Daily Market Highlights

Cattle futures edged mostly lower on Friday amid sluggish trade and week-end position taking.

Live Cattle futures closed an average of 35¢ lower (12¢ to 60¢ lower), except for 20¢ higher in the back contract.

Feeder Cattle futures closed an average of 22¢ lower, except for unchanged in the back two contracts.

Choice boxed beef cutout value was 74¢ higher Friday afternoon at $228.30/cwt. Select was 32¢ higher at $209.49.

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Major U.S. financial indices closed sharply higher on Friday. Key support for the day came from tech stocks, led by Apple, which surged on news that billionaire, Warren Buffet has been and aggressive Apple buyer for several months.

Depending on your mindset, the monthly U.S. employment report also provided some support, but less than the trade was expecting.

Non-farm employment increased by 164,000 in April, according to the U.S. Bureau of Labor Statistics; a little less than expectations. The unemployment rate dropped to 3.9% in April, one of the lowest rates in recent history.

The Dow Jones Industrial Average closed 332 points higher. The S&P 500 closed 33 points higher. The NASDAQ closed 121 points higher.

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U.S. beef exports set a new monthly value record in March at $693.1 million, 18% more than the previous year, according to data released by USDA and compiled by the U.S. Meat Export Federation (USMEF). Export volume in March was 6% more than the previous year at 111,994 metric tons (mt).

For the first quarter of this year, beef exports were 9% ahead of last year’s pace in volume (318,073 mt) and 19% higher in value at $1.92 billion.

Beef export value averaged $332.89 per head of fed slaughter in March, up 23% from a year ago. For the first quarter, per-head value averaged $315.67, up 18%.

Asian and Latin American markets drove the increase in beef export value.

March beef exports to leading market Japan were steady with last year’s pace at 28,158 mt, but 6% more in value at $177.5 million. USMEF notes that March was the final month of a higher safeguard tariff rate (50% versus the normal 38.5%) applied to Japan’s imports of frozen U.S. beef. The higher rate took effect in August and expired Apr. 1 with the beginning of the new Japanese fiscal year.

“While beef exports to Japan held up well during those eight months, the higher tariff rate certainly weighed on exports of frozen cuts such as short plate,” says Dan Halstrom, USMEF President and CEO. “U.S. short plate is an essential ingredient for Japan’s gyudon restaurants, which are part of a highly competitive fast-casual dining sector. We are pleased to have the higher safeguard tariff rate behind us, though U.S. beef still faces a widening tariff rate gap in Japan compared to Australian beef, and U.S. beef remains subject to Japan’s quarterly safeguard mechanisms for chilled and frozen imports. USMEF continues to monitor this situation, and we are hopeful that the frozen beef safeguard will not be triggered this year.”

Exports to Mexico—the leading volume destination for U.S. beef variety meat—were steady with last year in volume at 57,039 mt but climbed 10% in value to $250.3 million.

Negotiated cash fed cattle trade was $2 higher in the Southern Plains at $126/cwt. on Thursday. Elsewhere, prices were trending generally steady with the previous week, but a higher range in Nebraska with too few to trend.

That and strong wholesale beef values helped push Cattle futures sharply higher, led by Live Cattle.

Live Cattle futures closed an average of $1.20 higher.

Other than 17¢ higher in the back contract, Feeder Cattle futures closed an average of $1.84 higher. 

Choice boxed beef cutout value was 26¢ higher Thursday afternoon at $227.56/cwt. Select was $1.29 higher at $209.17.

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Major U.S. financial indices closed narrowly mixed on Thursday. There were sharp losses early in the session, tied to worries about the possible trade war with China, and then support by the end of the day with more positive quarterly earnings reports.

The Dow Jones Industrial Average closed 5 points higher. The S&P 500 closed 5 points lower. The NASDAQ closed 12 points lower.

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There are two supply-related keys to cull cow prices for the balance of this year, according to analysts with the Livestock Marketing Information Center (LMIC). One is persistently low milk prices that could increase dairy cow slaughter more than expected. The other is drought, which could force the culling of more beef cows than anticipated.

In the latest Livestock Monitor, LMIC analysts point out that so far this year, federally inspected cow slaughter is 7% more than last year—10% more for beef cows and 5% more for dairy cows.

Country cash fed cattle trade remained undeveloped through Wednesday afternoon. Four lots (413 head from Kansas) sold out of the 2,982 head offered in the weekly Fed Cattle Exchange auction, for a weighted average price of $122.40/cwt. (delivery 1-9 days). That was $2 less than most of last week’s country trade in the region.

Cattle futures continued the same overall sideways back and forth of late, this time settling mostly higher.

Other than 97¢ and 10¢ lower in the front two contracts, Live Cattle futures closed an average of 75¢ higher.

Feeder Cattle futures closed an average of 87¢ higher (55¢ to $1.17 higher).

Boxed beef cutout values moved higher on Wednesday with moderate to fairly good demand and light to moderate offerings, according to the Agricultural Marketing Service. Select and Choice rib, chuck, round, and loin cuts steady to firm.

Choice boxed beef cutout value was 87¢ higher Wednesday afternoon at $227.30/cwt. Select was 79¢ higher at $207.88.

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Major U.S. financial indices closed lower in late selling on Wednesday, perhaps on profit taking. Indices were higher for most of the session, supported by the Fed’s decision to leave interest rates unchanged, as expected.

The Dow Jones Industrial Average closed 174 points lower. The S&P 500 closed 19 points lower. The NASDAQ closed 29 points lower.

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Consumer adoption of online grocery shopping continues to grow, but slowly compared to other categories.

 About 10% of U.S. consumers regularly buy groceries on line, according to a new report from the NPD Group (NPD). Nearly all of those (99%) still shop in brick-and-mortar grocery stores, too.

As might be suspected, a key reason more consumers haven’t adopted buying groceries online more quickly has to do with wanting to select their own fresh items. Another is a reluctance to pay for delivery.

According to NPD, the benefits of online grocery shopping, like not needing to leave home, price comparisons, speed, and not having to wait in lines are enough for a growing number of consumers to be enticed, but not enough to get them to do all of their grocery shopping online. 

The NPD folks suggest groceries may follow the same path as other categories, like electronics, where consumers still want to see the item up close and personal.  Like electronics, NPD analysts say often the answer is in an omnichannel approach, which many of the major grocers are now offering.

“With major brick-and-mortar grocery stores announcing click and collect and various speedy delivery options, the line between physical and online is blurring and, as a result, consumers are getting the best of both worlds,” says Darren Seifer, NPD food and beverage industry analyst. “There is also a place for pure-play ecommerce grocers but it looks like, as of now, consumers want a seamless experience between brick-and-mortar and e-commerce.”

Increased grain prices helped pressure Feeder Cattle futures on Tuesday, while apparent continued fund liquidation held Live Cattle in check.

Other than 22¢ and $1.35 higher in the back two contracts, Live Cattle futures closed an average of 49¢ lower.

Feeder Cattle futures closed an average of $2.09 lower across the front half of the board ($1.50 to $2.72 lower) and then an average of 51¢ lower.

Choice boxed beef cutout value was $2.01 higher Tuesday afternoon at $226.43/cwt. Select was $2.30 higher at $207.09.

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Major U.S. financial indices closed mixed on Tuesday. Support came from a surge in Apple stock, ahead of that company’s after-hours earnings report.

The Dow Jones Industrial Average closed 64 points lower. The S&P 500 closed 6 points higher. The NASDAQ closed 64 points higher.

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Trade war concerns continue to drive a sharp decline in producer sentiment toward the agricultural economy, according to the latest Purdue University/CME Group Ag Economy Barometer.

The April barometer reading of 125 was 10 points lower than a month earlier and 15 points below the February reading. The barometer is based on a monthly survey of 400 agricultural producers from across the country.

The drop in producer sentiment was driven by declines in both the Index of Current Conditions, which fell 11 points to 123, and the Index of Future Expectations, which fell 9 points to 126.

The Index of Current Conditions was at its lowest level since May 2017. The Ag Economy Barometer and the Index of Future Expectations were at their lowest levels since March 2017.

“There seems to be a spillover effect that is driving concern among agricultural producers,” says James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture. “Negative perceptions about exports spill over into lower expectations for commodity prices, and then that changes producers’ views about farmland prices.”

The biggest issue surrounding U.S. agriculture and the trade dispute with China currently revolves around the possible impact on U.S. soybean exports, according to Mintert. About 30% of U.S. soybean exports go to China.

Producers were also more pessimistic about the livestock sector, in the April survey. Just 45% said they felt optimistic about the future, compared to 59% a month earlier. That’s the largest one-month drop since data collection began in fall 2015.

“There was already a sharp drop in hog prices that took place from mid to late- winter,” Mintert explains. “Then, add to that the impact of China’s 25% tariff on U.S. pork imports. It adds a layer of doubt regarding the profitability of pork production and appears to be affecting producers’ plans to increase hog production.”

Cash fed cattle trade last week ended up mostly $2-$3 higher in the Southern Plains at mostly $124/cwt. Live trade in Nebraska was mostly $4 higher at mostly $126; steady to $3 higher in the beef at $195-$198. Live trade in the western Corn Belt was mostly $1 higher at mostly $123-$126; mostly steady to $2 higher in the beef at mostly $195-$197

That and significantly higher wholesale beef values should help maintain the market stability established last week. Cattle futures closed lower on Monday with light trade, but apparently due to position squaring at the end of the month, rather than a directional shift.

Live Cattle futures closed an average of $1.25 lower (70¢ to $1.87 lower).

Feeder Cattle futures closed an average of $1.87 lower ($1.60 to $2.05 lower).

Choice boxed beef cutout value was $2.68 higher Monday afternoon at $224.42/cwt. Select was 47¢ higher at $204.79.

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Major U.S. financial indices closed lower on Monday, with some likely profit taking. T-Mobile’s announced intention to acquire rival, Sprint, also applied pressure.

The Dow Jones Industrial Average closed 148 points lower. The S&P 500 closed 21 points lower. The NASDAQ closed 53 points lower.

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“Higher cutout values are feeding into higher fed cattle prices,” says David Anderson, Extension livestock economist at Texas A&M University, in the latest issue of In the Cattle Markets. “The Choice beef cutout started this week at $224.50, up $13 in the last seven weekdays. The Choice cutout is about $5 above this point a year ago, while fed cattle prices are about $12 below this point last year. That has resulted in a live-to-cutout price spread more than $100 per head greater than April 2017. The Choice-Select spread is widening, seasonally, as the Choice cutout has increased faster than the Select cutout.”

Plus, Anderson reminds that the lingering winter likely delayed beef orders and featuring.

“There is some evidence of a rapid spike in beef orders for retail featuring over the next several months,” Anderson explains. “The rib and loin primal cut values are pulling the cutout higher with both primals up over $20 in the last week.”

Negotiated cash fed cattle prices moved higher on Friday, after a softer feel the day before. Live sales in the Southern Plains were $2-$3 higher than the previous week at $124/cwt., on active trade and good demand. There were too few transactions to trend elsewhere, but demand was strong, suggesting higher prices in the Northern Plains and western Corn Belt, too.

That and significantly higher wholesale beef values week to week helped lift Cattle futures late in the session.

Live Cattle futures closed an average of $1.81 higher through the front five contracts ($1.02 to $2.65 higher) and then an average of 41¢ higher.

Except for 42¢ lower in Mar, Feeder Cattle futures closed an average of 97¢ higher (22¢ to $1.75 higher).

Choice boxed beef cutout value was $1.59 higher Friday afternoon at $221.74/cwt. Select was 16¢ lower at $204.42.

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Major U.S. financial indices tread water on Friday.

The Dow Jones Industrial Average closed 11 points lower. The S&P 500 closed 2 points higher. The NASDAQ closed 1 point higher.

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“Wholesale beef prices surged this week with strength in the loin and rib primal driving prices higher,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “The price strength in Choice boxes is largely due to grilling season demand as this will be the first weekend of the year where most of the United States has favorable enough weather to throw beef on the grill.”

Griffith adds, “Expected increases in quantity supplied has some experts concerned, but strong consumer demand should absorb the production.”

There were no sales in the weekly Fed Cattle Exchange auction, with 3,194 head offered. Two lots—one steers and one heifers from Kansas—were passed out at $121/cwt. and $120.25, respectively.

Cattle futures were lightly traded on Wednesday, firming after a slow start.

Live Cattle futures closed an average of 42¢ higher (27¢ to 82¢ higher).

Feeder Cattle futures closed an average of 79¢ higher (35¢ to $1.20 higher).

Wholesale beef values continued higher on Wednesday. Choice boxed beef cutout value was 88¢ higher in the afternoon at $218.53/cwt. Select was $1.04 higher at $203.15.

“Demand has been bullish for beef prices while supply worries have led to bearish trade,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “It would seem the market has consistently been more concerned with increased supply as opposed to recognizing strong consumer demand. As the calendar moves deeper into spring, and as the unofficial start of summer begins with the Memorial Day weekend, the market will have a better idea of beef demand, which should provide a more consistent price direction for beef.”

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Major U.S. financial indices rebounded a little on Wednesday. Although rising Treasury Bond yields continued to pressure the market early, positive quarterly earnings from the likes of Boeing, provided enough support for a mostly positive close.

The Dow Jones Industrial Average closed 59 points higher. The S&P 500 closed 4 points higher. The NASDAQ closed 3 points lower.

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Although calf prices in the first quarter were 3.2% higher year over year—even with to slightly higher than seasonal indexes would project—analysts with the Livestock Marketing Information Center (LMIC) say, “The 10-year seasonal index indicates more potential downside than upside moving through 2018.”

In the latest Livestock Monitor, LMIC analysts point out the U.S. cattle inventory has grown four consecutive years, making for the second longest herd expansion phase since the cycle that began in 1976.

“Larger calf crops tend to put downward pressure on prices, particularly in the fourth quarter,” LMIC analysts say. “January of 2018 showed another 0.7% increase (cattle inventory) compared to the previous year, which would indicate that 2018 fall calf prices again should be the low price point during this calendar year.”

Following early support, Cattle futures drifted to a mostly marginally lower close on Tuesday, amid light activity and bearish outside markets.

Except for 17¢ higher in near Jun, Live Cattle futures closed an average of 43¢ lower (17¢ to 80¢ lower).

Other than 7¢ higher in spot Apr and 65¢ higher in the back contract, Feeder Cattle futures closed an average of 47¢ lower.

Wholesale beef values continued higher on Tuesday. Choice boxed beef cutout value was $2.54 higher in the afternoon at $217.65/cwt. ($5.89 higher in the last two days). Select was 39¢ higher at $202.11.

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Major U.S. financial indices closed sharply lower on Tuesday. Key pressure, according to many analysts, was the yield on the 10-year Treasury bond surpassing 3% for the first time in four years. Rising treasury yields are tied to higher inflation and higher interest rates, which can challenge consumer spending and related stocks. Pressure also came from a steep decline in Caterpillar, a bellwether for current economic conditions and future growth.

The Dow Jones Industrial Average closed 400 points lower. The S&P 500 closed 35 points lower. The NASDAQ closed 121 points lower.

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Spring planting continues to lose ground, relative to last year and the average, according to the weekly Crop Progress report.

5% of the corn is planted, which is 10% less than last year and 9% less than the 5-year average.

2% of soybeans are planted, which is 3% less than last year, but on par with average.

31% of oats are planted, compared to 55% last year and 55% for average. 26% have emerged, compared to 36% last year and 35% for average.

13% of winter wheat is headed, which is 17% less than last year and 6% less than average. 31% is rated in Good (25%) or Excellent condition (6%), compared to 54% last year. 37% is in Poor (22%) or Very Poor (15%) condition, compared to 13% last year.

When all was said and done last week, negotiated cash fed cattle sales were generally $2-$4 higher on a live basis at $121-$122/cwt. in the Southern Plains; $119-$124 in the Northern Plains; $122-$125 in the western Corn Belt. Dressed trade was $5 higher at $195 in Nebraska and the western Corn Belt.

The weekly 5-Area Direct average had steers $2.22 higher at $121.71 on a live basis and $1.87 higher in the beef at $191.84. Similar trends and prices for heifers.

Cash strength and the lack of negative surprise in Friday’s Cattle on Feed report, helped traders continue pushing Cattle futures higher on Monday.

After $2.37 higher in spot Apr, Live Cattle futures closed an average of 99¢ higher.

Feeder Cattle futures closed an average of $1.82 higher ($1.27 to $2.62 higher). 

Wholesale beef values finally found some spark on Monday. Choice boxed beef cutout value was $3.35 higher in the afternoon at $215.11/cwt. Select was $1.59 higher at $201.72.

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Major U.S. financial indices closed narrowly mixed on Monday, with continued pressure from tech stocks and worries about inflation.

The Dow Jones Industrial Average closed 14 points lower. The S&P 500 closed fractionally higher. The NASDAQ closed 17 points lower.

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March feedlot placements were significantly lower year over year—9.26% less—, but Derrell Peel, Extension livestock marketing specialist at Oklahoma State University reminds that the overall supply of cattle remains unchanged.

“Decreased March placements are not an indication of fewer total cattle supplies but rather are a confirmation of the change in feedlot timing in recent months,” Peel explains in his weekly market comments. “Larger, drought-enhanced placements in recent months built feedlot inventories and set the stage for larger than normal seasonal peak marketings in May and June.” 

Although heifers represent an increasing percentage of the on-feed mix, Peel points out that heifer slaughter continues at non-liquidation rates.

“In the past 12 months, heifers represented an average of 34.3% of total steer and heifer slaughter. Over the course of a cattle cycle, heifers account for about 37% of total yearling slaughter, a level that generally represents a stable herd size.  This percentage varies from roughly 31% during rapid herd expansion to about 40% during herd liquidation. The current level of heifer slaughter is up from a recent low of 31.4% in mid-2016 but is still less than the long-term average and certainly below levels that would suggest herd liquidation. Heifer slaughter is increasing but is still at a level that suggests limited but slightly positive herd growth.”

Negotiated cash fed cattle trade continued on Friday, with too few transactions to trend in Nebraska and the western Corn Belt, but there was a sense that prices could maintain or build on earlier-week strength. Prices in the Southern Plains were $2-$4 higher on Thursday at mostly $121/cwt. in the Texas Panhandle and at $122 in Kansas.

That, and a bounce in support late in the day, helped Cattle futures regain some of the ground lost in the previous session.

Except for $1.55 higher in spot Apr and 22¢ higher in the back contract, Live Cattle futures closed an average of 61¢ higher.

Other than 65¢ lower in the back contract, Feeder Cattle futures closed an average of 65¢ higher except for 7¢ higher in spot Apr.

Choice boxed beef cutout value was 64¢ higher Friday afternoon at $211.98/cwt. Select was $1.65 higher at $200.13.

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Major U.S. financial indices closed lower on Friday, pressured by Apple (a bearish forecast for quarterly iPhone) sales and the rising 10-year Treasury Yield.

The Dow Jones Industrial Average closed 201 points lower. The S&P 500 closed 22 points lower. The NASDAQ closed 91 points lower.

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At worst, logic suggests Friday’s Cattle on Feed report should be viewed as neutral by the trade. Keep in mind the data accounts for feedlots with a one-time capacity of 10,000 head or more.

Placements in March of 1.92 million head were 9.26% less (196,000 head fewer) than last year. Estimates ahead of the report expected a decline in placements of 9-12% less. In terms of weight composition, 31.24% were placed on feeds at weights less than 699 lbs.; 55.2% weighed 700-899 lbs.; 13.53% weighed more than 900 lbs.

Marketings in March of 1.84 million head were 3.87% less (74,000 head fewer) than last year. Ahead of the report, analysts expected a decline of 4-5%.

Total cattle on feed of 11.73 million head, were 7.42% more (810,000 head more) than last year. The average expectation of analysts ahead of the report was for an increase of 7.1-7.6%. It’s the second-highest total for Apr. 1 since the series began in 1996.

The on-feed mix Apr. 1 was 64.24% steers and 35.76% heifers, with heifers representing 2.07% more of the total than last year.