Daily Market Highlights

Cattle futures found some relief on Friday from oversold conditions and short covering.

Live Cattle futures closed an average of 48¢ higher (20¢ to 92¢ higher).

Feeder Cattle futures closed an average of 73¢ higher (10¢ to $1.27 higher).

Wholesale beef values weakened on Friday on light to moderate demand.

Choice boxed beef cutout value was 84¢ lower on Friday afternoon at $208.23/cwt. Select was $1.31 lower at $201.64. Rib and Chuck cuts sold mostly steady, while loin cuts sold steady to weak. Beef trimmings traded weak to lower on moderate demand.

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Major U.S. financial indices closed sharply higher again on Friday, fueled by strong quarterly earnings reports and the recent corporate tax cut.

The Dow Jones Industrial Average closed 228 points higher. The S&P 500 closed 18 points higher. The NASDAQ closed 49 points higher.

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Projected cattle price for 2018 rose slightly in the monthly World Agricultural Supply and Demand Estimates (WASDE) released on Friday, reflecting early-year price strength, according to analysts with USDA’s Economic Research Service (ERS).

First-quarter fed steer prices are projected at $120-$124/cwt.; $115-$123 in the second quarter; $110-$120 in the third quarter; $112-$122 in the fourth quarter.

WASDE projects the average fed steer price last year at $121.51

“The 2018 beef production forecast is raised as higher cattle placements in late 2017 are expected to result in higher fed cattle marketings and slaughter in the first half of 2018, say ERS analysts. “Average carcass weights are also expected to be heavier. USDA will release its semi-annual Cattle report Jan. 31, providing estimates of heifers held for breeding and an insight into the number of feeder cattle available for placement during 2018.”

Live Cattle futures closed an average of 16¢ higher, except for an average of 52¢ lower in the back two contracts.

Feeder Cattle futures closed an average of 63¢ lower through the front three contracts, and then 12¢ lower to 27¢ higher.

Wholesale beef values weakened on Thursday on light to moderate demand.

Choice boxed beef cutout value was 99¢ lower on Thursday afternoon at $209.07/cwt. Select was 28¢ lower at $202.95. Chuck cuts sold firm to steady, while rib, loin and round cuts sold steady to weak.

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Major U.S. financial indices closed sharply higher on Thursday on positive, early quarterly earnings reports.

The Dow Jones Industrial Average closed 205 points higher. The S&P 500 closed 19 points higher. The NASDAQ closed 58 points higher.

Cattle futures drooped lower on Wednesday, following early-session support. The week’s softer cash fed cattle prices applied pressure, as did softer front-month Lean Hogs.

Prices in the weekly Fed Cattle Exchange Auction were $1 lower than country trade at a weighted average price of $119/cwt. for delivery of 1-9 days. Out of 651 offered, 401 head sold—four lots of steers and heifers in Kansas. Another 60 head were offered for delivery at 10-17 days with no takers.

In country trade so far this week, live prices are generally $1-$2 lower at $120 with dressed sales $1-$3 lower at $192.

Live Cattle futures closed an average of 62¢ lower.

After $1.10 lower in spot Jan, Feeder Cattle futures closed an average of 54¢ lower.

Choice boxed beef cutout value was 43¢ lower on Wednesday afternoon at $210.06/cwt. Select was 46¢ lower at $203.23.

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Major U.S. financial indices closed slightly lower on Wednesday. Other than speculation about trade policy there didn’t seem to be much news driving a trend.

The Dow Jones Industrial Average closed 16 points lower. The S&P 500 closed 3 points lower. The NASDAQ closed 10 points lower.

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Producer sentiment toward the health of the agricultural economy declined in December for the second consecutive month, according to the latest reading of the Purdue University/CME Group Ag Economy Barometer.

The December barometer dropped 2 points to 126, driven by a 7-point decline in the Index of Future Expectations, one of two sub-indices that comprise the barometer.

“The share of producers expecting better financial positions for their farms fell to just 20% in December, while the share expecting worse financial positions climbed to 30%,” says James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture. “Both of these responses are the least optimistic levels in more than a year.”

Similarly, when asked about the overall agricultural economy, 63% of respondents said they expect bad times over the next 12 months.

In rare early-week trade late in the day on Monday, cash fed cattle prices softened Live prices were $1-$2 lower than last week at $120/cwt. in the Southern Plains and Colorado. Follow-through buying yesterday in Nebraska and the western Corn Belt was $2-$3 lower at the same $120 on a live basis. Dressed trade was $1-$3 lower at mostly $192.

Following early follow-through selling, Cattle futures found a foothold on Tuesday.

Live Cattle futures closed an average of 38¢ higher.

Other than 97¢ lower in spot Jan, Feeder Cattle futures closed an average of 79¢ higher (57¢ to $1.72 higher).

Choice boxed beef cutout value was 29¢ higher on Tuesday afternoon at $210.49/cwt. Select was 32¢ higher at $203.69.

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Major U.S. financial indices closed at record-high levels on Tuesday. Expectations for strong fourth-quarter earnings—reports begin this week—were widely attributed to the bullishness.

The Dow Jones Industrial Average closed 103 points higher. The S&P 500 closed 3 points higher. The NASDAQ closed 6 points higher.

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Producers need to use both technical and economic measures to monitor and their operations for maximum economic returns, says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments.

While technical measure like calving percentage and pounds of weaned calf per cow exposed are useful to monitor and manage production systems, Peel explains such measures tend to emphasize maximums (such as weaning weights) or minimums (such as death loss). And, often times, maximums and minimums are not optimal in terms of economic outcome.”

That’s where economic efficiency measures come in.

“For example, Peel explains, dollars of return per cow will reign in excessive focus on weaning weights by recognizing that some means of increasing weaning weights, such as increasing cow size, may be very expensive and not efficient at some point.

Likewise, Peel says, with land investment the biggest component for many cow-calf operations, the final assessment of economic efficiency is returns per acre. This incorporates physical animal components related to reproductive, nutritional, and health productivity along with feed and forage management plus output values and input costs.”

Considered alone, though, measures of economic efficiency have limitations as well.

“Economic efficiency measures focus on optimal use of inputs relative to the value of outputs. However, changes in output values or input costs can lead, for example, to improved returns due solely to changing market conditions while masking stagnant or even declining physical productivity,” Peel explains.

Cattle futures—especially Live Cattle—took another step lower on Monday, with technical selling, last week’s lower cash fed cattle prices and early reports of fed cattle trading for lower money on Monday.

Except for 25¢ lower in the back contract, Live Cattle futures closed an average of $1.17 lower (80¢ to $2.02 lower).

Feeder Cattle futures closed an average of 40¢ lower.

Choice boxed beef cutout value was 69¢ higher on Monday afternoon at $210.20/cwt. Select was $1.05 higher at $203.37.

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Major U.S. financial indices closed little changed on Monday, at historically high levels and amid general overall optimism stemming from the cut in the corporate tax rate.

The Dow Jones Industrial Average closed 12 points lower. The S&P 500 closed 4 points higher. The NASDAQ closed 20 points higher.

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U.S. beef exports continued their steamy pace in November, according to export results released by USDA and compiled by the U.S. Meat Export Federation (USMEF).

Although U.S. beef exports in November were 3% less than the prior year in terms of volume, value was 8% more at $666.4 million. For January through November, volume of beef exports was 7% more than the same period a year earlier and value was up 15% at $6.6 billion, slightly more than the record pace established in 2014.

November beef export value averaged $306.63 per head of fed slaughter, up 4% from a year ago and the highest in nearly three years. January-November export value averaged $282.34 per head, up 9%.

Japan continued to be the pacesetter for U.S. beef exports in November, with volume increasing 5% year over year and value up 6% to $159.2 million. Through November, the value of U.S. beef exports to Japan was 27% more at $1.75 billion.

November exports to China (655 mt) were the largest since the mid-June market opening, valued at $5.7 million. Through November, exports reached 2,225 mt valued at $22.8 million.

“U.S. beef has only really scratched the surface in China, so exports are still relatively small but the value per pound is among the highest in the world,” says Dan Halstrom, USMEF president and CEO. “This makes China an exciting addition to our strong portfolio of Asian markets, where beef exports continue to expand at an impressive rate.”

Surging U.S. pork exports—on pace to be record large for the year—also continue providing support to domestic beef prices.

Through November U.S. pork exports were 7% higher year over while the value of those exports was 10% more at $5.9 billion.

Another round of long liquidation and technical selling rattled Cattle futures on Friday, fueled along by the surprising downturn in cash fed cattle prices that were mostly steady to $1-$2 lower on a live basis $121-$123/cwt. Dressed trade was steady to $1 lower at $193-$195.

Other than 80¢ lower in the back contract, Live Cattle futures closed an average of $2.17 lower ($1.77 to $3.00 lower).

Feeder Cattle futures closed an average of $2.95 lower ($2.40 to $3.57 lower).

Packers also benefited from increasing wholesale beef values. Choice boxed beef cutout value was 84¢ higher on Friday afternoon at $209.51/cwt. Select was $1.46 higher at $202.32.

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Major U.S. financial indices surged higher again on Friday. That was despite a less bullish U.S. jobs report than expected; also less bullish than the December ADP National Employment Report^® released a day earlier.

Total nonfarm payroll employment increased by 148,000 in December, and the unemployment rate was unchanged at 4.1%, according to the U.S. Bureau of Labor Statistics. Employment gains came in health care, construction and manufacturing.

The Dow Jones Industrial Average closed 200 points higher. The S&P 500 closed 19 points higher. The NASDAQ closed 58 points higher.

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“Producers should continue to keep an eye on feeder cattle basis the next several weeks and see if it maintains its strength,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “The wide basis continues to point to a discrepancy between what traders believe cattle prices are going to do and what cattle feeders think they will do in coming months.”

Griffith notes that the basis between the CME Feeder Cattle Index and spot Feeder Cattle continues to be historically strong at more than $6.

Price strength through the fourth quarter suggests continued strength through the first quarter, Griffith says.

“This statement should not be taken as prices increasing but prices holding steady the next several weeks,” Griffith says. “It may be difficult for prices to increase given the number of cattle on feed. Placements of cattle into feedlots the next few months will provide a better picture for the outlook of prices moving forward.”

Cash fed cattle trade remained at an impasse through Thursday afternoon. Cattle feeders appear to have the leverage on their side, though, with current marketing and the recent weight-robbing winter weather. Plus, wholesale beef prices appear poised to continue trending higher.

Choice boxed beef cutout value was 5¢ higher on Thursday afternoon at $208.67/cwt. Select was $1.70 higher at $200.86; up about $8 in the last three days.

Following a positive start, sluggish trade and the lack of direction from cash fed cattle helped pressure Cattle futures on Thursday.

Other than 80¢ higher in the back contract, Live Cattle futures closed an average of 54¢ lower.

After 35¢ lower in spot Jan, Feeder Cattle futures closed and average of $1.18 lower.

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Major U.S. financial indices closed higher again on Thursday—the Dow closed above 25000 for the first time—supported by strong employment data.

Private sector employment increased by 250,000 jobs from November to December according to the December ADP National Employment Report®. That was significantly more than expected. The U.S. employment report comes out on Friday.

The Dow Jones Industrial Average closed 152 points higher. The S&P 500 closed 10 points higher. The NASDAQ closed 12 points higher.

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Despite increasing cattle numbers and beef production borne by ongoing herd expansion last year, Josh Maples, livestock economist at Mississippi State University points out average annual prices last year were near or above prior-year levels for fed cattle and feeder cattle.

For quick perspective, Maples explains about 1.3 million more calves were born in 2017 than the prior year. Cattle on feed Dec. 1 were 8.1% more than the previous year. Cattle slaughtered in 2017 was about 5% more than in 2016.

Heading into 2018, Maples suggests three key factors that will shape markets.

Herd Expansion—In the latest issue of In the Cattle Markets, Maples explains, “We’ll get a good measure of this when the annual USDA Jan. 1 Cattle Inventory report is released Jan. 31. I anticipate that expansion has continued, but not as rapidly as in the past few years.”

U.S. Beef Exports—“Our export markets are a primary reason for

stronger than expected prices in 2017,” Maples says. “With even more supplies coming in 2018, can export markets exceed expectations again in 2018?”

Impact of Total Meat Production—“While beef production is increasing, chicken and pork production are also expanding. This has set the stage for 2018 to be largest total meat consumption year of the past decade,” Maples says. “How will this increased production get sorted out at the grocery meat case by consumers?”

Early indications point to higher cash fed cattle once again this week as packers and retailers reload after the holidays.

Slaughter steers traded $2 higher at Sioux Falls Regional Livestock in South Dakota on Wednesday. Slaughter heifers sold $1-$2 higher. There were only 388 head offered in the weekly Fed Cattle Exchange Auction and no sales.

Wholesale beef prices continue to offer support.

Choice boxed beef cutout value was $3.48 higher on Wednesday afternoon at $208.62/cwt. That’s $5.72 higher in the last two days. Select was $2.59 higher at $199.16; up $6.18 in the last two days.

That and sluggish trade helped Cattle futures retain most of the strong gains in the previous session.

Live Cattle futures closed narrowly mixed but mostly higher (40¢ lower to 27¢ higher).

Feeder Cattle futures also closed narrowly mixed but mostly higher (15¢ lower to 45¢ higher).

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Major U.S. financial indices closed higher again on Wednesday amid supportive economic news that included the Fed being more optimistic about the domestic economy.

The Dow Jones Industrial Average closed 98 points higher. The S&P 500 closed 16 points higher and above 2700 for the first time. The NASDAQ closed 58 points higher.

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Fed steer prices climbed the most since September in 11 years, according to the Livestock Marketing Information Center (LMIC), in the latest Livestock Monitor.

Based on the 5-market Choice steer price monthly average (USDA AMS), October prices were up $5.35/cwt. from the prior month, according to LMIC. In 2013, analysts there note that the September-to-October increase was $5.13; it was $4.44 in 2014.

“Over the last 10 years, the average September-to-October price change was a decline of 16 cents, in no small part due to drops in 2015 and 2016 of $4.45 and $5.03, respectively,” LMIC analysts say. “The comparisons of fed cattle price increases in 2017 from September to November were even more dramatic. The average change for that two-month span during the prior 11 years was up by $1.42 per cwt. This year the price increase was $14.26.”

For the quarter, LMIC analysts project the average fed steer price at a little more than $117.50/cwt.. which would be 9% more than last year.

Live sales last week ended up mostly $3 higher at $123/cwt.; $2-$3 higher in the Western Corn Belt at $122-$123. Dressed trade was $4-$5 higher at $194-$195.

Higher cash fed cattle trade, along with firming wholesale beef values helped fuel strong buyer support for Cattle futures on Tuesday.

Choice boxed beef cutout value was $2.24 higher on Tuesday afternoon at $205.14/cwt. Select was $3.59 higher at $196.57.

Except for 22¢ higher in recently minted away Jun, Live Cattle futures closed an average of $1.71 higher ($1.42 to $1.92 higher).

Feeder Cattle futures closed an average of $3.35 higher ($2.07 to $4.20 higher).

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Major U.S. financial indices closed sharply higher on Tuesday amid general overall optimism.

The Dow Jones Industrial Average closed 104 points higher. The S&P 500 closed 22 points higher. The NASDAQ closed 103 points higher.

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“Domestic and international beef demand will determine cattle and beef price pressure relative to increasing beef production,” says Derrell Peel, of markets in 2018. “Modest price pressure is expected at this time but any threat to demand would quickly result in additional price weakness. Larger down-side price risk means that risk management takes on an added importance in 2018. While cattle producers cannot have much impact on overall market price levels, they may be able to reduce the risk of lower individual prices with risk management tools.”

Peel, the Extension livestock marketing specialist at Oklahoma State University says decent returns will be possible this year despite the likely squeeze on profits.

“Lower prices increase the likelihood of lower revenue and puts additional emphasis on production and cost management in the coming year,” Peel says. “Overall production costs are expected to remain stable in 2018, though rising interest rates may impact debt management at some point. Maintaining profitability this year in the face of lower prices will require increased production and/or reduced costs.”

Futures traders awaiting direction from the week’s cash fed cattle trade were disappointed on Friday as the standoff between feedlots and packers continued through the afternoon with scant trade and too few transactions to trend.

Front-month Live Cattle drooped as traders squared positions for the end of the year, while firming wholesale beef values helped lift Feeder Cattle.

Choice boxed beef cutout value was 62¢ higher on Friday afternoon at $202.90/cwt. Select was $2.07 higher at $192.98.

Live Cattle futures closed an average of $1.12 lower in the front two contracts, including $1.55 lower in expiring Dec. Contracts across the rest of the board were narrowly mixed but mostly lower (32¢ lower to 30¢ higher).

Except for 25¢ lower in the back contract, Feeder Cattle futures closed an average of 55¢ higher (40¢ to 82¢ higher).

Major U.S. financial indices closed lower on Friday with a late-session selloff, presumably tied to profit-taking, year-end book balancing and positioning ahead of the long holiday weekend. Spot Crude Oil futures (WTI) closed at its highest level in a couple of years.

The Dow Jones Industrial Average closed 118 points lower. The S&P 500 closed 13 points lower. The NASDAQ closed 46 points lower.

Overall, market fundamentals remain firm, with feedlot marketing apparently remaining current, wholesale beef values finding some traction and markets shrugging off the bearish monthly Cattle on Feed report from the previous Friday.

Cattle futures also received an early-week jolt from the severe cold and winter weather making its way across much of the U.S., which will impair feedlot performance.

Feeder Cattle futures closed an average of $3.79 higher week to week on Friday ($2.50 to $4.45 higher).

Live Cattle futures closed an average of $2.71 higher week to week on Friday ($2.17 to $3.17 higher). And that was with cash fed cattle trade stymied through late Friday afternoon.

Though too few to trend, through Saturday morning, AMS reported 1,266 head of fed cattle trading hands. Steers brought $120.27 on a live basis and $193.17 in the beef. Dressed heifer sales were at $196.