Daily Market Highlights

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.

Cattle futures finally closed strongly higher on Thursday, presumably fueled in part by technicals, short covering and perhaps positioning ahead of Friday’s monthly Cattle on Feed report.

Except for 45¢ and 77¢ higher at either end of the board, Live Cattle futures closed an average of $1.26 higher.

Except for 75¢ higher in spot Mar, Feeder Cattle futures closed an average of $1.86 higher ($1.57 to $2.05 higher).

The CME Feeder Cattle Index for Wednesday was $139.39, the first time below $140 since last April.

Choice boxed beef cutout value was 83¢ higher Thursday afternoon at $225.21/cwt. Select was $1.63 higher at $218.02.

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Jitters ran high on Wall Street Thursday as investors sold hard, apparently spooked by the growing specter of a trade war with China. That following President Trump signing an Executive Order that would impose tariffs on up to $60 billion worth of Chinese imports, in retaliation for intellectual property theft by that country.

The Dow Jones Industrial Average closed 700 points lower. The S&P 500 closed 68 points lower. The NASDAQ closed 178 points lower.

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Frozen beef supplies remain less year over year, according to the latest 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.

Frozen pork supplies were up 6% from the previous month and up 8% from last year.

Total red meat supplies in freezers were down slightly from the previous month but up 1% from last year.

Total frozen poultry supplies on February 28, 2018 were up 6% from the previous month and up 14% percent from a year ago.

Negotiated cash fed cattle sales continued to trend lower on Wednesday at mostly $126/cwt. in the Northern Plains and $125-$127 in the western Corn Belt. Dressed trade was $2-$5 lower than last week at $200-$203.

There were only two lots from Kansas—166 head—offered in the weekly Fed Cattle Exchange Auction. They sold for a weighted average price of $126.63/cwt. for delivery at 1-9 days.

Feeder Cattle futures tried for some stability in yesterday’s session but ultimately followed Live Cattle lower, led by the spot month.

Except for 20¢ lower at the back, Live Cattle futures closed an average of $1.23 lower (65¢ to $1.87 lower in spot Apr, which closed $5.30 lower week to week).

Feeder Cattle futures closed an average of $1.33 lower ($1.00 to $1.47 lower).

Choice boxed beef cutout value was $1.03 higher Wednesday afternoon at $224.38/cwt. Select was 35¢ lower at $216.39.

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After bouncing higher early in the session, major U.S. financial indices closed narrowly lower on Wednesday. Though expected, a wide swath of analysts attributed pressure to the Federal Reserve raising interest rates again.

Since it last met in January, according to the Federal Open Market Committee, “Information indicates that the labor market has continued to strengthen and that economic activity has been rising at a moderate rate. Job gains have been strong in recent months, and the unemployment rate has stayed low. Recent data suggest that growth rates of household spending and business fixed investment have moderated from their strong fourth-quarter readings. On a 12-month basis, both overall inflation and inflation for items other than food and energy have continued to run below 2%. Market-based measures of inflation compensation have increased in recent months but remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.”

The committee raised the target range for the federal funds rate 0.25% to 1.50-1.75%.

The Dow Jones Industrial Average closed 44 points lower. The S&P 500 closed 5 points lower. The NASDAQ closed 19 points lower.

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Reduced year-over-year steer slaughter last month, compared to heifers and cows, helped fuel the rally in cash fed cattle prices, says David Anderson, an Extension livestock economist with Texas A&M University.

In the latest issue of In the Cattle Markets, Anderson explains steer slaughter in February was 2.1% less than the previous year, while heifer slaughter increased 7.8%. Through the first half of March, steer slaughter was running about even with last year.

“The mix of animals going to market is an important part of this spring rally in prices,” Anderson says. “Relatively more heifers and cows than steers is working to moderate beef production, which is only up 2.5% so far this year…The expectation of growing steer and heifer supplies is contributing to falling Live Cattle prices on the futures market.”

Anderson notes that steer dressed weights are up 2.5 lbs. over last year. Heifer weights are up 7.2 lbs. and are 56 lbs. less than steer dressed weights. Cow dressed weights are 13.3 lbs. heavier.

Negotiated cash fed cattle trade opened on Tuesday with moderate demand and light to moderate trade in the Southern Plains and the Northern Plains. Live prices were at $126/cwt. which was $1 lower in the Southern Plains and $2-$3 lower in Nebraska.

Cattle futures traded on either side of steady early in Tuesday’s session and then gave way to continued pressure stemming from light volume, technical selling and overall bearishness.

Live Cattle futures closed an average of 76¢ lower (57¢ to $1.15 lower).

Feeder Cattle futures closed an average of 78¢ lower (67¢ to 92¢ lower).

Choice boxed beef cutout value was $1.52 lower Tuesday afternoon at $223.35/cwt. Select was 55¢ lower at $216.74.

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Major U.S. financial indices regained some of the previous days steep losses on Tuesday. Support included some recovery in tech stocks.

The Dow Jones Industrial Average closed 116 points higher. The S&P 500 closed 4 points higher. The NASDAQ closed 20 points higher.

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Although same-store restaurant sales and traffic declined in January, restaurant operators remained mostly optimistic about current business conditions, according to the latest Restaurant Performance Index (RPI) from the National Restaurant Association (NRA).

The RPI was 100.9 in January, which was down 2 points from the previous month and consistent with last year’s average level. Both of the sub-indexes that comprise the RPI were lower in January, too. The Current Situation Index in January was down 3.5% from the previous month to 99.4. The Expectations Index was 0.5% lower at 102.

Although same-store sales softened in January month-to-month, according to NRA, restaurant operators reported a net increase in same-store sales for the third consecutive month.

Sharply lower outside markets, more apparent non-commercial long liquidation and continued bearishness about increased harvest supplies a few weeks down the road helped pressure Cattle futures on Monday.

Except for 60¢ lower at the back of the board, Live Cattle futures closed an average of $1.27 lower ($1.05 to $1.62 lower).

Except for 40¢ lower at the back of the board, Feeder Cattle futures closed an average of $1.60 lower ($1.22 to $2.00 lower).

Choice boxed beef cutout value was 72¢ lower Monday afternoon at $224.87/cwt. Select was 43¢ higher at $217.29.

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Major U.S. financial indices plunged sharply lower on Monday, driven by losses at Facebook and the weekend revelation that a political data firm accessed and stored a vast collection of Facebook user data without users’ knowledge. Uncertainty surrounding political rhetoric from the White House continues to add pressure, too.

The Dow Jones Industrial Average closed 335 points lower. The S&P 500 closed 39 points lower. The NASDAQ closed 137 points lower.

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Continued growth in beef production in Mexico may ultimately lead to fewer live cattle exports from the country, says Derrell Peel, Extension livestock marketing Specialist at Oklahoma State University, in his weekly market comments.

“Mexico has exported about 1.1 million head of feeder cattle annually to the U.S. for the past 30 years. In 2017, total U.S. imports of Mexican cattle were 1.2 million, close to the long-term average but up 23.3% percent from 2016,” Peel says. “Current USDA-FAS projections for 2018 include a slight increase in Mexican cattle exports, but preliminary weekly data through early March shows a 13% year-over-year decrease for the year to date. Mexican cattle exports are determined by overall cattle numbers in Mexico, the U.S., and Mexican market conditions and drought conditions.”

Moreover, Peel explains the Mexican cattle and beef industries evolved rapidly over the last decade.

“Growth in Mexican beef exports has been the result of expanded feedlot production, increased federally-inspected slaughter and, most importantly, adoption of boxed beef fabricating technology. Beef carcass weights in Mexico have increased steadily over the past decade,” Peel says. “Mexican beef exports ranked tenth in the world by 2015 although recent growth in Argentinian beef exports in 2018 may push Mexico slightly out of the top-10 list of exporting countries.”

Technical selling helped pressure Cattle futures again on Friday, despite the higher cash trade and strong wholesale beef values. More supply is coming, but current pressure seems overdone.

Live Cattle futures closed an average of 42¢ lower (15¢ to 70¢ lower).

Feeder Cattle futures closed an average of 37¢ lower (10¢ to 65¢ lower).

Choice boxed beef cutout value was 60¢ higher Friday afternoon at $225.59/cwt. Select was 55¢ higher at $216.86.

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Major U.S. financial indices edged to a mixed close on Friday. Support included the latest Surveys of Consumers from the University of Michigan, indicating that consumer sentiment rose in early March to the highest level since 2004.

The Dow Jones Industrial Average closed 72 points higher. The S&P 500 closed 4 points lower. The NASDAQ closed fractionally higher.

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Grocery store sales growth in January was up 4.5% from 12 months earlier, the stoutest monthly year-over-year gain since January of 2015, according to the Livestock Marketing Information Center (LMIC), in the latest Livestock Monitor. Likewise, analysts there say food sector sales growth (grocery store plus food service and drinking places) during January was up 3.1% from a year ago.

“Wholesale demand for the three leading meat commodities (beef, pork and chicken) trends are generally consistent with the consumer spending situation,” LMIC analysts explain. “The Choice beef cutout will be up this quarter from the last quarter of 2017, which is a little better than estimates indicated at the end of last year that were driven by an outlook for larger beef production. Similarly, the pork cutout has also gained value this quarter from late 2017, even with larger pork production. Chicken breast meat prices at the wholesale level have held steady in January and February, in line with expectations at the start of the year. Chicken wing prices in wholesale trade have been surprisingly weak so far this year, which may be a consequence of modest sales growth in the food service and drinking place sector so far this year.”

Negotiated cash fed cattle trade on Thursday in Nebraska and the western Corn Belt continued mostly steady with prices established earlier in the week: $128.00-$128.50 and $128-$131, respectively on a live basis. In the beef, prices were $205 in Nebraska and $205-$207 in the western Corn Belt.

Despite steady to higher cash fed cattle trade and strong wholesale beef values, Cattle futures closed solidly lower on Thursday, amid apparent technical selling and continued concern about growing supplies relative to demand.

Live Cattle futures closed an average of $1.09 lower (95¢ to $1.22 lower).

Feeder Cattle futures closed an average of $1.97 lower ($1.42 to $2.17 lower).

Choice boxed beef cutout value was 88¢ higher Thursday afternoon at $224.99/cwt. Select was 70¢ lower at $216.31.

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Major U.S. financial indices closed mixed on Thursday, with worries about a potential trade war with China continuing to cast a pall.

The Dow Jones Industrial Average closed 115 points higher. The S&P 500 closed 2 points lower. The NASDAQ closed 15 points lower.

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Canadian cattle inventories grew last year, according to data recently released by Statistics Canada, but just a little.

There were 37.10 million beef cows in Canada Jan. 1, which was 0.80% more than the previous year, or 29,500 head more. Total cattle and calves in Canada of 11.62 million head were 0.91% (+105,000 head) more than the previous year.

By way of review, beef cows in the U.S. were 1.63% more (+509,800 head) more year over year at 3.71 million head. Total cattle and calves in the U.S. Jan. 1 of 94.40 million head (+694,400 head) were 0.74% more than the previous year.

Combined, the total number of beef cows in the U.S. and Canada Jan. 1 of 35.43 million head was 1.54% (+539,300 head) more than the previous year. The total inventory of cattle and calves for the two countries was 0.76% more (+799,400 head) at 106.02 million head.

Cash fed cattle continued on Wednesday at mostly higher money. Live sales in the western Corn Belt were $2-$3 more than last week at $128-$131/cwt. Dressed trade was mostly $3 higher at $207.

Earlier in the day, the handful of cattle (113 head—2 lots from Kansas) offered in the weekly Fed Cattle Exchange Auction, sold even with the $127 price established in the Southern Plains on Tuesday.

Cash trade failed to budge futures traders much. Early on, prices rallied higher but ran out of steam in a hurry.

Except for $1.10 higher in spot Apr, Live Cattle futures closed unchanged to an average of 20¢ higher.

Except for 7¢ and 27¢ lower at the back, Feeder Cattle futures closed an average of 50¢ higher.

Choice boxed beef cutout value was 38¢ higher Wednesday afternoon at $224.11/cwt. Select was 26¢ higher at $217.01.

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Major U.S. financial indices closed lower again on Wednesday. Negative news included a sharp decline in Boeing stock on investor fears about a potential trade war with China. Fundamental pressure came from another monthly decline in U.S. retail sales, according to the U.S. Commerce Department.

The Dow Jones Industrial Average closed 248 points lower. The S&P 500 closed 15 points lower. The NASDAQ closed 14 points lower.

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“To the extent that drought conditions in the Southern Plains have diminished pasture availability, more cattle have been placed in feedlots in late 2017 and early 2018 than in the prior year. This likely diminishes the pool of cattle available for placement throughout the first-half of 2018,” say analysts with USDA’s Economic Research Service (ERS), in the latest Livestock, Dairy and Poultry Outlook. “The price forecast for feeder steers 750-800 lbs. was adjusted lower for the first quarter to $146-$149/cwt on current price movements. In the second quarter, fewer calves will likely be available for placement, which should keep prices relatively strong at $144-$152/cwt.”

Based on current cash cattle prices and expectations of wholesale beef prices continuing to show demand strength, ERS analysts adjusted the projected first-quarter fed steer price higher to $124-$127/cwt.

Negotiated cash fed cattle trade opened the week in the Southern Plains on Tuesday on moderate demand and trade, with live prices steady to $1 higher than last week at $127/cwt. in the Texas Panhandle and $126-$127 in Kansas.

Although supplies continue to be snugger in the North, according to various reports, the early trade on the part of packers speaks to their need for inventory. You couldn’t tell it by soggy Cattle futures, though.

Live Cattle futures closed little changed on Tuesday, while Feeder Cattle took another step down, though stronger early pressure softened by the end of the session.

Except for 35¢ higher in spot Apr, Live Cattle futures closed an average of 23¢ lower.

Except for unchanged at the very back, Feeder Cattle futures closed an average of 80¢ lower.

Choice boxed beef cutout value was 17¢ lower Tuesday afternoon at $223.73/cwt. Select was 74¢ lower at $216.75.

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Major U.S. financial indices closed lower on Tuesday. Among the pressure was a sharp decline in Qualcomm stock after President Trump kyboshed the proposed multi-billion dollar hostile buyout of that U.S. chip maker by Singapore-based chip maker, Broadcom, citing national security risk. The notion is that it could further strain ties with China, following the tariffs on imported steel and aluminum.

The Dow Jones Industrial Average closed 171 points lower. The S&P 500 closed 17 points lower. The NASDAQ closed 77 points lower.

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“Food and feed grains prices are expected to have bottomed out by marketing year 2017-18. Marketing year 2018-19 marks the beginning of gradual price increases that are expected to continue through the decade,” according to the recent USDA Agricultural Projections to 2027. “Despite price growth, prices are projected to remain lower than those seen over the past decade, leading to shifts in relative returns and accompanying changes in crop plantings. Shifts in acreage are expected—most notably from corn and, in the short run, wheat towards soybeans and sorghum, reflecting strong international demand for these commodities. These projections are the first in history where soybean acreage is expected to eclipse corn acreage.”

Cattle futures closed sharply lower on the front end, led by Live Cattle, as bears continue to win the day, and despite the cash premium.

Live Cattle futures closed an average of $1.14 lower through the front three contracts, (82¢ to $1.57 lower) and then an average of 31¢ lower except for an average of 20¢ higher at the back of the board.

Except for 7¢ and 30¢ higher at the back of the board, Feeder Cattle futures closed an average of 47¢ lower.

Choice boxed beef cutout value was 24¢ lower Monday afternoon at $223.90/cwt. Select was 23¢ higher at $217.49.

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Major U.S. financial indices closed mixed on Monday. Much of the pressure seemed to stem from unease about potential ramifications of the recently implemented tariff on U.S. steel and aluminum imports.

The Dow Jones Industrial Average closed 157 points lower. The S&P 500 closed 3 points lower. The NASDAQ closed 27 points higher.

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“Consumer demand for meat was stronger than average in 2017. It is rare for meat supplies to grow as they did last year without output prices suffering more severe declines,” say analysts with the Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri. “While economic projections

point to U.S. meat demand remaining solid, prices are projected to retreat for most products in 2018 due to continued supply pressure and a return to more historical levels of consumer demand.”

Among highlights in FAPRI’s annual U.S. Baseline Outlook released last week, which includes 10-year projections:

• Strong demand supported cattle, hog, chicken and milk prices in 2017, in the face of large increases in meat and milk production. Further production increases could weigh on livestock and dairy prices in 2018 unless demand growth is exceptionally strong.
• Projected prices for corn, soybeans and wheat all increase slightly in 2018-19 and 2019-20, but large global stocks limit the increase. Corn prices average $3.57/bu. for the 2018-19 crop, while soybean prices average $9.38 and wheat prices average $4.89.
• Projected net farm income increases slightly in 2019. In later years, real net farm income is fairly flat, remaining below the 2015 level through 2027.
• Annual food price inflation was below 1% for the second straight year in 2017. Projected food price inflation is about 2% in 2018, similar to the overall rate of inflation in the U.S. economy.