Daily Market Highlights

Negotiated cash fed cattle trade finished the week generally $7-$10 lower, depending on the region, at $112 to $117/cwt. Dressed prices were $4 to $10 lower than the previous week at $180-$185.

Choice wholesale beef value softened a bit on Friday with moderate offerings and light to moderate demand, according to the Agricultural Marketing Service. Choice boxed beef cutout value was 47¢ lower Friday afternoon at $232.21/cwt. Select was 22¢ higher at $208.46.

Select and Choice rib, chuck, and round cuts traded steady to weak, while loin cuts sold firm to higher. Beef trimmings sold generally steady on moderate demand and offerings.

Cattle futures closed lower on Friday, but choppiness early suggested a plumbing for bottom rather than free-fall. Profit taking likely added pressure, overall, while surging corn prices added squeeze to Feeder Cattle.

Other than 12¢ lower in the back two contracts, Live Cattle futures closed an average of 56¢ lower. 

Feeder Cattle futures closed an average of $1.17 lower (87¢ to $1.42 lower).

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Major U.S. financial indices closed little changed on Friday, amid ongoing pressure from rising interest rates and ongoing uncertainty surrounding trade talks between the U.S. and China.

The Dow Jones Industrial Average closed 1 point higher. The S&P 500 closed 7 points lower. The NASDAQ closed 28 points lower.

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“With the expansion of the cattle herd in 2016 and 2017, heifers were being retained at a higher rate than normal,” say analysts with the Agricultural Marketing Service (AMS). “The 2018 January to April heifer slaughter compared to total fed cattle slaughter is calculated at near 35.5%, while the same calculation for 2016 and 2017 was 33.2-34.0%. This would generally indicate a stable herd size. This indicator could change if the heart of cattle country gets encompassed by more drought conditions this summer.”

Based on the most current data from the World Agricultural Outlook Board, AMS analysts say about 23% of the nation’s cattle inventory is in areas currently experiencing drought.

According to the season’s first rating, pasture and range is off to a poorer year-over-year start.

For the week ending May 13, according to USDA’s Crop Progress report, 43% of pasture and range was rated in Good (37%) or Excellent (6%) condition, compared to the previous year’s historically higher 72%. 20% is rated as Poor (15%) or Very Poor (5%) compared to 10% last year. That’s the worst first week of the reporting season since 2014, according to the Livestock Marketing Information Center (LMIC).

States with the most pastures and range in Poor or Very Poor condition include: Arizona (100%); New Mexico (66%); Kansas (31%); Virginia (31%); Missouri (30%); Colorado (29%); North Dakota (28%); Texas (28%); California (25%); Oklahoma (23%); West Virginia (22%); Florida (21%).

Choice wholesale beef value bounced higher Thursday with moderate to fairly good demand and moderate to heavy offerings, according to the Agricultural Marketing Service. Choice boxed beef cutout value was $1.65 higher Thursday afternoon at $232.68/cwt., the highest level since last June. Select was 26¢ lower at $208.24. Select and Choice chuck, round, and loin cuts sold steady to firm. Rib cuts traded higher for Choice and weaker for Select. Beef trimmings sold mostly moderately lower on light demand and heavy offerings. At $24.44, the Choice-Select spread was also the widest since last June.

The firmer beef values helped Cattle futures come up for air on Thursday, along with apparent short covering.

Other than unchanged in Oct and 25¢ lower in the back contract, Live Cattle futures closed an average of 65¢ higher (5¢ to $1.22 higher in spot Jun).

Feeder Cattle futures closed an average of $1.28 higher (37¢ to $2.00 higher).

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Major U.S. financial indices closed lower on Thursday, giving back some of the previous session’s gains. Pressures included rising interest rates and negative rhetoric from the White House regarding trade talks with China.

The Dow Jones Industrial Average closed 54 points lower. The S&P 500 closed 2 points lower. The NASDAQ closed 15 points lower.

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“Greater U.S. production and continued strength in demand from Asian markets are expected to boost beef exports to a consecutive record high in 2019,” say analysts with USDA’s Economic Research Service (ERS), in the monthly Livestock, Dairy and Poultry Outlook.

Specifically, ERS forecasts a 3.8% year-over-year increase next year to 3.150 billion lbs.

Overall, ERS expects strong domestic and international demand for U.S. beef to support slightly higher fed cattle prices next year.

Cash fed cattle prices continued to tick lower on Wednesday at $115/cwt. in the Southern Plains, which was $7 less than last week. The same price and week-to-week decline defined trade in Nebraska a day earlier.

There were 2,586 head offered in the weekly Fed Cattle Exchange auction, but no takers.

Cattle futures continued lower, perhaps partly due to technical positioning, but there was at least a sense of trying to find some stable ground.

Other than 47¢ and 15¢ lower in the back two contracts, Live Cattle futures closed an average of 91¢ lower. 

Feeder Cattle futures closed an average of $1.07 lower (45¢ to $1.72 lower).

Choice boxed beef cutout value was 61¢ lower Wednesday afternoon at $231.03/cwt. Select was $1.01 lower at $208.50. Select and Choice rib cuts sold steady to firm, while chuck, round, and loin cuts traded steady to weak, according to the Agricultural Marketing Service. Beef trimmings traded mostly sharply lower on light demand and heavy offerings.

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Major U.S. financial indices closed higher on Wednesday, regaining some of the ground lost the previous day. Support included a bounce in retailer stocks, led by stronger than expected quarterly earnings from Macy’s, according to various analysts.

The Dow Jones Industrial Average closed 62 points higher. The S&P 500 closed 11 points higher. The NASDAQ closed 46 points higher.

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“Firm demand and a moderate marketing pace will likely support fed steer prices in the second quarter to average $116-$120/cwt…However, fed cattle prices will likely edge lower in the second half of the year as the supply of fed cattle increases and carcass weights make their seasonal rebound,” say analysts with USDA’s Economic Research Service (ERS), in the monthly Livestock, Dairy and Poultry Outlook.

From March to April, steer carcass weights declined 17 lbs. to 861 lbs., but were still 12 lbs. heavier than the previous year, according to ERS. Heifer carcass weights declined 22 lbs. to 798 lbs., but were 7 lbs. more than the previous year.

“It should be noted that the large drop in carcass weights vis-à-vis March reflects, in part, a seasonal shift toward a greater proportion of cattle weighing under 600 lbs. placed in feedlots in fourth-quarter 2017,” ERS analysts say. “Cattle placed at lighter weights are likely marketed at lighter weights.”

The folks at ERS expect the annual fed steer price (5-area direct) this year to average $114-$119/cwt. They forecast next year’s annual fed steer prices to average $113-$122./cwt.

Annual feeder steer prices for this year are forecast to average $138-$144; $135-$147 next year.

Market bears had their way on Tuesday, with continued follow-through pressure in Cattle futures, skittishness over heavy supplies and sliding fed cattle prices.

Negotiated fed cattle trade was at significantly lower prices on Tuesday. Early live trade in Nebraska was mostly $7 lower than last week at $115/cwt., with a few up to $117; that was on light to moderate trade and light demand. Early dressed purchases in the western Corn belt traded at mostly $184, which was $4-$9 lower than last week. Live sales in the western Corn Belt so far this week are at mostly $121-$122, in the middle of the previous week’s trading range.

Live Cattle futures closed an average of $1.25 lower (87¢ to $1.65 lower in spot Jun). That’s an average of $3.25 lower in the last two sessions.

Feeder Cattle futures closed an average of $1.84 lower ($1.60-$2.02 lower). That’s an average of $4.50 lower over the last two days.

Choice boxed beef cutout value was 48¢ lower Tuesday afternoon at $231.64/cwt. Select was 39¢ higher at $209.51. Select and Choice rib and loin cuts sold steady to firm, while chuck and round cuts traded steady to weak, according to the Agricultural Marketing Service. Beef trimmings sold sharply lower on light demand and offerings.  

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Major U.S. financial indices closed solidly lower on Tuesday, under pressure from an assortment of news, including a surge in interest rates and a month-to-month decline in consumer retail sales. According to the U.S. Commerce Department, U.S. food services and retail sales increased 0.3% in April, down from the 0.8% increase a month earlier.

The Dow Jones Industrial Average closed 193 points lower. The S&P 500 closed 18 points lower. The NASDAQ closed 59 point lower.

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The nation’s pasture and range is off to a poorer year-over-year start, as expected, given the long winter and wide swaths of dry conditions.

According to the most recent USDA Crop Progress report, 43% of pasture and range is in Good (37%) or Excellent (6%) condition, compared to 72% last year, which was historically high. 20% is rated as Poor (15%) or Very Poor (5%) compared to 10% last year. That’s the worst first week of the reporting season since 2014, according to the Livestock Marketing Information Center (LMIC).

In the latest Livestock Monitor, LMIC analysts add that the hay stock as of May 1 were the lowest since 2013.

“Nearly half of U.S. states saw declines of 30% or more in hay stocks. Only 16 states showed higher year-over-year May 1 stocks,” LMIC analysts say. “In critical drought areas of Texas and Oklahoma, declines were over 50%…Surrounding states also have large declines in inventory. Louisiana was down 63%, Missouri fell 61%, and Kansas by 30%. In most of the U.S., tight hay stocks will support new-crop hay prices, at least in the near-term.”

For most other crops, producers made significant strides in planting last week.

For instance, 62% of the corn is planted, which is 6% less than last year but just 1% less than the 5-year average.

In late trade on Friday, negotiated cash fed cattle trade ended up mostly $4 lower at $122/cwt. in the Southern Plains and Nebraska and at $118-$126 in the western Corn Belt. Dressed trade was steady to $5 lower in Nebraska at $189-$195; $3-$7 less in the western Corn Belt at $188-$193. Live trade in Colorado was mixed at $119-$122.

That news helped pressure Cattle futures, first a little and then a lot on Monday. Perhaps there was also some sense that wholesale beef values are running out steam sooner than later. The gap between spot Live Cattle and last week’s cash trade remains huge at $17 or so.

Live Cattle futures closed an average of $2.00 lower ($1.12 to $3.00 lower).

Feeder Cattle futures closed an average of $2.66 lower ($1.05-$3.52 lower).

Choice boxed beef cutout value was $1.15 higher Monday afternoon at $232.12/cwt. Select was 43¢ higher at $209.12. That was with fairly good demand and heavy offerings, according to the Agricultural Marketing Service.

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Major U.S. financial indices edged higher on Monday, amid chatter about trade tensions between the U.S. and China easing a bit.

The Dow Jones Industrial Average closed 68 points higher. The S&P 500 closed 2 points higher. The NASDAQ closed 8 point higher.

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“Beef exports continue to support cattle and beef markets with six strong major markets, plus a number of smaller markets, including lots of potential for China to be a much bigger market for U.S. beef over time,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments.

The six major markets account for 86.5% of U.S. beef exports so far this year. In order of market size, those nations are: Japan, South Korea, Mexico, Hong Kong, Canada and Taiwan.

“China is currently the number 12 beef export market for the U.S. and has accounted for less than 1% of total beef exports since exports to China resumed in June, 2017,” Peel says. “Despite the slow pace of exports to China thus far, there is tremendous potential for China to be a very significant beef export market for the U.S. Despite relatively low per capita beef consumption, China is the second largest beef consuming nation in the world, behind the U.S.”

First-quarter U.S. beef exports this year were 9% more than last year for volume and 19% more for value at $1.92 billion, according to the most recent data released by USDA and compiled by the U.S. Meat Export Federation. Beef export value averaged $315.67 per head of fed slaughter in the first quarter, up 18% year over year.

Cattle futures finished marginally mixed on Friday, following strong pressure early on. Cash markets offered no direction as negotiated fed cattle trade remained undeveloped through Friday afternoon.

Live Cattle futures closed unchanged to an average of 12¢ higher, except for 5¢ lower in Apr.

Except for 45¢ higher in the back contract, Feeder Cattle futures closed an average of 28¢ lower.

Choice boxed beef cutout value was 10¢ lower Friday afternoon at $230.97/cwt. Select was 45¢ lower at $208.69. Select and Choice rib, round, and loin cuts sold steady to weak, according to the Agricultural Marketing Service. Chuck cuts traded steady to firm. Beef trimmings sold unevenly steady on light to moderate demand and offerings.

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Major U.S. financial indices closed on a mixed basis Friday, but finishing the week higher, supported by surging crude oil prices and positive quarterly earnings.

The Dow Jones Industrial Average closed 91 points higher. The S&P 500 closed 4 points higher. The NASDAQ closed 2 point lower.

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Farm income declined in the first quarter of this year for the 17th consecutive quarter, according to the latest Agricultural Finance Monitor (AFM) published by the Federal Reserve Bank of St. Louis. That’s for the Eighth District, which includes all or parts of seven Midwest and Mid-South states: Arkansas, Illinois, Indiana, Kentucky, Mississippi, Missouri and Tennessee.

The majority of agricultural bankers (34 within the boundaries of the Eighth Federal Reserve District) continue to report declines in farm income relative to a year earlier.

More specifically, bankers attribute part of declining income to diversification and consolidation.

On the one hand, according to a Missouri lender, “In the past, producers sought off-farm income to bridge cash flow shortages. Today, larger producers are seeking to diversify (excavating, construction, trucking, and new livestock confinement) to provide additional income by using existing equipment and labor.”

On the other hand is consolidation borne by producer retirement.

“Older farmers are discontinuing operations at a fast pace to secure equity for retirement,” explained the same lender. “Few farmers and their bankers are interested in acquiring land due to really tight cash flow coverage ratios. Few producers start up in agriculture unless ushered in by a retiring producer.”

Quality farmland values fell 1.4% in the Eighth Federal Reserve District during the first quarter, compared to the same quarter last year. Cash rents for quality farmland declined 0.5%.

Pasture was a different story.

First-quarter ranchland or pastureland values increased 13.0% compared to the previous year. Cash rent for ranchland or pastureland increased 12.6%.

Cash fed cattle trade remained undeveloped through Thursday afternoon, although chatter continued about still-snug front-end supplies, stout boxed beef sales and declining carcass weights.

Other than 12¢ higher in the back contract, Live Cattle futures closed an average of 86¢ higher (50¢ to $1.85 higher in spot Jun).

Feeder Cattle futures closed an average of $1.11 higher, not counting 37¢ higher in the back contract.

Choice boxed beef cutout value was 11¢ higher Thursday afternoon at $231.07/cwt. Select was 19¢ higher at $209.14. Select and Choice rib, round, and loin cuts traded steady to firm, while chuck cuts sold steady to weak, according to the Agricultural Marketing Service.

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Major U.S. financial indices closed sharply higher on Wednesday, for the second consecutive day. Support included a less than expected increase in the monthly Consumer Price Index (CPI), which softened treasury yields a touch.

The CPI for all urban consumers increased 0.2% in April on a seasonally adjusted basis after falling 0.1% in March, according to the U.S. Bureau of Labor Statistics.

The all items index is up 2.5% over the last 12 months before seasonal adjustment.

The Dow Jones Industrial Average closed 196 points higher. The S&P 500 closed 25 points higher. The NASDAQ closed 65 point higher.

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Projected total red meat and poultry production this year was forecast lower than last month in the World Agricultural Supply and Demand Estimates (WASDE) released yesterday. Beef production for the year is estimated at 27.23 billion lbs.,  compared to 27.70 billion last month.

“Cattle slaughter in the second quarter has been slower than anticipated, and the pace of marketings in the second half of the year is slowed,” say analysts with USDA’s Economic Research Service (ERS). “However, carcass weights are increased for the second half of the year, partly offsetting the reduction in the slaughter forecast.”

Projected fed cattle prices for this year were little changed from last month. The second-quarter fed steer price (5-area direct, all grades) is projected at $116-$120/cwt. Prices are projected at $106-$112 in the third quarter and at $108-$116 in the fourth.

The May WASDE provides the first outlook for 2019. U.S. beef production next year is forecast above this year at 27.78 billion lbs.

“Beef production is forecast above 2018 on higher slaughter and heavier carcass weights,” ERS analysts say. “Pork production in 2019 is forecast to increase as expected growth in farrowings and pigs per litter will support larger pig crops…For 2019, fed cattle and hog prices are forecast above 2018 as relatively strong demand absorbs expected increases in supplies.”

ERS projects the annual fed steer price this year at $114-$119. The first projection for next year is $113-$122.

As expected, weekly cash fed cattle trade was slow out of box through Wednesday afternoon.

None of the cattle sold out of the 2,456 head offered in the weekly Fed Cattle Exchange auction Wednesday. There was one lot of Kansas heifers (89 head) passed on at $122.25/cwt.

Likewise, there was too little country trade to trend.

That lack of cash direction helped quash early follow through support for Cattle futures, which closed lower but in the long-term, narrow range.

Live Cattle futures closed an average of 49¢ lower (30¢ to $1.10 lower).

Feeder Cattle futures closed an average of 61¢ lower (42¢ to $1.02 lower).

Choice boxed beef cutout value was 3¢ higher Tuesday afternoon at $230.96/cwt. Select was 98¢ lower at $208.95.

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Cash bids were higher for soybeans on Wednesday, but lower for grains, according to the Daily National Grain Market Summary.

“Much of the day’s trading may have been focused on getting positions set ahead of USDA’s World Supply and Demand Estimates,” said analysts with the Daily National Grain Market Summary. That report comes out Thursday.

Soybean bids were mostly 4½¢ higher. Wheat bids were mostly 1¢ to 4¢ lower. Corn bids were mostly ½¢ lower.  

Corn futures closed mostly unchanged to fractionally lower.

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Major U.S. financial indices closed sharply higher on Wednesday with support from energy stocks, boosted by rallying oil prices, following the announcement that the U.S. is withdrawing from the Iran nuclear pact.

The Dow Jones Industrial Average closed 182 points higher. The S&P 500 closed 25 points higher. The NASDAQ closed 73 point higher.

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As trade talks continue between the U.S. and China, consider this data provided by the North American Meat Institute (NAMI). China is the second largest export destination for U.S. agricultural products. U.S. exports of beef, pork and poultry products to China/Hong Kong exceeded $2.5 billion last year, 13% more than in 2016. Last year, China also imported more than $1 billion worth of U.S. cattle hides, pig skins and semi-processed leather products. Part of the increasing demand is tied to Chinese consumers’ desire for food safety.

“With China’s domestic production constraints and increasing demand from consumers for high quality, safe food products, the resulting import demand offers significant opportunities for U.S. agricultural exporters,” explained, Bill Westman, NAMI senior vice president of International affairs. “The U.S. is in an excellent position to compete in the Chinese market if it can avoid unnecessary, unjustified barriers to agricultural trade.” He was testifying a couple of weeks ago at a U.S.-China Economic and Security Review Commission hearing focused on China’s agricultural policies.

In his testimony, Westman detailed how China uses means, such as high tariffs and sanitary and phytosanitary measures, to restrict market access for U.S. agricultural products. He also identified several trade barriers and regulations—laboratory protocols, maximum residue limit tolerance restrictions and re-inspection processes, among other policies—that China could address or eliminate to bolster U.S. meat imports.

At the same hearing, David Ortega, assistant professor of Agricultural, Food, and Resource Economics at Michigan State University explained, in his statement, “China’s food safety situation poses a significant risk to its domestic economy, threatens the safety of the U.S. food supply and at the same time presents an opportunity for high quality U.S. agricultural exports.”

Ortega conducted one of the pioneer studies that assessed demand for food safety in China; he’s made about 10 research trips to the country.

“Over the past 10 years, I have found that Chinese consumers are very concerned about the safety of the food products they purchase. Furthermore, they are willing to pay significant premiums to ensure the safety of their food,” Ortega said. “The high level of concern regarding food safety (in China) can be linked to incidents involving pork and dairy products, most notably the clenbuterol-contaminated pork and melamine-tainted dairy and infant formula incidents. These, however, are not isolated events. Reports of contaminated foods and incidents of food fraud have been frequently reported since China joined the World Trade Organization in 2001.”

After early pressure, Cattle futures recovered some on last week’s heavy trade and apparent short covering, but still closed mostly lower.

Live Cattle futures closed an average of 47¢ higher in the front four contracts (12¢ to $1.25 higher in spot Jun) and then an average of 20¢ lower.

Other than 10¢ higher and 2¢ higher in the front two contracts, Feeder Cattle futures closed an average of 63¢ lower.

Choice boxed beef cutout value was $1.79 higher Tuesday afternoon at $230.93/cwt. Select was $1.27 lower at $209.93.

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Major U.S. financial indices closed marginally mixed on Tuesday. Key news was President Trump’s announcement to withdraw the U.S. from the Iran nuclear deal and re-impose economic sanctions on that country. Sanctions lifted by the U.S. and other countries when the deal was established in 2015 boosted the Iranian economy, including Iranian oil exports. Though lower yesterday, many analysts attribute a portion of the recent surge in oil prices to the expectation that U.S. sanctions on Iran will decrease global oil supplies.

The Dow Jones Industrial Average closed 2 points higher. The S&P 500 closed fractionally lower. The NASDAQ closed 1 point higher.

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U.S. cattle producers continue to build upon their already-strong track record in areas important to consumers, according to the Cattlemen’s Stewardship Review (CSR) released this week. Those specific areas are animal welfare, beef quality, sustainability and commitment to community.

Funded by the Beef Checkoff, the CSR documents progress made since the benchmark CSR conducted in 2010.

Among the highlights:

87% percent of consumers say that when they make a meal decisionat home, it is important the meal is “extremely safe to eat—90% of cattle producers say they understand their management practices affect the safety and quality of beef (up 3% from 2010). Further, 95% of producers said their management practices are consistent with producing safe food.

More than 100,000 farmers and ranchers are part of the voluntary Beef Quality Assurance program, which influences the health and animal welfare management practices of more than 80% of U.S. cattle.

75% of consumers say it’s important for meat industries to use sound environmental practices—95% of responding producers say conservation of their land is extremely important to them; 88% manage manure and waste in a way that safeguards air and water

62% of consumers feel its important for meat industries to support their local economies—95% of supplies are purchased from the local area in which beef farmers and ranchers live. Nearly half of cattle farmers and ranchers are involved with a youth organization, such as 4-H, FFA, youth sports, or church youth group. More than a third (39%) donate their time to other civic organizations, compared to a national average of 7%. 

“Cattlemen and women raise high-quality beef to feed families in the United States and around the globe,” says Kendal Frazier, CEO of the National Cattlemen’s Beef Association. “As the beef community looks to the future, there will be an ongoing focus to not only improve beef as a product and the process in which it’s raised, but also to appreciate and honor the tradition and history associated with this important industry.”

Although still range-bound, cattle futures closed solidly lower on Monday. More than anything, sluggish trade seems to indicate uncertainty, including ongoing trade talks, the higher U.S. dollar, looming increased fed cattle supplies and wonderments about how many cattle drought could force to town (see below).

Live Cattle futures closed an average of 98¢ lower (25¢ to $1.35 lower).

Feeder Cattle futures closed an average of $1.97 lower (75¢ to $2.77 lower).

Choice boxed beef cutout value was 84¢ higher Monday afternoon at $229.14/cwt. Select was $1.71 higher at $211.20.

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Major U.S. financial indices closed higher on Monday, propelled by energy stocks, which were buoyed by surging crude oil prices that topped $70 for the first time since 2014 (spot CME-WTI).

The Dow Jones Industrial Average closed 94 points higher. The S&P 500 closed 9 points higher. The NASDAQ closed 55 points higher.

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“The drought can pass with little significant additional impact if rains arrive very soon. Failing that, the drought will become a major issue in the next few weeks,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “I’m not aware of any cattle liquidation in the worst drought areas yet. However, hay supplies are tight and if summer pastures do not develop in the next month the situation will be much more critical. Significant removal of cattle could begin by June. The total D3 and D4 drought area in Kansas, Oklahoma and Texas is currently 53.5 million acres. This area has a carrying capacity between 2.0-2.5 million animal units. The drought area and the number of cattle impacted could expand rapidly in the coming weeks.”