Daily Market Highlights

Negotiated cash fed cattle prices surged $2-$4 higher in the Southern Plain on Thursday at mostly $121/cwt. in the Texas Panhandle and at $122 in Kansas; moderate demand and trade.

Bears took Cattle futures down a sharp notch on Thursday, despite higher cash trade and the fundamentals that provided recent stability—including a gap in harvest-ready fed cattle supplies in the North and a looming seasonal increase in wholesale beef values.

Besides likely profit taking overall, perhaps some of the funds with remaining long positions wanted out ahead of Friday’s Cattle on Feed report. As reported in Cattle Current yesterday, most analysts anticipate a sharp drop in March placements, while expecting the Apr. 1 on-feed inventory to be 7.0-7.5% higher than last year.

Live Cattle futures closed an average of $1.58 lower ($1.20 to $2.27 lower).

Feeder Cattle futures closed an average of $2.03 lower ($1.10 to $2.35 lower).

Choice boxed beef cutout value was 30¢ lower Thursday afternoon at $211.34/cwt. Select was 9¢ lower at $198.48.

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Major U.S. financial indices closed lower on Thursday. Pressure included lower tech stocks, based on the forecast for semiconductor sales.

The Dow Jones Industrial Average closed 83 points lower. The S&P 500 closed 15 points lower. The NASDAQ closed 57 points lower.

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Fire crews continue to make progress in containing the devastating wildfires raging in western Oklahoma. Yesterday, Oklahoma Forestry Services estimated 15% containment of the Rhea Fire Complex in Dewey County.

“Hay is the number one need right now,” explained Dana Bay, Woodward County Oklahoma State University Extension educator, in a statement from the Oklahoma Cattlemen’s Association (OCA) earlier this week. “Ranchers that were able to save their cattle but lost their grass and hay are in desperate need of hay to sustain those animals.”

Last week the Oklahoma Cattlemen’s Foundation (OCF) established a relief fund for cattle producers affected by the fires.

“We will coordinate with the Extension Offices in the affected areas to organize relief efforts and to identify ranchers that are in need,” explained Tiffani Pruitt OCF Coordinator.

You can find more information about donating hay or contributing to the relief fund at the OCA website.

Yesterday’s weekly Fed Cattle Exchange auction served as one more indicator that negotiated cash fed cattle prices should be higher this week. There were 3,220 head offered. Only two lots (499 head) sold from Nebraska: steers (1-9 day delivery) for a weighted average price of $122/cwt.; heifers (1-17 day delivery) for a weighted average price of $120. The steer price was even with the top reported country price in the region last week.

Cattle futures continued to grind higher Wednesday with renewed optimism.

Live Cattle futures closed an average of 62¢ higher (37¢ to 92¢).

Other than 2¢ higher in spot Apr, Feeder Cattle futures closed an average of 81¢ higher.

Choice boxed beef cutout value was 49¢ lower Wednesday afternoon at $211.64/cwt. Select was $1.01 lower at $198.57.

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Major U.S. financial indices closed narrowly mixed on Wednesday, amid mostly positive quarterly earnings reports and despite a surge in crude oil prices.

The Dow Jones Industrial Average closed 38 points lower. The S&P 500 closed 2 points higher. The NASDAQ closed 14 points higher.

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When the monthly Cattle on Feed report comes out on Friday, most analysts expect to see placements lower year over year for the first time in 12 months. Reasoning includes earlier placements of last year’s spring calf crop thus far and declining economic incentive for feedlots.

“March Placements are expected to be 12.2% lower than last year at 1.859 million head,” say analysts with Allendale, Inc.“This would be the smallest March placement in three years…Cattle feeding margins is the main reason for the decline. Finished cattle in March were seeing a $122 breakeven, still profitable. The concern comes with April, May, and June, where breakevens increase to the $126-$129 region due to those heavy fall feeder purchases.”

Similarly, according to the Daily Livestock Report, analysts surveyed by Urner Barry expect March placements to be 9.1% less than last year.

Allendale projects March marketings at 5% less than last year. Analysts responding to the Urner Barry survey expect, on average, 4% less.

Combined, Allendale estimates Apr. 1 cattle on feed to be 7.1% more than last year. Analysts in the Urner Barry survey expect 7.6% more.

Market optimism grew on Tuesday with more chatter about short front-end fed cattle supplies in the north and the increasing likelihood that cash prices can move higher again this week. There was no negotiated trade reported.

Other than an average of 5¢ lower in Feb, Live Cattle futures closed an average of 34¢ higher (12¢ to 90¢ higher in spot Apr).

Other than 12¢ to 50¢ lower in three contracts, Feeder Cattle futures closed an average of 34¢ higher.

Choice boxed beef cutout value was 34¢ higher Tuesday afternoon at $212.13/cwt. Select was 40¢ lower at $199.58.

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Major U.S. financial indices closed sharply higher again on Tuesday, supported by strong quarterly earnings from some of the big players, including Netflix and UnitedHealth.

The Dow Jones Industrial Average closed 213 points higher. The S&P 500 closed 28 points higher. The NASDAQ closed 124 points higher.

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“Current projections indicate losses (cattle feeding) spanning the rest of 2018, consistent with lower expected sales prices, which have decline by $8-$12/cwt. (depending on closeout month) since early March,” according to the latest Historical and Projected Kansas Feedlot Net Returns (KFNR) from Kansas State University.

Keep in mind that KNFR estimated returns are on a cash to cash basis with no risk management assumed.

March net returns for steers were estimated at $41.54 per head. Projections are for negative net returns of -$253.77 (April) to -$256.67 (June) per head. Estimated losses for the rest of the year range from -$70.95 (December) to -$191.13 (July).

Similarly, March net returns for heifers were projected at $59.56 per head. Projections are for negative net returns of -$238.69 (April) to -$48.27 (December) per head), but mostly well above $100.

Cash fed cattle trade perked up at the end of the week, according to reports for late-Friday trade. Live prices for the week were generally steady to $3 higher at $118-$120/cwt. in Kansas, $122 in Nebraska and $119-$123 in the western Corn Belt. Dressed trade was steady to sharply higher at $190.

Stronger cash prices helped Cattle futures barrel out of the blocks, building on the previous week’s momentum. Futures closed mixed, though, with uncertainty about the impact of the weekend’s brutal winter weather, and interest in Live Cattle likely capped by the gaping discount between spot Apr and June. 

Other than an average of 56¢ higher in the front two contracts, Live Cattle futures closed an average of 11¢ lower.

Except unchanged in May and $1.37 higher in Mar, Feeder Cattle futures closed narrowly mixed, 32¢ lower to 25¢ higher.

Choice boxed beef cutout value was 82¢ lower Monday afternoon at $211.79/cwt. Select was 7¢ higher at $199.98.

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Major U.S. financial indices closed sharply higher on Monday, supported by strong quarterly earnings, as well as less tension after the missile strike against Syria by the U.S. and its allies.

The Dow Jones Industrial Average closed 212 points higher. The S&P 500 closed 21 points higher. The NASDAQ closed 49 points higher.

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Retail beef prices continue to suggest strong consumer demand, says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. 

“The All-Fresh beef retail price for March was $5.598/lb., up from $5.53/lb. in February and up 0.9% from one year ago,” Peel says. “Choice boxed beef cutout has declined from a February high of $224.46/cwt. to $213.34/cwt. in mid-April but remains 1.6% higher year over year for the latest weekly data.”

Moreover, Peel notes that retail beef prices continue to hold up well relative to pork and poultry prices.

“March retail pork price was $1.502/lb., up from $1.478/lb. in February and down 0.7% from one year ago,” Peel explains. “Composite broiler retail price in March was $1.867/lb., up slightly from the February level of $1.861/lb. and down 0.6% from last year. The ratio of retail beef price to both pork and broiler continues to hold strong despite growing supplies of beef, pork and poultry.  Production of beef, pork and broilers are all expected to be record large in 2018 leading to record large total meat supplies of nearly 103 billion lbs., up 3.3% year over year.” 

So far this year, beef production is up about 1.5% compared to last year, Peel says, adding that projections call for about a 5% increases by the end of the year.

Negotiated cash fed cattle trade remained mostly undeveloped for the week through Friday afternoon. Although too few to trend, there were a few live trades in Kansas at $118-$120/cwt.; some earlier in the week in the Texas Panhandle at $117.

Cattle futures closed mixed on Friday, amid apparent profit taking and waiting on direction from cash fed cattle.

Other than unchanged to 15¢ lower in four contracts, Live Cattle futures closed an average of 48¢ higher (20¢ higher to 80¢ higher in spot Apr).

Except for 30¢ and 10¢ lower at the back of the board, Feeder Cattle futures closed an average of 47¢ higher.

Choice boxed beef cutout value was 13¢ higher Friday afternoon at $212.61/cwt. Select was 76¢ lower at $199.91.

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Major U.S. financial indices closed lower on Friday, pressured by banks like Citigroup and J.P. Morgan, even though their quarterly earnings surpassed expectations.

The Dow Jones Industrial Average closed 122 points lower. The S&P 500 closed 7 points lower. The NASDAQ closed 33 points lower.

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According to analysts with the Agricultural Marketing Service (AMS), preliminary first-quarter slaughter data indicates heifer slaughter was 4% more than last year and 10% more than the 3-year average. Beef cow slaughter was 10% more than last year and about 19% more than the 3-year average.

With drought in so many locations and forage prices increasing, AMS analysts note that heifer and beef cow slaughter levels could accelerate.

Cattle futures surged higher on Thursday—led by Live Cattle—amid short covering, technical buying and the notion that cash fed cattle prices for the week will be firm to a touch higher.

Live Cattle futures closed an average of $1.87 higher ($1.62 to $2.25 higher).

Feeder Cattle futures closed an average of $3.62 higher ($2.90 to $4.42 higher).

Choice boxed beef cutout value was 59¢ lower Thursday afternoon at $212.48/cwt. Select was 6¢ higher at $200.67.

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On Wall Street Thursday, Major U.S. financial indices ricocheted back the other way from the previous session, closing sharply higher, with a strong start to quarterly earnings and President Trump taking some edge off his rhetoric from the previous day regarding a potential attack on Syria.

The Dow Jones Industrial Average closed 293 points higher. The S&P 500 closed 21 points higher. The NASDAQ closed 71 points higher.

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USDA’s General Accounting Office, this week, released the results of its investigation into the price behavior of fed cattle prices from 2013 to 2016.

That investigation was launched at the behest of some in the industry convinced there had to be some reason, other than market forces, for the sudden decline of prices in the fall of 2015.

You might recall that prices that year continued historically high, buoyed by still-tight cattle supplies from the multi-year widespread drought, as well as nascent herd expansion. Some chinks were starting to  show up in the armor of the extraordinary price run, though, including China’s currency devaluation that summer which rocked export markets, on top of a glut of international animal protein supplies. Cattle feeders were bleeding red ink, on a cash to cash basis at least, with pricey cattle in their yards and the fed market starting to turn south as domestic demand sputtered with price-weary consumers. So, they held cattle, adding more pounds to get as much as possible out of each head and delaying the need to pay for still high-priced replacements. Carcass weights increased and marketing fell behind, way behind, markets sank.

Rather than the popular bogymen posited by folks calling for the GAO investigation, specters like packer collusion and cattle and beef imports to the U.S., by and large, fundamentals did a swell job of explaining the situation.

That’s also the bottom line of the GAO report, which attributes the price behavior to supply and demand factors, including the drought that affected cattle and feed prices.

“GAO’s analysis of cattle market data from the U.S. Department of Agriculture also indicated that competition levels among packers that slaughter and process fed cattle did not appear to affect the national price changes in the fed cattle market in 2015 but that areas of the country with less competition among packers had lower cattle prices,” according to the report.

So, again, no surprises.

There were significantly more cattle—3,931 head—offered in the weekly Fed Cattle Exchange Auction on Wednesday. All said and done, 450 head sold for 1-9 day delivery at a weighted average price of $117.71/cwt.; 59 sold for 17-30 day delivery at a weighted average price of $114.

That mirrored light country trade in the Southern Plains. Though too few to trend, there were some early live sales in the Texas Panhandle at $117 and in Kansas at $117-$118.

Cattle futures were mostly a repeat of the prior session, strong support early that eroded with a lack of activity.

After 70¢ higher in spot Apr, Live Cattle futures closed narrowly mixed, (an average of 20¢ lower in five contracts to an average of except for 8¢ higher in three.

Feeder Cattle futures closed narrowly mixed (from an average of 6¢ lower in three contracts to an average of 32¢ higher in five contracts).

Choice boxed beef cutout value was 44¢ lower Wednesday afternoon at $213.07/cwt. Select was 72¢ lower at $200.61.

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Major U.S. financial indices closed strongly lower Wednesday, reportedly on President Trump’s tweet-threat that the U.S. might aim missiles at Syria, in response to the alleged use of chemical weapons there over the weekend.

The Dow Jones Industrial Average closed 218 points lower. The S&P 500 closed 14 points lower. The NASDAQ closed 25 points lower.

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“It is unlikely that trade issues are responsible for the dramatic market softening in March,” says Stephen Koontz, agricultural economist at Colorado State University, in the latest issue of In the Cattle Markets. “Rather, many of the underlying fundamentals are different between this year and this time in 2017.  And, different such that lower prices are to be expected.”

Most notable, Koontz says, are significantly more cattle on feed for more than 120 days. 

“It is well known that inventories of cattle are higher as are on-feed numbers.  But, the number of long-fed cattle is substantially higher this year than last, Koontz explains. “Last year, the market entered April with a very clean show-list.  Not this April. Consequently, while in seasonal decline, carcass weights are running ahead of last year. Both of these will limit upward potential for fed cattle.”

On the other hand, Koontz believes the overall situation is unlikely to worsen for fed cattle, given the healthy fed slaughter volume and strong packers margins.

“It will be important to watch Saturday volumes (fed harvest) through the remainder of April. Strong volumes will indicate solid featuring at retail, which for the most part of this year has been soft compared to last year,” Koontz says. “I am not optimistic that retail featuring will lead to much improved beef demand in the northern and central parts of the nation–with the cold spring solidly in place. Further, beef will clearly need to compete through the summer with larger volumes of chicken and pork. These also limit upward potential for cattle and calves.”

Cattle futures settled narrowly mixed on Tuesday after a surge of support to start the day.

Live Cattle futures closed an average of 33¢ lower, except for 77¢ higher in spot Apr and 25¢ higher in Feb.

Other than 37¢ higher in spot Apr, Feeder Cattle futures edged lower (5¢ to 42¢ lower).

Choice boxed beef cutout value was $1.53 lower Tuesday afternoon at $213.51/cwt. Select was $1.81 lower at $201.33.

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Major U.S. financial indices bounced sharply higher on Tuesday with conciliatory comments from China’s president boosting investor optimism. Crude oil prices also offered support.

The Dow Jones Industrial Average closed 428 points higher. The S&P 500 closed 43 points higher. The NASDAQ closed 143 points higher.

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Projected total red meat and poultry production was lowered in the latest World Agricultural Supply and Demand Estimates (WASDE). Anticipated beef production was reduced from the previous month on lower first-half slaughter and lighter weights.

“Cattle and hog price forecasts are reduced from last month as demand for cattle and hogs has softened and supplies are expected to be large in the coming quarters,” said analysts with USDA’s Economic Research Service.

The annual fed steer price (5-area direct) was estimated $2-$4 lower at $114-$119/cwt. Second-quarter prices are projected at $114-$118; third quarter at $106-$114; fourth quarter at $108-$118.

Ending corn stocks were increased 55 million bu. on 50 million fewer bu. for feed and residual use. The projected range for the season-average corn price received by producers was unchanged at the midpoint with the range narrowed to $3.20 to $3.50/bu.

U.S. soybean stocks were projected 5 million bu. less with record-large soybean crush. The season-average soybean price is forecast at $9.10 to $9.50/bu., unchanged at the midpoint. The soybean oil price is projected at 30.5¢ to 32.5¢/lb., also unchanged at the midpoint. Soybean meal prices are projected at $340 to $360 per short ton, up $10.00 at the midpoint.

Ending U.S. wheat stocks were estimated 30 million bu. higher on lower feed and residual use. Based on NASS prices and marketings reported to date, along with price expectations for the rest of 2017-18, the season-average farm wheat price is unchanged at the range of $4.60 to $4.70/bu.

Although Cattle futures closed mixed on Monday, the rally in the session earlier hinted at some stability, and with the higher week-to-week close, the sense that the bottom might have been established.

Live Cattle futures closed narrowly mixed (25¢ lower to 17¢ higher).

Feeder Cattle futures closed mixed (an average of 35¢ lower—10¢-87¢ lower—except for 12¢-35¢ higher in three contracts).

Choice boxed beef cutout value was 73¢ higher Monday afternoon at $215.04/cwt. Select was $2.46 lower at $203.14.

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Major U.S. financial indices were sharply higher for much of Monday’s session, on what were perceived as hopeful statements from the U.S. Treasury Secretary, regarding the prospects of a trade war with China. Markets barreled lower late a report circulated that the FBI raided the offices of President Trump’s personal lawyer.

The Dow Jones Industrial Average closed 46 points higher. The S&P 500 closed 8 points higher. The NASDAQ closed 35 points higher.

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“As we work through the escalating trade tensions that are currently roiling markets, it will be beneficial if all sides remember that trade adds value and is not a zero-sum game,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments.

Whether between individuals or nations, Peel points out that trade boils down to the same factors.

“Trade between two economic agents adds value to both and is the basis for nearly all economic growth,” Peel explains. “These gains from trade are the result of specialization where market participants capitalize on their comparative advantage in some activity. Comparative advantage allows all parties in a market to produce at their lowest opportunity cost thereby using scarce resources most efficiently.”

He uses the example of an individual buying the parts to build a computer rather than buying one off the shelf. It’s more efficient to buy one—capitalizing on someone else’s comparative advantage.

“International trade is fundamentally no different than any other trade in terms of the underlying economic forces. However, the complication of multiple governments and lots of politics often puts international trade under a different lens,” Peel explains. “One of the concerns is trade deficits that sometimes result from international trade. The term trade deficit is usually applied to the negative balance of goods that occurs when a country imports more products from another country than it exports to that country. To call this negative balance of trade a deficit is really a misnomer as it does not imply any unpaid obligation, in contrast to, say, a budget deficit.” 

For instance, Peel says Oklahoma has a tae deficit with Florida and California in terms of the fruits and vegetables consumed in the state.

“Oklahoma does not have a comparative advantage in fruit and vegetable production and it would not be efficient to produce them all in the state. However, the state’s trade deficit regarding fruits and vegetables is part of a bigger economic picture and not a source of concern,” Peel explains. “In general, the same is true for country-to-country trade deficits…it is part of a larger picture involving the entire macro-economy of the country and the broader global trade picture. For example, goods sourced cheaper in another country free up resources and consumer dollars in the U.S. to support other businesses.”

Cattle futures dropped on Friday, amid more trade worries, even as the most recent statistics show that U.S. beef exports continue higher year over year…coming up on your Cattle Current Market Update with Wes Ishmael.

Cattle futures closed sharply lower on Friday, amid position squaring and renewed angst about international trade issues.

Live Cattle futures closed an average of $1.54 lower (72¢ to $2.72 lower).

Feeder Cattle futures closed an average of $1.69 lower ($1.22 to $2.42 lower).

Choice boxed beef cutout value was 78¢ lower Friday afternoon at $214.31/cwt. Select was 71¢ lower at $205.60.

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Major U.S. financial indices closed sharply lower on Friday, on more worries about a trade war with China after the Trump Administration directed the U.S. Trade Representative to determine if an additional $100 billion worth of tariffs on Chinese imports would be appropriate. Some also viewed the monthly unemployment report as bearish. Although non-farm payroll employment increased by 103,000 in March, according to the Bureau of Labor Statistics, it was less than the trade anticipated.

The Dow Jones Industrial Average closed 572 points lower. The S&P 500 closed 58 points lower. The NASDAQ closed 161 points lower.

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U.S. beef exports continue to provide critical support for domestic prices.

February exports of U.S. beef were higher than a year ago in both volume and value, according to statistics released by USDA and compiled by the U.S. Meat Export Federation (USMEF).

Specifically, February beef export volume (100,593 metric tons) improved 11% from the previous year, while export value increased 18% to $599.8 million. For the first two months of the year, beef export volume (206,079 mt) was 10% more than the first two months of 2017, while export value was 20% more at $1.22 billion.

For meaning closer to home, February beef export value averaged $322.29 per head of fed slaughter, up 16% from a year ago. Through February, per-head export value averaged $306.69, up 15%.

“Red meat exports are off to a strong start in 2018 and continue to deliver excellent returns for U.S. producers,” says Dan Halstrom, USMEF President and CEO. “The outstanding level of export value per head slaughtered is especially encouraging at a time in which U.S. meat production is high and the trade climate is somewhat volatile. Through all the uncertainty, international customers remain very committed to U.S. pork and beef.”