Daily Market Highlights

Early indications suggest steady to lower cash fed cattle prices this week.

In the weekly Fed Cattle Exchange Auction, 75 head sold out of 704 offered, at $116/cwt. for delivery at 1-9 days. That was about $1.50 lower than last week’s 5-area weekly weighted average.

Likewise, slaughter steers and heifers traded steady to $1 lower at Sioux Falls Livestock in South Dakota.

Cattle futures gave back most of the previous session’s gains on Wednesday. Following tentative early follow-through support.

Live Cattle futures closed an average of 57¢ lower (20¢ to 77¢ lower).

Feeder Cattle futures closed an average of $1.36 lower (75¢ to $1.85 lower).

Choice boxed beef cutout value was $1.58 lower on Wednesday afternoon at $202.48/cwt. Select was 90¢ lower at $185.02.

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Major U.S. financial indices closed mixed on Wednesday with mostly positive macro news that included the Fed’s long-expected and nominal raise in interest rates.

The Dow Jones Industrial Average closed 80 points higher. The S&P 500 closed 1 point lower. The NASDAQ closed 13 points higher.

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Although alternative protein markets are growing, don’t expect to see lab-grown meats hitting the market any time soon, according to a recent report from CoBank’s Knowledge Exchange Division.

Alternative proteins include products derived from plant sources, insects and what are known as cultured or alternative meats, those grown in a lab.

“The future success of alternative meat lies squarely with rising global demand for protein rather than a battle for the existing market share of animal protein food products,” says Trevor Amen, an economist with CoBank. “The road to commercial viability and consumer acceptance of cultured meat is long and this type of product is unlikely to have a marked effect on traditional animal protein demand through at least the next decade.”

Challenges for the cultured meat folks include prohibitive production costs currently, consumer perception and the lack of any sort of regulatory framework.

Cattle futures finally rallied from their recent doldrums on Tuesday. There isn’t anything to suggest any driver other than technical correcting and potential bottom picking.

Live Cattle futures closed an average of $1.10 higher (80¢ to $1.42 higher).

Feeder Cattle futures closed an average of $1.76 higher (87¢ to $2.22 higher).

Choice boxed beef cutout value was $1.47 lower on Tuesday afternoon at $204.06/cwt. Select was 26¢ higher at $185.92.

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Major U.S. financial indices closed mixed on Tuesday. Support was reportedly tied to increasing optimism over the tax proposal.

The Dow Jones Industrial Average closed 118 points higher. The S&P 500 closed 4 points higher. The NASDAQ closed 12 points lower.

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Beef production this year was lowered slightly in the latest World Agricultural Supply and Demand Estimates (WASDE) released yesterday. The reduction came from the current pace of cattle slaughter and lighter carcass weights.

Total red meat and poultry production for this year was also projected lower on reduced beef and pork production.

Based on softer, recent prices, WASDE estimates were a touch lower for fed cattle prices in the fourth quarter ($116-$119/cwt.) and for the year ($121.42).

Price estimates for fed cattle in 2018: first quarter, $117-$123; second quarter, $112-$122; third quarter, $110-$120; 2018 annual, $113-$122.

Cattle futures settled mostly nominally lower on Monday, following a two-side session with early pressure, a surge in support for Feeder Cattle and then running out of steam.

Except for 15¢ higher in the back contract, Live Cattle futures closed an average of 41¢ lower (5¢ to 62¢ lower).

Other than 85¢ lower in the back contract, Feeder Cattle futures closed narrowly mixed, mostly to the down side (22¢ higher to 37¢ lower).

Choice boxed beef cutout value was 6¢ lower on Monday afternoon at $205.53/cwt. Select was 31¢ lower at $185.66.

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Major U.S. financial indices closed higher on Monday, supported by bullishness in energy and tech stocks.

The Dow Jones Industrial Average closed 56 points higher. The S&P 500 closed 8 points higher. The NASDAQ closed 35 points higher.

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“There seems little doubt that herd expansion continued in 2017, albeit at a slower pace than 2016,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his market comments this week.

When the January Cattle inventory report comes out at the end of January, Peel expects the numbers will show that the beef cowherd grew 1.5-2.0% this year. Higher expansion rates are possible, but he just doesn’t see it in the current data. Likewise, a lower rate of expansion is possible, but Peel says that would mean an unusually large percentage of bred heifers available on January 1 of this year never entered the herd…again, unlikely.

For perspective, there were 31.2 million beef cows at the beginning of this year. That represented 7.2% growth in the beef cowherd the start of 2014.

Cattle futures edged lower on Friday…though softer week to week, cash calf and feeder cattle prices should strengthen seasonally with the new year… coming up on your Cattle Current Market Update with Wes Ishmael.

Cattle futures settled lower on Friday, after follow-through support early in the session. The overall tone remains weak.

Except for a few cents higher in a couple of contracts, Live Cattle futures closed 32¢ lower.

Feeder Cattle futures closed an average of 85¢ lower (67¢ to $1.17 lower).

Choice boxed beef cutout value was 51¢ higher on Friday afternoon at $205.59/cwt. Select was $2.14 higher at $185.97.

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Major U.S. financial indices closed higher on Friday, buoyed by the monthly employment outlook. Total non-farm employment increased by 228,000 in November, according to the U.S. Bureau of Labor Statistics. That was more than the trade expected.

The Dow Jones Industrial Average closed 117 points higher. The S&P 500 closed 14 points higher. The NASDAQ closed 27 points higher.

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Although cash calf and feeder cattle prices softened recently—under pressure from deteriorating Cattle futures—Andrew P. Griffith, Agricultural economist at the University of Tennessee, expects prices to strengthen seasonally in the first quarter of the new year.

“The sudden price downturn is likely to reverse and move back to the trading range that has been consistent since the middle of September,” Griffith says, in his weekly market comments. “Additionally, prices for lightweight calves tend to strengthen after the first of the year. Similarly, feeder cattle prices generally find support in January, though they have been supported most of the fourth quarter of 2017. It may also be important for producers to realize that it may be difficult for calf and feeder cattle prices to outpace the prices realized the last few months of 2017. Fall calf and feeder cattle prices were supported throughout the fall marketing time period, which is rare. However, the market simply followed the live cattle market, which it is expected to do in the coming months. Thus, as live cattle prices begin to escalate late in the first quarter of 2018, so will feeder cattle prices. Calf prices toward the end of the first quarter will be supported by the feeder cattle market and abundant spring forage.”

Negotiated cash fed cattle trade continued on Thursday. Live sales so far are $2-$4 lower than last week at $117.00 to $118.50/cwt. Dressed sales are $3-$4 lower at $186-$187.

Helped along by short covering, Cattle futures found some stability on Thursday after strong pressure continued early in the session.

Live Cattle futures closed narrowly mixed (40¢ higher to 60¢ lower).

Feeder Cattle futures closed an average of 26¢ higher, except for 35¢ to 75¢ lower in the back three contracts.

Choice boxed beef cutout value was $1.32 lower on Thursday afternoon at $205.08/cwt. Select was 28¢ lower at $183.83.

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Major U.S. financial indices closed higher on Thursday, led by gains in tech stocks.

The Dow Jones Industrial Average closed 70 points higher. The S&P 500 closed 7 points higher. The NASDAQ closed 36 points higher.

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Producers expressed lower sentiment toward the agricultural economy in November, on the heels of fall harvest, according to the Purdue University/CME Group Ag Economy Barometer.

The November barometer declined 7 points to 128, the second-lowest reading of 2017.

“The November slide in sentiment was primarily driven by reduced optimism about the future,” says James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture. “We saw the Index of Future Expectations fall by 10 points, while the barometer’s other sub-index, the Index of Current Conditions, held steady at 129.”

When asked whether they thought the next 12 months would be good times or bad times financially for the agricultural economy as a whole, 62% saw bad times ahead. The negative expectation has been growing since July when 50% expected worsening financial conditions.

The barometer is based on a monthly survey of 400 agricultural producers from across the country.

Although too few to trend, scattered cash fed cattle trade on Wednesday was at softer money, as suspected. A few live sales in Nebraska were reported at $117-$118/cwt., which was $3-$4 less than last week. A few dressed trades in Nebraska and the western Corn Belt were $3 less than the previous week at $187.

Likewise, slaughter steers and heifers sold $1-$2 lower at Sioux Falls Regional in South Dakota.

There were only 657 head offered and no sales in the weekly Fed Cattle Exchange Auction. There were a couple of POs at $117.25 and $117.50.

Cattle futures trended lower again on Wednesday as more signs pointed to funds starting to unwind long positions amid growing market bearishness and the end of the year looming.

Live Cattle futures closed an average of $1.00 lower (52¢ to $1.27 lower).

Feeder Cattle futures closed an average of $1.90 lower ($1.65 to $2.10 lower).

Choice boxed beef cutout value was $2.68 lower on Wednesday afternoon at $206.40/cwt. Select was $2.52 lower at $184.11.

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Major U.S. financial indices closed narrowly mixed and little changed on Wednesday, with plenty of eyes focused on Congress and whether they can pass a spending bill before the current money runs out on Friday.

The Dow Jones Industrial Average closed 39 points lower. The S&P 500 closed fractionally lower. The NASDAQ closed 14 points higher.

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U.S. beef exports are poised to break $7 billion this year for only the second time, according to October export results released by USDA and compiled by the U.S. Meat Export Federation (USMEF).

Beef exports in October were 5% more in terms of volume (111,287 mt) and 18% more in value ($662 million) compared to the same time a year earlier. For January through October, exports totaled 1.038 million mt, up 9% year over year, with value 16% more at ($5.93 billion). That’s slightly ahead of the record value pace established in 2014.

October beef export value averaged $301.88 per head of fed slaughter, up 12% from a year ago and the highest since December 2016. For January-October, export value averaged $279.85 per head, up 10%.

Japan continued to be the pacesetter for U.S. beef exports in October, with volume climbing 19% from a year ago and value up 23% percent to $147.1 million.

“The U.S. beef industry has really broadened its reach in Japan, expanding the range of cuts offered and the retail and foodservice venues in which they are featured,” says USMEF President and CEO Dan Halstrom. “But USMEF remains concerned about market access barriers in Japan, as we face significantly higher tariffs than our main competitor, Australia, and import safeguards that could hinder further growth.”

Cattle futures took another step lower on Tuesday after a glimmer of promise in early trade. Demand uncertainty seems to be the main driver, while funds largely retain their long positions.

Other than 5¢ higher in spot Dec, Live Cattle futures closed an average of 55¢ lower (15¢ to 87¢ lower).

Feeder Cattle futures closed an average of $1.50 lower (55¢ to $2.12 lower) except for marginally higher in the back two contracts.

Choice boxed beef cutout value was 89¢ higher on Tuesday afternoon at $209.08/cwt. Select was $1.09 higher at $186.63.

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Major U.S. financial indices closed lower on Tuesday, with part of the pressure presumably tied to fretting over whether or not Congress can get its act together to avoid a government shutdown with current funding set to expire on Friday.

The Dow Jones Industrial Average closed 109 points lower. The S&P 500 closed 9 points lower. The NASDAQ closed 13 points lower.

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“For the next two years, the major market outlook issue or headwind for all the U.S. livestock and poultry markets is the sheer tonnage of product that will be produced,” say analysts with the Livestock Marketing Information Center (LMIC). “In both 2018 and 2019, forecasts call for record-large total U.S. red meat and poultry output. It is important to note that even though many consumers do some substituting between categories, it is not one-for-one. That is, for example, in the overall retail marketplace one pound of beef does not substitute for that same amount of chicken.”

U.S. beef production this year is projected to be the largest since 2011, according to LMIC. Pork and poultry production are estimated to the most ever.

“On a retail weight basis, 2017’s total red meat and poultry disappearance is projected by the LMIC at 215.5 lbs. per person, up 1.6 lbs. from a year ago,” say LMIC analysts in the most recent Livestock Monitor. Forecasts for 2018 and 2019 are for 218.5 and 220.9 lbs. per capita, respectively. If realized, both those years would be the largest since 2007’s. Those levels are not unprecedented, but the 2019 forecast is only 1 lb. below the record high set in 2004.”

Cattle futures closed mixed on Monday, with plenty of bearishness… lighter carcass weights continue to dilute the impact of increasing cattle numbers… coming up on your Cattle Current Market Update with Wes Ishmael.

Cattle futures closed mixed on Monday amid widely divergent action that featured plenty of pressure early in the session as traders continued to focus on uncertainty about beef demand.

Live Cattle futures closed an average of 72¢ lower in the front four contracts and then narrowly mixed.

Feeder Cattle futures closed 37¢ lower to 47¢ higher.

Choice boxed beef cutout value was $2.20 higher on Monday afternoon at $208.19/cwt. Select was $1.93 higher at $185.54.

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Major U.S. financial indices closed mixed on Monday. Presumably the uptick in the Dow stemmed from the Senate’s narrow approval of its tax reform package on Saturday, as well as news that CVS will acquire U.S. health insurer, Aetna, in a $69 billion deal. Tech stocks provided most of the drag.

The Dow Jones Industrial Average closed 58 points higher. The S&P 500 closed 2 points lower. The NASDAQ closed 72 points lower.

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Although the latest data indicates that beef carcass weights continued to edge seasonally higher, they remain significantly lower than last year, fueled by aggressive feedlot marketing.

“The current steer carcass weight is 16 lbs. less than the same week last year,” says Derrell Peel, Extension livestock marketing specialist with Oklahoma State University, in his weekly market comments. “Steer carcass weights have been lower 44 of 46 weeks this year and the average decrease for the year to date is 14 lbs. below last year. Heifer carcass weights are currently 13 lbs. below last year and have been lower every week of the year resulting in an average of 12 lbs. lighter year over year for the year to date.”

Peel explains the lighter carcass weights continue to partially offset increased cattle slaughter and moderate increased beef production. While steer and heifer slaughter is 5.3% more year over year, beef production is up 4.1%.

However, Peel notes steer and heifer carcass weights have increased an average of 5 lbs. per year for the last 50 years, and there’s no reason to believe this year’s unique factors suggest a change.

“Current production systems, technology, and genetics would suggest that there is no end in sight to just how big cattle can get from a production standpoint,” Peel says.

Negotiated cash fed cattle trade for the week was generally steady to $1-$3 higher at $120-$121/cwt. on a live basis. Dressed prices were mostly steady to $2 higher at $190.

However, faltering wholesale beef values and growing uncertainty about beef demand heading into the end of the year helped fuel long liquidation in Cattle futures on Friday, along with technical selling.

Choice boxed beef cutout value was $5 lower week to week on Friday, despite being $1.35 higher day-to-day at $205.99. Select was 60¢ lower on Friday at $183.61; $4.24 lower week to week.

Live Cattle futures closed an average of $2.53 lower ($1.97 to $3.00 lower).

Feeder Cattle futures closed an average of $3.29 lower (87¢ to $4.25 lower).

“It almost seems to be a case of the tail wagging the dog as fundamentals in the market seem consistent with previous weeks, yet prices turned and headed south,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments “There is a good possibility that technical trading in the Live Cattle market is the cause of the downturn in Feeder Cattle futures. The turn in the live cattle market had packers hesitant to purchase finished cattle late in the week at cattle feeders’ asking prices, which then bleeds into the feeder cattle market.”

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Major U.S. financial indices closed lower on Friday, apparently fueled by worries that revelations by Michael Flynn, short-lived National Security Advisor, could impair or derail the Trump administration.

The Dow Jones Industrial Average closed 40 points lower. The S&P 500 closed 5 points lower. The NASDAQ closed 26 points lower.

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“Load-lot prices continue to prove profitable for cow-calf and stocker producers as winter is quickly approaching,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “Weekly auction market prices also continue to be favorable for profitability for cow-calf producers, as well as offering purchasing opportunities to stocker producers.”

In fact, Griffith explains market fundamentals and prices are such that it’s difficult to encourage cow-calf producers to sell now or hold calves and add some weight for marketing the first part of the new year.

“Many producers will make the decision to cash out in the near term, which is difficult to argue with,” Griffith says. “Other producers will hold on a little while longer, which is also difficult to argue against. It is hard to be frustrated with positive returns in business as risky as this.”

Negotiated cash fed cattle prices were $2-$3 higher than last week in the Southern Plains on Thursday at $120-$121/cwt., on moderate trade and good demand. Though too few to trend, prices elsewhere were generally steady.

Even so, Cattle futures closed lower, weighed down in part by month-end position squaring and sagging wholesale beef values.

Choice boxed beef cutout value was $1.91 lower Thursday afternoon at $204.64/cwt. Select was $1.63 lower at $184.21. That’s about $4 lower for Choice in the last two days; $3 lower for Select.

Live Cattle futures closed an average 92¢ lower (57¢ to $1.62 lower).

Feeder Cattle futures closed an average of $1.26 lower (77¢ to $1.55 lower).

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Major U.S. financial indices closed sharply higher on Thursday, led by a herculean bounce for the Dow. More than anything, optimism appeared tied to the increasing likelihood that the Senate would pass its tax reform proposal later in the day. Never mind that if and when that happens, there’s still lots of hammering left between the House and Senate.

The Dow Jones Industrial Average closed 331 points higher. The S&P 500 closed 21 points higher. The NASDAQ closed 49 points higher.

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Restaurant operators are more optimistic about higher sales for the next six months than they’ve been in two years, according to the latest Restaurant Performance Index (RPI) from the National Restaurant Association (NRA).

The RPI−comprised of a Current Situation Index and one for Expectations−edged 0.2% higher in October than the previous month to 100.9. That was on the back of the expectations index, which was up 0.8% to 102.4, the highest level in eight months.

All told, 44% of restaurant operators expect higher sales in six months−compared to the same period a year earlier. That’s 11% more than the previous month and the most in two years.

Conversely, the Current Situation Index declined for the fourth consecutive month, down 0.3% in October to 99.5. October was the second consecutive month the index was below 100, which indicates industry contraction.