Daily Market Highlights

Cattle futures closed higher in the nearby contracts and then on either side of steady. Along with apparent short covering, ongoing strength in wholesale beef values provided some support, as did higher outside markets.

After an average of $1.19 higher in the front two contracts, Live Cattle futures closed an average of 16¢ higher, except for 2¢ lower in away Apr.

After 77¢ higher in spot Mar, Feeder Cattle futures closed narrowly mixed, 22¢ lower to 20¢ higher.

Choice boxed beef cutout value was 26¢ higher Friday afternoon at $224.14/cwt. Select was 48¢ higher at $217.26.

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Major U.S. financial indices spiked sharply higher on Friday, fueled by a monthly jobs report that bulldozed expectations to the upside. Total non-farm payroll employment increased by 313,000 in February, according to the U.S. Bureau of Labor Statistics. The unemployment rate remained at 4.1%. At the same time, softer wage growth (+2.6%) diluted some of the chatter about inflation.

The Dow Jones Industrial Average closed 440 points higher. The S&P 500 closed 47 points higher. The NASDAQ closed 132 points higher.

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U.S. beef exports continued at a strong pace in January, accounting for $293.06 per head of fed slaughter—14% more than the previous January—according to data released by USDA and compiled by the U.S. Meat Export Federation (USMEF).

U.S. beef exports totaled 105,486 metric tons (mt) in January, up 9% year over year, while export value surged 21% to $624.4 million.

“January export results were solid overall and were especially strong for muscle cuts,” says USMEF President and CEO Dan Halstrom. “Despite the decline in variety meat volume, export value continued to increase. This underscores the important contribution variety meats deliver for producers and for everyone in the U.S. supply chain.”

Among the January highlights:

U.S. beef exports to Japan were 7% more for volume (23,968 mt) and 19% more in value ($148.6 million).

Exports to South Korea were 13% more for volume (17,133 mt) and 34% more for value ($122.3 million). Incidentally, U.S. beef exports to South Korea last year were record high for value at $1.2 billion.

U.S. beef exports to China reached a new monthly high of 819 mt in January valued at $7.5 million.

Cash fed cattle trade on Thursday was mainly steady with the previous week on moderate demand and trade. Live prices were at mostly $126-$127/cwt. with dressed trade at mostly $204.

Despite positive fundamentals and the oversold nature of the market, bears continued to drive Cattle futures lower on Thursday, helped along by technical selling.

Live Cattle futures closed an average of $1.04 lower (65¢ to $1.55 lower).

Feeder Cattle futures closed an average of $2.21 lower ($2.02 lower to $2.42 lower).

Choice boxed beef cutout value was 31¢ higher in the afternoon at $223.88/cwt. Select was $1.58 higher at $216.78.

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Major U.S. financial indices closed higher on Thursday. Presumably, the boost was tied to President Trump implementing the 25% tariff on imported steel and 10% tariff on imported aluminum, but excluding key trade partners Canada and Mexico.

The Dow Jones Industrial Average closed 93 points higher. The S&P 500 closed 12 points higher. The NASDAQ closed 31 points higher.

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Analysts with USDA’s Economic Research Service (ERS) project total red meat and poultry production this year fractionally lower than last month, in the latest World Agricultural Supply and Demand Estimates (WASDE).

Beef production was estimated to be 27.69 billion lbs., which is 40 million lbs. less than the previous month’s projection. That’s based on lower first-quarter slaughter and lower weights. However, ERS analysts say the decline is offset somewhat by higher second-quarter fed beef production and higher non-fed beef production during the first half of the year.

With that in mind, projected fed steer prices for the first-quarter are projected slightly higher at $124-$127/cwt. Projected quarterly prices for the remainder of the year: second quarter at $118-$124; third quarter at $110-$120; fourth quarter at $112-$122.

Other WASDE Estimates

ERS reduced expected ending corn stocks by 225 million bu. on expectations for increased exports and usage for ethanol. The projected range for the season-average corn price received by producers was narrowed 10¢ on the low end to $3.15 to $3.55/bu., with the midpoint up 5¢ to $3.35.

U.S. soybean supply and use changes for 2017-18 included higher crush, lower exports, and increased ending stocks. The season-average soybean price range forecast of $9.00 to $9.60/bu. was unchanged at the midpoint. Soybean oil prices are forecast at 30¢ to 33¢/lb., down 1¢ at the midpoint. Soybean meal prices are projected at $325 to $355/short ton, up $20 at the midpoint. Higher soybean meal prices reflect the impact of sharply lower soybean production in Argentina, ERS analysts say.

Despite a projected reduction in exports of 25 million bu., the season-average farm price for wheat increased 5¢ at the midpoint of the range to $4.65 per bushel based on expectations of higher prices for the remainder of the year.

There were only 474 head offered (5 lots) in the weekly Fed Cattle Exchange Auction on Wednesday, but most of them sold: 387 head (4 lots) for a weighted average price of $126/cwt. for delivery at 1-9 days. That’s the same price paid the previous day in early Nebraska trade. It also mirrored eventual country trade.

Early live trade was at $126 in the Southern Plains on Wednesday, in light trade with light to moderate demand. Early dressed trade in Nebraska was at $203-$204; $204 in the western Corn Belt.

After strong support early, Cattle futures drifted to a mostly narrowly mixed close.

Live Cattle futures closed unchanged to an average of 17¢ higher.

After an average of 64¢ lower in the front two contracts, Feeder Cattle futures closed narrowly mixed (22¢ lower to 35¢ higher).

Wholesale beef values were little changed Wednesday with Choice boxed beef cutout value 22¢ higher in the afternoon at $223.57/cwt. Select was even at $215.20.

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Major U.S. financial indices closed mixed on Wednesday and off of session lows, following chatter that tariffs on steel and aluminum might not apply to key trading partners, Canada and Mexico.

The Dow Jones Industrial Average closed 82 points lower. The S&P 500 closed 1 point lower. The NASDAQ closed 24 points higher.

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“The underlying agricultural story for 2018 may be due to the global demand for meat,” say Lee Schulz, Extension livestock economist and Chris Hart, livestock economist with Iowa State University (ISU). “Currently, the surge in meat consumption globally has improved livestock market returns and led to significant increases in production. That is, in turn, providing support for the crop markets, at a time when those markets need a usage boost.”

Schulz and Hart provide a summary of USDA’s annual outlook in the most recent Agricultural Policy Review from ISU’s Center for Rural Agriculture and Development (CARD).

“For the livestock sector, expansion is projected in all of the major product groups,” they say. “Beef production is set to be 6% higher and pork production will grow by 5%. Broiler production will climb to nearly 42.5 billion lbs. and turkey production will reach 6 billion lbs…Price projections for 2018 show lower prices, but the drops in prices are being offset by the gains in production.

Cattle futures tried to build on the previous day’s gains early in Tuesday’s session but quickly lost traction, amid sluggish two-sided trade with more uncertainly than direction.

Live Cattle futures closed an average of 48¢ lower through the front three contracts (5¢ to 67¢ lower) and then an average of 42¢ higher.

Feeder Cattle futures closed an average of 57¢ lower across the front half of the board (10¢ to 85¢ lower) and then an average of 28¢ higher.

There were a handful of early negotiated cash fed cattle live sales reported in Nebraska on Tuesday at $126/cwt., but there were too few transactions to trend.

Wholesale beef values were little changed Tuesday with Choice boxed beef cutout value 12¢ higher in the afternoon at $223.35/cwt. Select was 36¢ higher at $215.20.

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Major U.S. financial indices edged higher on Tuesday, as folks tried to sort out the potential of President Trump moving forward with his announced tariffs on aluminum and steel. There’s plenty of backlash and uncertainty.

The Dow Jones Industrial Average closed 9 points higher. The S&P 500 closed 7 points higher. The NASDAQ closed 41 points higher.

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Producer sentiment increased 5 points in February to 140—the second consecutive month of improved optimism—according to the most recent Purdue University-CME Group Ag Economy Barometer. But, producers continued to indicate uncertainty surrounding a possible U.S. withdrawal from the North American Free Trade Agreement (NAFTA).

The barometer is based on a monthly survey of 400 U.S. agricultural producers.

“In early 2017, producer sentiment was largely driven by an uptick in the future-looking measure of producer sentiment, the Index of Future Expectations,” explains James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture. “More recently, the barometer’s upturn has been driven in part by a shift toward more positive sentiment regarding current farm financial conditions, as measured by the Index of Current Conditions.”

In the recent survey, researchers asked agricultural producers about the likelihood of the U.S. withdrawing from NAFTA. On a scale of 1-9, the most common response at 39% was a neutral rating of 5, while 34% of respondents said they thought a U.S. NAFTA withdrawal was likely (a rating of 6 or higher), and 29% thought withdrawal was unlikely (a rating of 4 or lower).

“Taken as a whole, the February survey indicates that producers are really uncertain about the future of NAFTA,” Mintert says. “But despite the uncertainty surrounding NAFTA, producers remain optimistic about the future of U.S. agricultural exports.”

Half of responding producers said they expect U.S. agricultural exports to increase over the next five years, while another 37% said they expect exports to remain about the same. Only 13% expected U.S. agricultural exports to be lower five years from now.

Cattle futures found a foothold on Monday and recovered a portion of Friday’s losses. Depending on whom you talked to, explanations ranged from some seeing a bottom and hunting for bargains, to strength in wholesale beef prices and feedlot market currentness.

Except for 57¢ higher in the back two contracts, Live Cattle futures closed an average of $1.04 higher.

Feeder Cattle futures closed an average of $1.47 higher ($1.15 to $1.60 higher).

Choice boxed beef cutout value was 71¢ higher on Monday afternoon at $223.23/cwt. Select was 20¢ higher at $214.84.

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Major U.S. financial indices closed solidly higher on Monday. Presumably, it was something of a relief rally as President Trump softened his rhetoric about imposing tariffs on aluminum and steel, leading some to believe a trade war will be averted.

The Dow Jones Industrial Average closed 336 points higher. The S&P 500 closed 29 points higher. The NASDAQ closed 72 points higher.

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“In general, there is no reason to expect feeder markets not to follow seasonal tendencies,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “While there may be relatively fewer feeder cattle marketed in the March to May period, feedlot demand is likely to be somewhat muted as feedlots are quite full until some cattle are marketed. Thus, the overall demand/supply balance likely has not changed a great deal for the spring period.”

Lightweight feeder prices typically peak in March, while heavyweight feeder prices usually increase from a February low heading towards a summer peak, Peel says.

Peel is speaking to the increased late-fall and early-winter placements resulting, in part, from dry conditions the pushed cattle from wheat pasture early or prevented them ever going to pasture.

Moreover, unless it rains soon in winter wheat portions of the Southern Plains, Peel explains, “Wheat production prospects will decrease sharply and it is increasingly likely that wheat producers will terminate wheat and switch to a summer crop. Even if the wheat receives rain and begins to grow it is unlikely that many producers will purchase new stockers for graze-out.”

Cattle futures continued to trudge lower on Friday, helped along by apparent technical selling and continued fund liquidation.

Live Cattle futures closed an average of 65¢ lower (7¢ lower toward the back of the board to $1.15 lower in spot Apr).

Feeder Cattle futures closed an average of $1.22 lower (80¢ to $1.47 lower).

Choice boxed beef cutout value was 22¢ higher on Friday afternoon at $222.52/cwt. Select was 96¢ lower at $214.64.

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Major U.S. financial indices closed mixed on Friday. There was follow-through pressure tied to the previous day’s announcement by President Trump’s that the U.S. will levy tariffs on steel and aluminum imports, starting next week.

The Dow Jones Industrial Average closed 70 points lower. The S&P 500 closed 13 points higher. The NASDAQ closed 77 points higher.

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Pressure in deferred Live Cattle futures and the number of cattle already placed against summer months weakened feeder cattle prices last week.

“Moderate to good demand for this large offering, with the best demand seen for cattle suitable for grass,” explained the AMS reporter on hand for Friday’s sale at Herreid Livestock Auction in South Dakota, where about 5,000 head were on offer. “…The volume of finishing type cattle moving right now, coupled with the dismal looking summer futures, when most of these cattle will finish, is making buyers nervous and very choosy about what they send to feed.”

If pen space and lower cash fed cattle prices explain last week’s softer feeder cattle demand, then the decline might be short lived, says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments.

“However, if the price decline is due to a larger underlying issue, such as in-creased beef production and no further increases in beef demand, then softer prices may persist,” Griffith says.

Although too few transactions to trend, there were some dressed sales in Nebraska and the western Corn Belt on Thursday at $205/cwt., which was even with last week and $1 higher than sales the day before.

Futures traders applied pressure to Feeder Cattle early in the session amid sluggish trade and general bearishness. Apparent profit taking ultimately helped lift prices above session lows. Live Cattle traded both sides of even.

After 5¢ higher in spot Apr, Live Cattle futures closed 5¢ to 32¢ lower.

After 30¢ higher in spot Mar, Feeder Cattle futures closed an average of 38¢ lower in the next four contracts (7¢ to 62¢ lower) and then 7¢ to 22¢ higher.

Choice boxed beef cutout value was $1.27 higher on Thursday afternoon at $222.30/cwt. Select was 50¢ higher at $215.60.

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Major U.S. financial indices closed sharply lower again on Thursday, with lots of help from President Trump’s announcement that the U.S. will levy tariffs on steel and aluminum imports, starting next week. If so, that will likely add an unwelcome wrinkle to NAFTA negotiations.

The Dow Jones Industrial Average closed 420 points lower. The S&P 500 closed 36 points lower. The NASDAQ closed 92 points lower.

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Wholesale beef values continue to find traction earlier than usual from a seasonal standpoint. Week to week on Thursday, Choice boxed beef cutout value was $3.90 higher and Select was $3.54.

“There are certainly retailers who are purchasing product for the spring months, but those sales are probably not as strong as what the current spot market price reflects,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments.

Between rising beef prices and lower cash fed cattle prices last week—and mostly lower again so far this week, Griffith explains, “…lower input costs and higher output prices have allowed packers to experience improved margins. The values to keep an eye on that will have the greatest influence on beef prices are beef production, imports, and exports. Production is sure to increase, while import and export levels are less certain.”

Negotiated cash fed cattle trade developed Wednesday with moderate trade and demand in the Southern Plains and Nebraska. Live prices were $1-$2 lower than last week at $126-$127/cwt. Dressed trade in Nebraska was $1 lower at $204.

There were only 365 head (5 lots) offered in the weekly Fed Cattle Exchange auction. One lot of heifers (80 head) sold for $126/cwt.

Cattle futures took a wide and wild ride on Tuesday, but ended decidedly lower, pressured by softer cash fed cattle trade, a sense of overall market weakness and month-end position squaring.

Live Cattle futures closed an average of 56¢ lower (32¢ to 97¢ lower), except for 2¢ higher at the back of the board.

Feeder Cattle futures closed an average of $1.27 lower (65¢ to $2.20 lower).

Choice boxed beef cutout value was 51¢ higher on Wednesday afternoon at $221.03/cwt. Select was 31¢ higher at $215.10.

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Major U.S. financial indices closed sharply lower on Wednesday amid continued volatility. Pressure included ongoing concerns about rising interest rates, along with technical selling.

The Dow Jones Industrial Average closed 380 points lower. The S&P 500 closed 30 points lower. The NASDAQ closed 57 points lower.

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“The strength of all the cattle markets through this late winter needs to be kept in mind,” says Stephen Koontz, agricultural economist at Colorado State University, in the latest issue of In the Cattle Markets. “Calf prices have remained close to $200 per cwt, feeder cattle are about $150, fed cattle remain above $125, and boxed beef values are above $200. These are rather strong prices, given the volume of beef, pork and poultry in the domestic market. The strong domestic demand and strong export volumes that were well-reported through last year appear to be continuing. The other aspect that appears to be maintained is the retailer’s willingness to feature beef, keep beef posted prices somewhat reduced, and live with a smaller margin. All of these factors have kept the quantities moving and the prices strong.”

Cattle futures closed higher on Tuesday, though off of session highs, boosting hopes for steady to slightly higher negotiated cash fed cattle prices this week.

Live Cattle futures closed an average of 35¢ higher (10¢ higher to 62¢ higher in nearly spent Feb).

Feeder Cattle futures closed an average of $1.14 higher (95¢ to $1.42 higher).

Choice boxed beef cutout value was $1.00 higher on Tuesday afternoon at $220.52/cwt. Select was 7¢ higher at $214.79.

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Major U.S. financial indices closed sharply lower on Tuesday. Though it seemed expected, given the fundamental strength of the economy, plenty of analysts credited the dip with Federal Reserve Chair, Jerome Powell, suggesting to Congress that the Fed will continue increasing interest rates this year.

The Dow Jones Industrial Average closed 299 points lower. The S&P 500 closed 35 points lower. The NASDAQ closed 91 points lower.

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“The expectation moving through the spring is for strength in the calf market as the seasonal tendency for freshly weaned calves is stronger prices,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “Though there is an expectation for calf prices to continue increasing through March and maybe into early April, due to grass fever, weakness in the feeder cattle market can and will quickly dampen buyers’ attitudes…Based on the March feeder cattle contract, there appears to be support near the $145 level and even stronger price support at $140. Similarly, the August feeder cattle contract has strong support at the $148 and $143 price levels. The point being made here is that downside price risk does exist in the feeder cattle market. However, it appears the downside price risk is limited to price levels that are still fairly strong.”

Support also continues to come from cattle feeders remaining aggressive in marketing and placing cattle.

“…Strong margins and a basis near zero should keep cattle feeders interested in marketing cattle,” Griffith says. “Similarly, the strong feeding margins should keep cattle feeders active in placing cattle. Looking forward a few weeks, it may be difficult to push finished cattle prices higher as the seasonal tendency would indicate, due to the current strength. A steady market would be well received.”

Cattle futures see-sawed to start the week as traders digested Friday’s Cattle on Feed report. As many suspected, the 4.4% increase in January feedlot placements year to year created pressure, especially early on, but futures managed to close with more moderate declines.

Live Cattle futures closed an average of 48¢ lower through the front five contracts (12¢ lower to 85¢ lower) and then an average of 21¢ higher.

Feeder Cattle futures closed an average of 38¢ lower (17¢ to 55¢ lower).

Though lower than the previous week, last week’s cash fed cattle trade continues to offer market support with live prices that were at mainly $128/cwt. and mostly at $205 in the beef.

Likewise, wholesale beef values continue to churn higher. Choice boxed beef cutout value was $1.15 on Monday afternoon at $219.52/cwt. Select was $1.90 higher at $214.72.

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Major U.S. financial indices closed sharply higher once again on Monday, driven by gains in giants like Boeing and 3M.

The Dow Jones Industrial Average closed 399 points higher. The S&P 500 closed 32 points higher. The NASDAQ closed 84 points higher.

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“Limited winter grazing numbers and early movement of wheat pasture cattle to feedlots means that little of the normal March run of wheat pasture cattle will be seen this year in the Southern Plains,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “Likewise few cattle remain or are likely to be purchased for wheat graze-out.”

All of that, of course, has to do with drought conditions that began pushing cattle to feedlots earlier several months ago.

“Early placement of feeders in the feedlots means that the short term supply of feeder cattle outside of feedlots is tighter, as reflected in the year over year decrease in the estimated Jan. 1 feeder supply,” Peel explains. “However, many of the lightweight feeders placed late in 2017 will remain in feedlots until mid-2018. Feedlots are pretty full and will have reduced demand for feeders for some time yet this spring, thus the overall supply-demand balance may not have changed much. Larger feedlot placements in recent months represents a change in timing of feedlot production but not a change in the overall supply situation. In general, while feedlots will not maintain the placement rate of recent months going forward, feeder cattle numbers will be larger in 2018 supporting increased cattle slaughter and beef production.”