices, tied to reports that OPEC will increase production. CME Crude Oil futures (WTI) closed $2.15 Lower (May ’19) to $2.83 lower (spot Jul). There was also ongoing uncertainty, following President Trump cancelling the meeting with North Korea’s leader.

The Dow Jones Industrial Average closed 58 points lower. The S&P 500 closed 6 points lower. The NASDAQ closed 9 points higher.

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Logic suggests the market will view Friday’s Cattle on Feed report as neutral to perhaps a touch bearish, with numbers mostly in line with expectations ahead of the report.

Placements in April of 1.695 million head were 8.28% less than the previous year (153,000 head fewer). That’s about 1% more than estimates ahead of the report. In terms of weights, 42.45% were placed at weights of 699 lbs. or less; 50.73% at weights of 700-899 lbs.; 16.81% weighing 900 lbs. or more.

Marketings in April of 1.803 million head were 5.87% more than last year (100,000 head more).

Total cattle on feed May 1—feedlots with 1,000 head or more capacity—of 11.558 million head were 5.09% more than the previous year (560,000 head more). That’s the second most cattle on feed May 1 since the series began in 1996, according to the National Agricultural Statistics Service.

There were only 225 head—two lots of steers—offered in the weekly Fed Cattle Exchange auction on Wednesday and no takers. Likewise, country trade remained undeveloped through the afternoon.

Cattle futures took another step higher on Wednesday, though, building on early-week gains. Besides follow-through support, perhaps some of it was positioning ahead of the monthly Cattle on Feed report due out Friday, and the long holiday weekend ahead.

Live Cattle futures closed an average of $1.49 higher (55¢ higher in spot Jun to $2.15 higher).

Feeder Cattle futures closed an average of $2.01 higher (95¢  higher in spot May to $2.62 higher).

Wholesale beef values were mixed on Wednesday. 

Choice boxed beef cutout value was 73¢ higher in the afternoon at $230.08/cwt. Select was 82¢ lower at $205.04. The Choice-Select spread widened to $25.04, the most since last June.

Select and Choice rib and chuck cuts sold steady to firm, while round cuts traded steady to weak, according to the Agricultural marketing Service. Choice loin cuts sold higher, weak for Select. Beef trimmings sold mostly moderately lower on light to moderate demand and moderate offerings.

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Major U.S. financial indices closed higher on Wednesday, after early follow-through pressure. Reportedly, much of the support was tied to release of minutes from the Federal Open Market Committee (FOMC) indicating a willingness to let inflation run a little past its objective of 2% without applying more brake via more aggressive interest rate hikes.

Consumer price inflation, as measured by the 12-month percentage change in the price index for personal consumption expenditures, was 2% in March, according to the minutes.

The Dow Jones Industrial Average closed 52 points higher. The S&P 500 closed 8 points higher. The NASDAQ closed 47 points higher.

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“…heifer carcass weights in 2018 are the same size as steer carcasses were in 2005,” notes Derrell Peel, Extension livestock marketing specialist at Oklahoma State University.

In his weekly market comments, Peel provides insights regarding the impact of heifer slaughter, relative to overall fed beef production. It has to do with both the percentage of heifers in the slaughter mix and their average carcass weight.

“During periods of herd expansion, the heifer percentage of yearling slaughter drops to roughly 31%. During periods of herd liquidation, heifers will contribute about 40% to total yearling slaughter,” Peel explains. “Most recently, heifer slaughter has increased to an annual average of 34.3% of yearling slaughter as heifer retention slows down.”

As for weight, both steer and heifer carcass weights continue to trend higher, as they have for the past 50 years, Peel says. However, heifer carcass weights continue to grow more, relative to steers.

Heifer carcasses averaged 564 lbs. in 1967, according to Peel. The average weight last year was 811 lbs. Looking from another angle, he explains heifer carcasses averaged 84% of steer carcass weights until the mid 1970s. By 2010, heifer carcass weights were 92.3% of steer carcass weights. The percentage continues to edge higher since then—92.5% for the 12-month moving average.

“Heifer carcass weights appear to have provided a buffer against big steer carcasses for the past decade or more, but that may be coming to an end,” Peel says. “It may be that cattle and carcass weights can physically continue to get bigger, but there is a very real question of the demand implications and economic consequences of continued growth in steer and heifer carcass weights.”

Cattle futures edged marginally higher on Tuesday, able to hold on to the previous day’s strong gains, after early pressure and amid light trade.

Except for 2¢ lower in spot Jun, Live Cattle futures closed an average of 20¢ higher.

Feeder Cattle futures closed an average of 10¢ higher.

Wholesale beef values continued to unwind Tuesday. 

Choice boxed beef cutout value was $1.47 lower in the afternoon at $229.35/cwt. Select was $1.66 lower at $205.86. Demand was light to moderate on moderate offerings.

Select and Choice rib, chuck, round, and loin cuts sold steady to weak, according to the Agricultural marketing Service. Beef trimmings sold sharply higher on moderate to good demand and moderate offerings.

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Major U.S. financial indices gave back a majority of the previous day’s gains on Tuesday, reportedly on President Trump commenting that he’s dissatisfied with Chinese trade talks thus far. Of course, it was the weekend joint statement from the two nations—placing new tariffs on hold—that boosted stocks on Monday.

The Dow Jones Industrial Average closed 178 points lower. The S&P 500 closed 8 points lower. The NASDAQ closed 15 points lower.

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Total pounds of beef in freezers edged up last month, according to the monthly Cold Storage report released yesterday.

As of Apr. 30, there were 471.5 million lbs. of beef in freezers, which was 1.6% more than the previous month and 2.9% more than the previous year.

Frozen pork supplies were 5.0% more than the previous month and 8.7% more than the same time a year ago.

Total red meat supplies in cold storage were 3.9% more than the previous month and 6.8% more than the previous year.

Frozen poultry supplies were 1.9% more than the previous month and 7.2% more than the previous year.

Cattle futures blasted from the weekly blocks with a sharply higher close on Monday, presumably tied to oversold conditions, short covering and the cash premium for fed cattle.

Live Cattle futures closed an average of $1.93 higher ($1.47 higher to $2.52 higher in spot Jun).

Feeder Cattle futures closed an average of $2.47 higher.

That’s more than welcome, considering the plunge last week, led by fed cattle prices. Looking at the weekly report—5-area Weekly Weighted Average Direct Slaughter—fed steer prices declined $6.92 on a live basis to an average of $114.73/cwt. Fed heifers were $7.31 lower at $114.08. On a dressed basis, steers were $7.97 lower at $184.02 and heifers were $9.35 less at $182.99.

Cattle markets were also buoyed by higher outside markets, which rose on increasing optimism about simmering trade issues between the U.S. and China.

According to a joint U.S. and China statement issued by the White House on Saturday, “There was a consensus on taking effective measures to substantially reduce the United States trade deficit in goods with China. To meet the growing consumption needs of the Chinese people and the need for high-quality economic development, China will significantly increase purchases of United States goods and services. This will help support growth and employment in the United States.

“Both sides agreed on meaningful increases in United States agriculture and energy exports. The United States will send a team to China to work out the details…”

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Wholesale beef value softened on Monday amid moderate offerings and demand, according to the Agricultural Marketing Service. Choice boxed beef cutout value was $1.39 lower Monday afternoon at $230.82/cwt. Select was 94¢ lower at $207.52.

Select and Choice chuck, round, and loin cuts sold steady to weak, according to AMS. Choice rib cuts sold lower, while Select traded steady. Beef trimmings sold sharply lower on light demand and moderate offerings.

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Major U.S. financial indices surged Monday on the weekend news that the U.S. and China were making progress toward reducing the U.S. trade deficit in goods with China.

The Dow Jones Industrial Average closed 298 points higher. The S&P 500 closed 20 points higher. The NASDAQ closed 39 points higher.

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“The packer margin is strong, as are net exports of beef. Saturday and total slaughter volumes have been strong, slaughter weights continue their seasonal decline and boxed beef composite values have been relatively high,” says Stephen Koontz, agricultural economist at Colorado State University, citing current bullish market fundamentals, in the latest issue of In the Cattle Markets. “The Choice-Select spread is also very strong, indicating excellent demand going into summer. All of these indicate strong beef movement and good demand in the face of high production.”

On the other side of the scale, Koontz point to increasing supplies of market-ready fed cattle, the looming seasonal increase in carcass weights, dismal byproduct values and retail beef prices so high that they could limit some demand.

“Strong margins incentivize the packer to buy aggressively and continue to move large volumes of beef,” Koontz says of key factors to monitor. “We need to see continued heavy marketings, slaughter, and a pull-down in the number of market-ready cattle. Aggressive marketings will also limit the seasonal growth in slaughter weights. It would not hurt to see continued strong exports and some softening of retail beef prices. But, the market has very limited upside potential based on fundamental supply and demand. A lot has to happen to see a market similar to that of 2017. One or two things going wrong have the potential to seriously weaken fed and feeder cattle prices.”