Daily Market Highlights

Cattle futures continued sharply higher on Thursday for the second day in a row. The surge, coupled with heavy volume in Live Cattle the previous day, increases hopes that a near-term bottom was established earlier this week.

Live Cattle futures closed an average of $1.65 higher (67¢ to $2.72 higher.

Feeder Cattle futures closed an average of $2.36 higher ($1.77 to $2.97 higher).

Choice boxed beef cutout value was $3.08 lower Thursday afternoon at $215.09/cwt. Select was 13¢ higher at $206.31.

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Major U.S. financial indices closed sharply higher again on Thursday, bouncing back further from aggressive pressure earlier in the week, tied to the brewing trade war with China.

The Dow Jones Industrial Average closed 240 points higher. The S&P 500 closed 18 points higher. The NASDAQ closed 34 points higher.

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Levi Russell, an agricultural economist at the University of Georgia provides some year-over-year market perspective, in light of recent pressure exerted on calf and feeder prices by fewer than expected corn acres.

“At this time last year, we were seeing a typical spring rally thanks to several factors,” Russell says, in the latest issue of In the Cattle Markets. “Demand was quite strong and was offsetting increases in beef production. Supply fundamentals across all proteins were bearish, but both domestic and export demand were strong enough to keep prices moving higher. Additionally, the prospective plantings report was bearish for corn, which was good news for feedlot demand. Time will tell whether export demand (which has been strong) and domestic demand (which is increasingly tied to consumers’ incomes) will buoy prices into grilling season.”

Only four lots (373 head) were offered in the weekly Fed Cattle Exchange auction. One lot of steers and one lot of heifers (156 head total)—both from Kansas—sold for a weighted average price of $117/cwt., for delivery at 1-9 days. That ended up mostly mirroring country trade.

Live trade was $2-$3 lower in the Southern Plains through Wednesday afternoon at $117-$118/cwt. In Nebraska live prices were at mostly $114, which was $3.50 to $8.00 less than last week. Dressed prices in Nebraska and the western Corn Belt were generally $2-$6 lower at $184-$188.

Cattle futures closed sharply higher on Wednesday, perhaps with traders believing that lengthy long liquidation has established a near-term bottom. That came after Cattle futures trending strongly lower for much of the session, reacting in part, to China’s proposed tariffs on a long list of goods that included U.S. beef (see below).

Live Cattle futures closed an average of $1.99 higher through the front five contracts and then 62¢ to $1.50 higher.

Feeder Cattle futures closed an average of $3.00 higher ($2.22 to $4.15 higher).

Choice boxed beef cutout value was $1.51 lower Wednesday afternoon at $218.17/cwt. Select was $3.15 lower at $206.18.

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It was a wild rollercoaster on Wall Street Wednesday as major U.S. financial indices started out sharply lower, in response to China’s proposed tariffs on U.S. goods. Markets roared back, though, presumably on chatter from the White House that eased investor worries.

The Dow Jones Industrial Average closed 230 points higher. The S&P 500 closed 30 points higher. The NASDAQ closed 100 points higher.

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China fired another retaliatory round in the brewing trade war with the U.S., issuing proposed tariffs on 25% of the agricultural and food products it imports from the United States, including U.S. beef. That came after the Trump Administration took another step toward imposing tariffs on $50 billion worth of Chinese exports to the U.S., as a penalty for China’s ongoing violation of intellectual property rights.

“China is a promising market for U.S. beef, and, since the June 2017 reopening, the U.S. industry has made an exceptional effort to provide customers with high-quality beef at an affordable price. This is not an easy task, due to our 13-year absence from the market and China’s beef import requirements,” says Dan Halstrom, president and CEO of the U.S. Meat Export Federation (USMEF).

In the second half of last year, after China reopened the doors, U.S. beef exports to China totaled 3,020 metric tons valued at $31 million, according to USMEF. In January 2018, exports reached the highest monthly volume to date at 819 metric tons, valued at $7.5 million.

In a special edition of Beltway Beef, Kent Bacus points out the tariff on U.S. beef is contingent on the proposed U.S. tariffs going into effect on the imports from China. He reckons there are 6-8 weeks before that happens, if it does, based on ultimate findings by the U.S. Trade Representative. Bacus is director of international trade and market access for the National Cattlemen’s Beef Association.

“Over the past nine months, interest in U.S. beef has steadily gained momentum in China and our customer base has grown. But if an additional import tariff is imposed on U.S. beef, these constructive business relationships, and opportunities for further growth, will be put at risk,” Halstrom says.

Cash fed cattle trade wobbled out of the blocks on Tuesday with a decidedly lower tone, as expected. Although too few to trend, there were some early live sales in the Southern Plains at $117-$118/cwt. and a few dressed trades in the western Corn Belt at $188-$192. That’s about $3 lower on a live basis and $2-$3 lower in the beef for those regions.

Early two-side trading in Cattle futures gave way to the bears on Tuesday, amid light volume and uncertainty about how much lower cash fed cattle will trade this week.

Live Cattle futures closed an average of 55¢ lower across a broad range (12¢ to $1.32 lower). Near Jun and Aug closed below $100 at a contract low for Aug and within spitting distance of the low for Jun, which was established early on in March of last year.

Except for an average of 30¢ lower in the back two contracts, Feeder Cattle futures closed an average of $1.36 lower.

Wholesale beef value continued to tread water on Tuesday, with Choice boxed beef cutout value was 12¢ lower in the afternoon at $219.68/cwt. Select was $1.17 lower at $209.33.

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Major U.S. financial indices closed sharply higher on Tuesday, led by tech stocks, which were behind the previous day’s sharp decline; nothing new fundamentally except for perhaps being oversold.

The Dow Jones Industrial Average closed 389 points higher. The S&P 500 closed 32 points higher. The NASDAQ closed 71 points higher.

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Producer concern about trade issues helped pressure the Purdue University/CME Group Ag Economy Barometer five points lower to 135 last month. Both sub-indices that comprise the overall index were lower, too. The Index of Current Conditions fell 9 points in March to 134, while the Index of Future Expectations dropped by 4 points to 135.

Nearly half (47%) of respondents to the March survey said that a trade war negatively impacting agricultural exports was somewhat likely, compared with just 28% who thought it was unlikely. The remaining 25% indicated uncertainty with a neutral rating.

Producers also were asked about the likelihood of a U.S. withdrawal from the North American Free Trade Agreement (NAFTA). More than one-third expressed uncertainty, while 28% expected the U.S. to remain in NAFTA and 34% said they expect the U.S. to exit the agreement.

“Interestingly, when comparing results from the two trade questions, a larger share of respondents reported a significant decline in agricultural exports from a trade war was more likely than the U.S. withdrawing from NAFTA,” says James Mintert, director of Purdue University’s Center for Commercial Agriculture and principal investigator on the barometer project. “These results are important for two reasons. First, nearly half of producers rated the risk of a trade war as at least somewhat likely. Second, producers’ concerns about risks to agricultural trade are broader than just the ongoing NAFTA situation.”

The barometer and both sub-indices are based on a monthly survey of 400 U.S. agricultural producers.

All of the fundamental dominos in favor of cattle markets for so long are lining up in the other direction. Along with increasing supplies, last week’s sharply higher grain prices took a toll on Cattle futures and cash prices. On Monday, it was the weekend news that China is imposing additional tariffs on a list of U.S. imports, including pork (see below).

Although Cattle futures tried for support early, they couldn’t withstand the pressure of tumbling Lean Hog futures and related technical selling.

Live Cattle futures closed an average of $1.28 lower through the front three contracts (87¢ to $1.62 lower) and then an average of 30¢ lower.

Except for 22¢ lower in newly minted away Mar, Feeder Cattle futures closed an average of $1.22 lower (65¢ to $1.65 lower).

Choice boxed beef cutout value was $1.24 lower Monday afternoon at $219.80/cwt. Select was $1.81 higher at $210.50.

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Major U.S. financial indices closed sharply lower on Monday, led by tech stocks—fears over increased regulation—and concerns about trade wars, with China’s weekend tariff retaliation.

The Dow Jones Industrial Average closed 458 points lower. The S&P 500 closed 58 points lower. The NASDAQ closed 193 points lower.

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China is imposing an additional 25% tariff on U.S. pork imports.

That’s on top of duties that were already in place of 20% and 12% for chilled pork and frozen pork, respectively, according to Import Duties by Country, compiled by the U.S. Meat Export Federation (USMEF).

“China was the third largest value market, with more than $1 billion in U.S. pork being shipped there last year,” says Neil Dierks, CEO of the National Pork Producers Council. “Exports are extremely critical to the financial well-being of our producers. Over the past 10 years, the United States, on average, has been the top exporter of pork in the world, and we’re the lowest-cost producer. In any given year, we export pork to more than 100 nations, and those exports support 110,000 American jobs. Last year, nearly $6.5 billion of U.S. pork was exported, which was more than 26% of U.S. pork production.”

For context, Glynn Tonsor, agricultural economist at Kansas State University explains, “The Chinese market for U.S. red meat indeed remains highly valued both today and for the foreseeable future. However, the U.S. export portfolio is more diverse than in the past, and hence likely less impacted by any changes in trade with any single country.” He adds that total U.S. pork exports last year exceeded 5.6 billion lbs., up from 109 million lbs. in 1987.

Tonsor provides an insightful factsheet that summarizes the relative concentration of export destinations for U.S. beef and pork.

In it, he explains, “The Herfindahl-Hirschman Index (HHI) is an often-used measure of market concentration where lower values reflect less concentration and a value of 1 reflects reliance on one sole country.”

By that measure, market concentration is relatively low for both U.S. beef and pork exports. The HHI for pork last year was around 0.20; about 0.18 for beef.

Cattle markets head into the new week with a fair bit of uncertainty and plenty of questions tied to Thursday’s USDA reports. For instance the Prospective Plantings report—fewer corn and soybean acres than expected—boosted spot grain cash bids and futures prices significantly higher when it came out during trading hours on Thursday, despite sharply higher stocks. With futures and equity markets closed in observance of Good Friday, there was no chance to judge follow-through action. Likewise, the quarterly Hogs and Pigs report came out after futures trade on Thursday. It has the inventory of market hogs (66.7 million head) 3% higher than the previous year, though 1% less than the previous quarter.

The higher grain prices helped push Cattle futures sharply lower to end the week.

Live Cattle futures closed an average of $4.62 lower through the front five contracts week to week on Thursday and then an average of $2.42 lower. Analysts with the Agricultural Marketing Service point out the June contract closed the week at the lowest level since late April of last year.

Except for $1.92 lower in expiring March, Feeder Cattle futures closed an average of $4.40 lower week to week on Thursday; about $11 lower over the last three weeks.

Cash fed cattle trade for the week also added pressure. Live prices were $5 lower in the Southern Plains at $121/cwt.; $3-$4 lower in Nebraska at $120-$122. Dressed trade ended in Nebraska at $190, which was $10-$13 less than the previous week.

Choice boxed beef cutout value was 4¢ higher Friday afternoon at $221.04/cwt. Select was 99¢ lower at $208.69.

“Significant equity has vanished from the cattle complex in recent weeks as

feedlot managers trade a substantial amount of cattle out front for future

delivery in order to lock in a price ahead of calf-feds hitting the supply chain in late April to early May,” say analysts with the Agricultural Marketing Service (AMS). “…packers bought the second largest weekly total purchased for 15 to 30-day deliveries since the data series started in March of 2010.”

AMS analysts note that mild winter weather in the Southern Plains will likely contribute to the expected year-over-year increase in carcass weights.

Surging futures prices for grains and soybeans—tied to USDA’s much-anticipated reports (see below)—and technical selling helped fuel aggressive selling in Cattle futures on Thursday.

Live Cattle futures closed an average of $2.46 lower ($1.70 to $3.00 lower).

Except for 37¢ lower in expiring Mar, Feeder Cattle futures closed an average of $4.17 lower.

Futures and equity markets will be closed in observance of Good Friday.

Choice boxed beef cutout value was 62¢ lower Thursday afternoon at $221.00/cwt. Select was $1.95 lower at $209.68.

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Major U.S. financial indices closed sharply higher on Thursday, buoyed in part by a rebound in tech stocks and investors squaring positions for the week, month and quarter.

The Dow Jones Industrial Average closed 254 points higher. The S&P 500 closed 35 points higher. The NASDAQ closed 114 points higher.

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Corn growers intend to plant 88.0 million acres in 2018, down 2%, or 2.14 million acres from last year. That’s according to the Prospective Plantings report from USDA’s National Agricultural Statistics Service (NASS). If realized this will be the lowest planted acreage since 2015. That’s on the low side of most estimates ahead of the report.

Soybean acres are also estimated lower at 89.0 million acres, which is 1% less than last year. If realized, the planted area of soybeans in Indiana, Kentucky, North Dakota, Pennsylvania, and Wisconsin will be the largest on record.

Acreage for all wheat planted this year is estimated at 47.3 million acres, up 3% percent from 2017, but it would be the second lowest all wheat planted area on record since records began in 1919.

Harvested acres of all hay are estimated to be about even with last year at 53.7 million acres.

NASS’s acreage estimates are based on surveys conducted during the first two weeks of March from a sample of approximately 82,900 farm operators across the United States.

Corn Stocks Up 3%

USDA also released the quarterly Grain Stocks report on Thursday.

Corn stocks totaled 8.89 billion bu. Mar. 1, up 3% from the same time last year. On-farm corn stocks were up 2% from a year ago; off-farm stocks were up 5%.

Soybeans stored totaled 2.11 billion bu., up 21% from the previous year. On-farm soybean stocks were up 28% from a year ago, while off-farm stocks were up 17%.

All wheat stored totaled 1.49 billion bu., down 10% from a year ago. On-farm all wheat stocks were 26% less than last year; off-farm stocks were 6% less.

Early negotiated cash fed cattle trade took a steep step lower on Wednesday, with early live prices mostly $5 lower in the Southern Plains and Nebraska at $120.50 (Nebraska) to $121/cwt. Dressed trade in Nebraska was $10-$13 lower at $190.

There were only 409 head (three lots) offered and no sales in the weekly Fed Cattle Exchange Auction on Wednesday. There were two lots of heifers passed out at $120 and $121/cwt.

Cattle futures, especially Feeder Cattle, closed higher, perhaps buoyed by rolling contracts ahead.

Live Cattle futures closed an average of 61¢ higher.

Except for 55¢ higher in spot Mar, Feeder Cattle futures closed an average of $1.95 higher ($1.22 to $2.47 higher).

Choice boxed beef cutout value was 78¢ lower Wednesday afternoon at $221.62/cwt. Select was $2.61 lower at $211.63.

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Major U.S. financial indices edged lower on Wednesday, with tech stocks once again applying most of the pressure.

The Dow Jones Industrial Average closed 9 points lower. The S&P 500 closed 7 points lower. The NASDAQ closed 59 points lower.

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Heading into Thursday’s Prospective Plantings report from USDA, most estimates favor corn losing more ground to soybeans, with wheat about even with last year.

For instance, analysts with Allendale, Inc. have corn acres at 88.5 million acres, compared to USDA’s estimate at the Agricultural Outlook Forum (AOF) of 90.0 million and last year’s 90.2 million.

Allendale has soybean acres at 92.1 million acres, compared to 90.1 acres last year and the AOF estimate of 90.0 million.

Allendale estimates total wheat acres at 46.9 million acres, compared to 46.0 million last year. The AOF estimate was 46.5 million acres.

Cattle futures, led by Feeder Cattle, closed mostly higher on Tuesday, although off of session highs. Apparently, they were so far oversold for so long that traders had little other choice.

Live Cattle futures closed fractionally mixed (5¢ lower to 32¢ higher).

Except for 17¢ higher in the back contract, Feeder Cattle futures closed an average of 86¢ higher.

Choice boxed beef cutout value was 17¢ lower Tuesday afternoon at $222.36/cwt. Select was $1.22 lower at $214.24.

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Major U.S. financial indices continued to rebound early in Tuesday’s session and then headed south in a hurry, led by tech stocks.

The Dow Jones Industrial Average closed 344 points lower. The S&P 500 closed 45 points lower. The NASDAQ closed 211 points lower.

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“Red meat, especially beef, continues to move briskly through the marketing chain, but chicken has struggled in that regard,” say analysts with the Livestock Marketing Information Center (LMIC), citing last week’s monthly Cold Storage report from USDA.

Total pounds of beef in freezers Feb. 28 were 8% less than the previous month and 8% less than the previous year, according to the recent report. Frozen pork supplies were up 6% from the previous month and up 8% from last year. Total frozen poultry supplies were up 6% from the previous month and up 14% percent from a year ago.

“In January and February, according to the latest Livestock Slaughter report from USDA’s National Agricultural Statistics Service, U.S. output of beef was up 5.2% year over year,” say LMIC analysts in the latest Livestock Monitor. “Beef production was the largest for those two months since 2008. January-February U.S. pork output this year increased 5.0% from a year ago and was record-large for that timeframe. Chicken output also was record-large for those two months and rose 3.4% year-over-year.”

LMIC analysts note that chicken in cold storage was more than 900 million lbs. for the first time in any month.

Cattle futures tried for gains early in yesterday’s session but quickly fell lower on Friday’s monthly Cattle on Feed report and general overall bearishness. Wonderments about trade wars continue to add uncertainty, although equity markets rebounded Monday, with reports of easing trade tensions with China.

Live Cattle futures closed an average of 89¢ lower (45¢ to $1.35 lower).

Except for 77¢ and 45¢ lower at either end of the board, Feeder Cattle futures closed an average of $1.41 lower ($1.22 to $1.95 lower).

Choice boxed beef cutout value was 56¢ lower Monday afternoon at $222.53/cwt. Select was 94¢ lower at $215.46.

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Major U.S. financial indices bounced sharply higher to start the week, with optimism stemming from weekend trade talks with China, according to a variety of reports. The upshot was that China might offer some give and take.

The Dow Jones Industrial Average closed 669 points higher. The S&P 500 closed 70 points higher. The NASDAQ closed 227 points higher.

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“Cattle producers need to closely monitor the broad range of macroeconomic and global conditions and be prepared to abruptly switch to a strongly defensive business strategy,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “Markets are increasingly volatile and it will be important to maintain as much short-term flexibility as possible to deal with rapidly changing conditions.”

On the one hand, Peel points to continuing fundamental strength for the time being—demand strength in the face of increasing supplies and higher cattle and beef prices year over year.

On the other hand, Peel cites the increasingly negative market tone stemming from looming supplies, as well as growing volatility associated with trade uncertainty. The wonderments include ongoing U.S. negotiations around several agreements, including NAFTA, the potential response from U.S. trading partners to recently imposed tariffs on U.S. imports of aluminum and steel, as well as last week’s announced increased duties on up to $60 billion worth of Chinese goods.

“It’s as though the economy has one foot on the accelerator and another foot on the brakes, making it extremely difficult to figure out what happens next or, perhaps more importantly, what happens after that,” Peel says. “Markets, in general, are increasingly scared and running for cover. The fear of the unknown may be the worst of it but the reality of the unknown could be far worse.”

Cattle futures took another step down on Friday, unable to build upon gains established a day earlier. Along with the overall bearish bent tied to larger beef supplies, pressure came from China placing pork on a list of U.S. products that could be subject to increased import duties. That was in response to President Trump’s Executive Memo calling for tariffs on up to $60 billion worth of Chinese imports, in retaliation for intellectual property theft by that nation. The monthly Cattle on Feed report (see below) will likely add more pressure to start the week.

Live Cattle futures closed an average of $1.91 lower through the front three contracts, an average of 87¢ lower through the next three and then an average of 38¢ lower.

Feeder Cattle futures closed an average of $1.74 lower ($1.22 to $1.95 lower).

Choice boxed beef cutout value was $2.12 lower Friday afternoon at $223.09/cwt. Select was $1.62 lower at $216.40.

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Major U.S. financial indices closed sharply lower again on Friday as trade tensions with China escalated.

The Dow Jones Industrial Average closed 424 points lower. The S&P 500 closed 55 points lower. The NASDAQ closed 174 points lower.

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Despite more cattle being placed earlier from late fall through the winter, in response to drought-reduced small grain pastures, more cattle than expected continue to be placed, according to Friday’s monthly Cattle on Feed report.

Feedlots with a capacity of 1,000 head or more placed 1.8 million head on feed in February, which was 7.3% more than the previous year. That’s at least 3% more than most estimates heading into the report. Most of the cattle placed in February (52.7%) weighed 700-899 lbs.; 36.3% went on feed weighing 699 lbs. or less; 11.1% weighed 900 lbs. or more.

Marketings in February of 1.68 million head were 1.6% more than last year, about in line with expectations.

Total cattle on feed Mar. 1 of 11.72 million head was 8.8% more than the previous year, which was about 1% more than most projections ahead of the report.