Daily Market Highlights

Through Friday afternoon, cash fed cattle was shaping up to be another final-hour affair. The surprising break in futures prices the previous day likely had both packers and feeders trying to assess leverage. Depending on how you slid the beads and who was working the abacus, odds still favored cattle feeders.

According to the Texas Cattle Feeders Association late in the day, members traded steers and heifers for $127/cwt., which was $4 more than the previous week’s country trade.

Cattle futures roared back on Friday, regaining the majority of losses from the previous session. That was ahead of the monthly Cattle on Feed report, which came in with more placements than many analysts expected but far from the double-digit hikes in recent months (see below).

Live Cattle futures closed an average of $1.74 higher ($1.15 to $2.12 higher in spot Feb).

Feeder Cattle futures closed an average of $2.50 higher, except for 60¢ lower in newly minted away Jan.

Choice boxed beef cutout value was 6¢ higher on Friday afternoon at $206.83/cwt. Select was 51¢ higher at $201.83.

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Major U.S. financial indices closed sharply higher on Friday as major companies continued to report earnings that beat estimates.

The Dow Jones Industrial Average closed 223 points higher. The S&P 500 closed 33 points higher. The NASDAQ closed 94 points higher.

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Although year-to-year placements in December were significantly less than in recent months, they were more than the trade was expecting, according to the monthly Cattle on Feed report issued Friday.

Placements in December of 1.79 million head were 0.8% more (14,000 head) than the previous year. Estimates ahead of the report called for about 3% less. In terms of weight, 48.9% went on feed weighing less than 700 lbs.; 10.8% weighing 900 lbs. or more.

Marketings in December of 1.75 million head were 1.4% less (25,000 head) than the previous year, about in line with pre-report estimates.

Cattle on feed in feedlots with one-time capacity of 1,000 head or more was 11.48 million head Jan. 1, which was 8.3% more than the previous year. That was about 0.6% more than estimates ahead of the report. There were 16% more heifers and heifer calves on feed than the previous year.

Cattle futures closed sharply lower Thursday after early follow-through support, and all indications for higher cash fed cattle trade this week. There was no clear or even fuzzy reason for such a reversal.

Live Cattle futures closed an average of $2.48 lower through the front four contracts and then an average of $1.35 lower (92¢ to $1.70 lower).

Feeder Cattle futures closed an average of $2.12 lower ($1.65 to $2.55 lower), except for 30¢ lower in expiring Jan.

Choice boxed beef cutout value was $1.22 lower on Thursday afternoon at $206.77/cwt. Select 47¢ higher at $201.32.

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Cash bids for grains and soybeans were mixed on Thursday, according to the Daily National Grain Market Summary.

Wheat bids were mostly 1¢ to 3¢ higher. Sorghum bids were 2¢ lower. Soybean bids were mostly steady. Corn bids were 1¢ to 2¢ lower.

Corn futures closed fractionally lower to 1¢ lower.

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Major U.S. financial indices closed mixed on Thursday. Positive quarterly earnings reports provided support, including reports from Caterpillar and 3M.

The Dow Jones Industrial Average closed 140 points higher. The S&P 500 closed 1 point higher. The NASDAQ closed 3 points lower.

Commercial red meat production for the United States totaled 4.40 billion lbs. in December, up slightly from the previous December, according to the monthly Livestock Slaughter report released by the National Agricultural Statistics Service yesterday. Keep in mind that there was an extra workday during the months last year.

Beef production of 2.15 billion lbs. was 1% less than the the previous year. Cattle slaughter of 2.58 million head was also 1% less. The average live weight was 2 lbs. less than the previous year at 1,379 lbs.

Pork production was record high for the month at 2.23 billion lbs., up 1% from the previous year, although hog slaughter was slightly less at 10.5 million head. The average live weight was up 3 lbs. at 286 lbs.

Slaughter steers and heifers sold mostly $2-$4 higher at Sioux Falls Regional in South Dakota on Wednesday, with instances of $6 higher. Choice 2-3 steers brought $124-$126/cwt., which was $1-$3 more than last week’s country trade.

There were just 494 head offered in the weekly Fed Cattle Exchange Auction—no takers. One lot of heifers for current delivery was a P.O. at $123.75.

That helped Live Cattle futures close a touch higher on Wednesday, while profit taking and positioning ahead of Friday’s monthly Cattle on Feed report pressured Feeder Cattle.

Live Cattle futures closed an average of 26¢ higher (unchanged to 70¢ higher in spot Feb).

Feeder Cattle futures closed an average of 57¢ lower (42¢ to $1.07 lower).

Wholesale beef values were firm to higher on moderate to good demand and light to moderate offerings. Choice boxed beef cutout value was $1.14 higher on Wednesday afternoon at $207.99/cwt. Select 69¢ higher at $200.85.

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Major U.S. financial indices closed mixed on Wednesday. Mostly positive quarterly earnings reports continued to provide support. Some of the drag may have come from investors wondering to what degree current valuations are real or oversold.

The Dow Jones Industrial Average closed 41 points higher. The S&P 500 closed 1 point lower. The NASDAQ closed 45 points lower.

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Total pounds of beef in freezers Dec. 31 were up 1% from the previous month but 14% less than a year earlier, according to USDA’s monthly Cold Storage report issued yesterday.

Frozen pork supplies were down 2% from the previous month but up 3% from last year.

So, total red meat supplies in freezers were down 1% from the previous month and down 6% from last year.

Total frozen poultry supplies were up 1% from the previous month and up 10% from a year ago.

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Heading into Friday’s monthly Cattle on Feed report, most popular estimates are for December placements to be 3-4% less than last year. Part of that expectation stems from dry conditions pushing more cattle to feedlots earlier the past couple of months.

For instance, Allendale, Inc. expects to see a decline in placements of 3.9%. If so, analysts there say it would be noteworthy, given the increases of 10.2% to 13.9% the past three months.

Allendale pegs December marketings at 1.5% less than last year, which would still make it the second largest total for the month in six years.

Put it all together and Allendale suggests the on-feed total Jan. 1 will be 7.6% more than a year earlier at 11.415 million head.

Follow through buying, a bump in wholesale beef values and notions of snugger short-term supply due to weather helped Cattle futures continue to gain on Tuesday.

Live Cattle futures closed an average of 71¢ higher (52¢ to $1.17 higher in spot Feb).

Feeder Cattle futures closed an average of $1.40 higher (72¢ to $1.90 higher).

Boxed beef cutout values were firm to higher on moderate to good demand and light to moderate offerings. Choice boxed beef cutout value was $1.78 higher on Tuesday afternoon at $206.85/cwt. Select 64¢ higher at $200.16.

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Major U.S. financial indices closed mostly higher on Tuesday, supported once again by better than expected quarterly earning reports.

The Dow Jones Industrial Average closed 3 points lower. The S&P 500 closed 6 points higher. The NASDAQ closed 52 points higher.

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Expect an expanding global economy, strong U.S. consumer confidence and persistent economic recovery in many rural areas, according to the 2018 outlook report from CoBank’s Knowledge Exchange Division.

“The rural economy is uniquely impacted by what happens in Washington, the broader U.S. economy and around the world,” says Dan Kowalski, vice president of CoBank’s Knowledge Exchange Division. “In the coming year, rural America will rise with the broader economic tide, but it will also contend with persistent barriers to prosperity.”

The report highlights 10 key factors that will shape rural communities and the market sectors that support them. Among them, according to the report:

Global economy—“2018 will offer a prime opportunity for governments to address structural impediments that have been ignored during the decade-long recovery.”

U.S. economy—“Consumer confidence and the unemployment rate are at their best levels since 2000 and inflation-adjusted wages have been growing faster than the historical average since 2014…Business investment will rise in 2018 to keep up with strengthening demand.”

Agricultural economy—“The surplus of agricultural commodities will continue to depress prices and shrink farmer working capital. Farm debt loads will continue to climb as prices fall short of persistently high production costs. Market conditions have also resulted in a sharp, unsustainable divergence between farm income and farm asset values.”

Agricultural trade—“NAFTA will be the primary focus for agriculture in the first half of 2018. All three countries involved will be incentivized to come to an agreement before the Mexican presidential election in July. But more trade deals are in flux that could also greatly affect U.S. agriculture exporters. The rebooted TPP (CPTPP) is being negotiated between all of the original member-countries except the U.S. And the U.S. trade agreement with Korea is also being re-evaluated.”

Cash fed cattle prices ended up mainly $3 higher last week at $123/cwt. ($2-$3 higher in the western Corn Belt at $122-$123). Dressed trade was $3 higher at $195.

That helped renew support in Cattle futures. Traders also were eying another round of severe winter weather in the Northern Plains that will slow production.

Except for 25¢ lower in the back contract, Live Cattle futures closed an average of 78¢ higher (35¢ to $165 higher).

Except for 5¢ lower in spot Jan, Feeder Cattle futures closed an average of 64¢ higher (22¢ to $105 higher).

Choice boxed beef cutout value was 21¢ higher on Monday afternoon at $205.07/cwt. Select 64¢ lower at $199.52.

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Major U.S. financial indices closed higher on Monday, supported by quarterly earning reports and hopes that a short-term spending bill passed by the Senate would also receive House approval, reopening the government for at least a couple of more weeks.

The Dow Jones Industrial Average closed 142 points higher. The S&P 500 closed 22 points higher. The NASDAQ closed 71 points higher.

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The percentage of cattle on feed for more than 120 days during the fourth quarter remained below the prior year, according to the January Livestock, Dairy and Poultry Outlook. Analysts with USDA’s Economic Research Service (ERS) note that dry conditions in the Southern Plains stressed pasture availability, supporting strong placements of calves in feedlots in fourth-quarter.

“Given expected pressure on fed cattle prices from larger placements in second-half 2017, feedlot operators will likely have incentives to continue to aggressively market finished cattle in 2018,” explained analysts with USDA’s Economic Research Service (ERS). “As feedlots are expected to maintain a rapid pace of marketings in the first half of 2018, the percent of cattle on feed beyond 120 days should stay relatively low.”

ERS analysts project the 5-Area fed steer price at $120-$124/cwt. in the first quarter and at $115-$123 in the second.

Cattle futures trended lower on Friday with apparent position squaring and profit taking, and without direction from the cash fed cattle market.

There were too few cash fed cattle trades to trend through Friday afternoon. According to the AMS Cattle Dashboard, 1,036 head were reported on Friday with steers selling for $121.31/cwt. on a live basis and at $193 in the beef.

Similarly, the Texas Cattle Feeders Association reported its members trading steers about $2 higher than the previous week at $122.04 and heifers about $3 higher at $123.

The previous week, live trade was at $120/cwt. in all major cattle feeding regions. Dressed trade was at $192 in Nebraska and the western Corn Belt.

Lack of cash direction helped Cattle futures drift lower on Friday, along with profit taking and position squaring.

Live Cattle futures closed an average of 41¢ lower (from 5¢ lower in spot Feb to 75¢ lower).

Except for 35¢ lower in the back contract, Feeder Cattle futures closed an average of $1.22 lower.

Choice boxed beef cutout value was 83¢ lower on Friday afternoon at $204.86/cwt. Select 71¢ lower at $200.16.

A wildcard heading into this week will be the government shutdown, if it continues: the overall impact of market reaction, as well as the absence of data provided by the Agricultural Marketing Service.

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Major U.S. financial indices closed higher on Friday, even as Congress had yet to pass a spending bill or stopgap measure to prevent the government shutdown that began after midnight on Friday.

The Dow Jones Industrial Average closed 53 points higher. The S&P 500 closed 12 points higher. The NASDAQ closed 40 points higher.

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JBS USA announced last week that that it entered an agreement to sell its Five Rivers Cattle Feeding assets to affiliates of Pinnacle Asset Management, L.P. for approximately $200 million in U.S. dollars.

Five Rivers, the world’s largest cattle feeding operation has a one-time capacity of more than 900,000 head—close to a million head depending on who you talk to. Pinnacle Asset Management is a commodities and natural resources investment firm.

The transaction includes 11 feedyards in six states and a long-term agreement for Five Rivers to supply cattle to JBS USA beef processing plants. The current Five Rivers management team will remain in place.

A press statement last week indicated that Five Rivers will continue to operate as usual, including the purchasing of cattle and commodities in the ordinary course of business, until the closure of the transaction. In addition, JBS USA will continue agreements to purchase cattle from feedyards associated with Five Rivers Cattle Feeding operations.

Completion of the acquisition is subject to U.S. regulatory review and approval, approval from the JBS S.A. Board of Directors, and subject to Pinnacle Asset Management, L.P. securing the relevant funding.

Weekly cash fed cattle trade remained a no-go through Thursday afternoon with feedlots eyeing recent futures market strength and packers apparently overlooking apparent regional snugness in supplies.

Cattle futures continued to firm on Thursday with chatter about more optimistic demand in the short run and the chance for prices to rally.

Live Cattle futures closed an average of 67¢ higher (7¢ to 97¢ higher in spot Feb).

Feeder Cattle futures closed an average of $1.21 higher through the front four contracts and then an average of 71¢ higher, except for 12¢ higher in the back contract.

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Major U.S. financial indices closed lower on Thursday, dampened by the continuing possibility of a government shutdown if Congress can’t pass a spending bill or stop-gap measure by the end of the week.

The Dow Jones Industrial Average closed 97 points lower. The S&P 500 closed 4 points lower. The NASDAQ closed 2 points lower.

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Restaurant operator confidence in current and future business conditions grew in November, according to the National Restaurant Association’s monthly Restaurant Performance Index (RPI) released at the end of December.

The RPI in November was 101.1, up from 100.9 the previous month.

“Although the overall RPI increase was modest in November, some key indicators registered notable improvements,” according to the report. “Restaurant operators reported their strongest same-store sales performance since June. In addition, nearly one-half of operators expect their sales to be higher in six months, while their outlook for the overall economy improved to its strongest level in three years.”

It’s worth noting this optimism was in place before the reality of tax reform.

Cattle futures surged higher on Wednesday, extending gains from the previous session. Perhaps traders are expecting a bounce back from last week’s winter storms that dampened beef demand. High-flying equity markets added to market optimism.

There was no country trade to speak of, but early signs pointed to steady to slightly higher cash fed cattle prices this week.

Besides strength on the Board, Choice 2-4 steers sold $2-$3 higher at Sioux Falls Regional in South Dakota on Wednesday at $121.50 to $125.00/cwt. Last week’s country trade was mainly $120 on a live basis.

Only 108 head (one lot—steers) out of 304 offered sold in the weekly Fed Cattle Exchange Auction. The weighted average price was $119.75 for deliver at 1-9 days. There were POs on two lots of heifers at $118.00 and $119.50.

Choice boxed beef cutout value was 28¢ lower on Wednesday afternoon at $205.30/cwt. Select was 28¢ lower at $199.61.

Live Cattle futures closed an average of $1.93 higher ($1.52 to $2.87 higher in spot Feb).

Feeder Cattle futures closed an average of $2.03 higher ($1.72 to $2.27 higher).

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Major U.S. financial indices closed sharply higher on Wednesday, fueled by stronger than expected quarterly earnings reports from the likes of Bank Of America. Apple’s announcement that it plans to repatriate billions of dollars of cash from overseas—and pay billions in taxes here—also provided support.

The Dow Jones Industrial Average closed 322 points higher. The S&P 500 closed 26 points higher. The NASDAQ closed 74 points higher.

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“The hard cold weather in the northern and eastern U.S. and the warm dry weather in the southern and western U.S. will likely contribute to further declines in hay stocks and support hay prices through the rest of the winter,” says Stephen Koontz, an agricultural economist with Colorado State University, in the latest issue of In the Cattle Markets.

As it is, Koontz points out that all-hay production was 2.6% less last year than in 2016, according to the recently released annual Crop Production Summary from USDA’s Economic Research Service.

“The largest decreases were in states most impacted by dry weather last year, including Montana and the Dakotas, and there were substantial decreases in states with some of the largest production, including California and Texas,” Koontz says. “Missouri and Nevada showed substantial increases among the higher-production states. On farm hay stocks as of Dec. 1 showed a 3% decline compared to the prior year.”

A surge in Lean Hog futures and oversold conditions helped lift Cattle futures on Tuesday, despite last week’s lower cash fed cattle trade and faltering wholesale beef values.

Choice boxed beef cutout value was $2.45 lower on Tuesday afternoon at $205.58/cwt. Select was $2.15 lower at $199.89.

Live Cattle futures closed an average of 55¢ higher (5¢ to 92¢ higher).

Feeder Cattle futures closed an average of $1.00 higher (72¢ to $1.27 higher).

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Major U.S. financial indices surged sharply higher early in the session on Tuesday before whiplashing to a slightly lower close. Some analysts credited the potential government shutdown as the cause. A spending bill or some other intervention needs to pass by the end of the week in order to prevent a shutdown. Then again, maybe it was more a matter of rally fatigue and rationality.

The Dow Jones Industrial Average closed 10 points lower. The S&P 500 closed 9 points lower. The NASDAQ closed 37 points lower.

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“International price quotations for bovine meat fell (last month), pressured by increased offerings in both domestic and international markets,” according to analysts with the Food and Agricultural Organization of the United Nations (FAO). “However, pig, poultry and ovine meat quotations changed only little, reflecting an overall balanced supply and demand situation.”

The FAO Meat Price Index averaged 171.6 points in December, marginally below its slightly revised value of November. For 2017, the FAO Meat Price Index averaged 170 points, up 9% from the previous year but 4.7% below the average for the preceding five years (2012-2016).

Futures and equity markets were closed on Monday in observance of Martin Luther King, Jr. Day.

Choice boxed beef cutout value was 20¢ lower on Monday afternoon at $208.03/cwt. Select was 40¢ higher at $202.04.

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“Total U.S. beef exports are projected to increase another 2.5% to 3.5% year over year in 2018 to a new record level,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. He adds that growth is expected to include some export expansion to China, although he says the total contribution of beef exports to China will likely remain limited in the near term.

Through November, Peel notes that U.S. beef exports to China were 1.97 million lbs., making China the 10th largest U.S. beef export market.

“USDA’s Foreign Agricultural Service has projected that China will import 2.26 billion lbs. of beef in 2018. At the current level, U.S. beef exports to China would represent roughly 1% of Chinese beef imports,” Peel says. “If the U.S. were to increase beef exports to China tenfold to a 10% market share, it would make China the 5th largest beef market for beef exports and add roughly 10% to total U.S. beef exports. However, growth this rapid seems unlikely in 2018. Such a level may be more feasible in three to five years. Still, it is difficult to anticipate how markets will evolve and growth could happen more quickly than is apparent now.”