Daily Market Highlights

Cattle futures tread water for most of Tuesday’s session and then closed decidedly lower in late trade. Along with the consolidated price range, perhaps late selling included some positioning ahead of Friday’s monthly Cattle on Feed report.

Live Cattle futures closed 91¢ lower (55¢ to $1.37 lower).         

Feeder Cattle futures closed an average of $1.82 lower ($1.42 to $2.15 lower).

Choice boxed beef cutout value was $1.15 lower Tuesday afternoon at $197.66/cwt. Select was 72¢ lower at $189.85.

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Major U.S. financial indices closed narrowly mixed on Tuesday with support from continued strength in quarterly earnings.

The Dow Jones Industrial Average closed 40 points higher. The S&P 500 closed 1 point higher. The NASDAQ closed fractionally lower.

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USDA withdrew its controversial Grain Inspection, Packers and Stockyard Administration (GIPSA) interim final rule (IFR) yesterday, a victory for those who favor a free market and competition.

You’ll recall that the rule (also known as the Farmer Fair Practices Rules) would have eliminated the need for someone to prove competitive injury in order to win a GIPSA lawsuit. Intended or not, the rules would have unhinged the alternative marketing arrangements that enable producers to receive more than an average price for more than added value. In other words, rather than risk litigation, beef packers would have effectively been forced by law to pay the same money for all cattle, regardless of value.

“Collectively, the rules would have made it unnecessary for plaintiffs to show general harm to competition when challenging a packer’s decision to offer premiums to producers through established marketing agreements, going well beyond the statutory language, potentially opening the gates to lawsuits from disgruntled producers, and ultimately limiting marketing options and consumer choice,” according to a statement from the House Committee on Agriculture.

“The IFR attempted to renew a proposal rejected by Congress through four funding bills and directly circumvented the rulings of eight separate federal appeals courts,” according to a statement from the North American Meat Institute. “The IFR would have greatly limited marketing agreements that allow the industry to meet consumer demand for various animal handling and production requirements, such as organic, grass fed, raised without an antibiotics and others, limiting the availability of these products for consumers.”

House Agriculture Committee Chairman K. Michael Conaway said after yesterday’s announcement, “Today’s decision helps restore both Congressional intent and common sense by ensuring American producers have the freedom to market their products without the threat of frivolous lawsuits.”

Colin Woodall, the National Cattlemen’s Beef Association’s Senior Vice President, Government Affairs, summed up withdrawal of the IFR this way: This is a victory for America’s cattle and beef producers – and it’s a victory for America’s consumers…The proposed rule would have crippled cattle producers’ ability to market their products through the value-added programs that help make American-produced beef the most delicious and nutritious in the world. This is a decision worthy of celebrating with a top-quality steak.”

Cattle futures meandered to a lower close in mostly sideways trade on Monday with traders apparently awaiting further direction from the cash market.

After $1.10 lower in spot Oct., Live Cattle futures closed 15¢ to 47¢ lower, except for 10¢ and 27¢ higher at the back.    

Other than 5¢ lower in spot Oct., Feeder Cattle futures closed an average of 50¢ lower.

Choice boxed beef cutout value was 59¢ higher Monday afternoon at $198.81/cwt. Select was 52¢ higher at $190.57.

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Major U.S. financial indices closed at record highs on Monday, buoyed by strong quarterly earnings reports and gains in crude oil.

The Dow Jones Industrial Average closed 85 points higher. The S&P 500 closed 4 points higher. The NASDAQ closed 18 points higher.

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Increasing cattle number are boosting opportunities for stocker operators, according to Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments.

“Feedlot preferences to buy pounds in the form of heavy feeders rather than placing lighter feeders and adding more weight per animal in the feedlot necessarily translates into a signal for stocker producers to provide that additional weight gain on feeder cattle,” Peel explains. “As stocker producers respond to these signals, they are not only adding weight to feeder cattle but are spreading out feeder supplies over time. Larger cattle supplies allows feedlots for focus more on feeding yearlings, and that in turn, provides more opportunities for stocker producers to profitably add weight to calves to meet that feedlot demand.”

Along the way, Peel says stocker demand is lifting the price of heavy feeders and reducing the seasonal price decline of lighter calves.

“Big feeder cattle (over 700 lbs.) have not only failed to decline seasonally but have increased so far this fall,” Peel says. “Current prices for heavy feeders are about 8% above August levels. Strong feedlot demand for bigger yearlings is more than offsetting increased feeder cattle supplies this fall. Feedlots continue to have an incentive to place and feed cattle and, with bigger feeder supplies, to focus more on yearlings rather than calves at this time of the year. Feedlots have the ability to be more choosy about the kind of cattle they want to feed and the resulting demand for yearlings relative to middleweight feeders produces a more pronounced stocker signal in the form of a higher value of gain. It’s typical this time of year to see middleweight feeder price weaken relative to heavy feeders but the tendency is even more evident with larger feeder cattle supplies.”

In Oklahoma, where stocker and feeder prices typically decline 4% between August and October; this year, prices are about 2% less. At the same time Peel notes auction volume in the state for the past six weeks was 11% more year over year.

“It appears that abundant supplies of other forages have permitted stocker purchases despite delays in wheat pasture this fall,” Peel says. “Fall armyworms have either damaged early-planted wheat or have prompted delays in wheat planting to reduce the risk of damage. Nevertheless, it seems that significant numbers of stockers are waiting in the wings on other forages until wheat pasture is ready.”

Negotiated cash fed cattle trade ended last week $1-$3 higher: mainly $111.00-$111.50 on a live basis and $175 in the beef.

Feeder Cattle futures wandered to a mostly higher close on Friday, while Live Cattle settled mostly marginally mixed as traders bided their time for the next week.

Other than 47¢ and 22¢ higher on either end of the board, Live Cattle futures closed marginally mixed (15¢ lower to 5¢ higher).       

Other than 5¢ and 7¢ lower at the back of the board, Feeder Cattle futures closed an average of 55¢ higher (32¢ to 80¢ higher).

Choice boxed beef cutout value was 78¢ higher Friday afternoon at $198.22/cwt. Select was 60¢ higher at $190.05.

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Major U.S. financial indices edged higher on Friday, basically regaining ground lost in the previous session. Some of the optimism stemmed from a strong start to quarterly earnings reports.

The Dow Jones Industrial Average closed 30 points higher. The S&P 500 closed 2 points higher. The NASDAQ closed 14 points higher.

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“Some may be asking themselves why feeder cattle prices remain elevated given the increased number of cattle, the expectation for increased meat production in the beef, pork, and poultry sectors, and relatively low finished cattle prices,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. Among the reasons Griffith cites:

• “…Low corn prices, which result in relatively low feed costs. December corn futures prices have been hanging around $3.50/bu. for two months now. Given expected corn production this year, there is little concern of corn prices rallying to the upside. Additionally, the cash corn price in many cattle feeding states is closer to $3 given the highly negative basis…”
• “The February and April live cattle futures prices are trading in the $121 to $122 range, which provides cattle feeders the opportunity to bid current levels for feeder cattle. Some cattle feeders may be even betting on stronger prices in the spring, which makes them feel like they are getting a good deal at today’s feeder cattle prices.”
• “Last but not least, beef demand domestically and internationally remains strong which is supporting prices.”

Cattle feeder confidence paid off in the Southern Plains on Thursday as packers paid $2 more than last week on a live basis at $111/cwt. There was too little trade for a trend in other regions through the afternoon.

Cattle futures lost ground on Thursday. Although the bounce higher in grains likely provided some pressure, more than anything, it had the feel of modest positioning and correcting rather than anything bearish.

Live Cattle futures closed an average of 96¢ lower (62¢ to $1.42 lower).        

Other than 60¢ and 37¢ lower at either end of the board, Feeder Cattle futures closed an average of $2.01 lower ($1.12 to $2.42 lower).

Choice boxed beef cutout value was $1.12 higher Thursday afternoon at $197.44/cwt. Select was 69¢ higher at $189.45.

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Major U.S. financial indices edged lower on Thursday, running out of early steam with sharp pressure in oil prices; though lower on the day, Crude Oil (WTI) recovered some ground by session end.

The Dow Jones Industrial Average closed 31 points lower. The S&P 500 closed 4 points lower. The NASDAQ closed 12 points lower.

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Forecast total red meat and production for this year was raised to 100.6 billion lbs. in the latest World Agricultural Supply and Demand Estimates (WASDE), with increased broiler and turkey production offsetting estimated reductions in beef and pork production.

“Beef production is reduced from the previous month largely due to lower expected fourth-quarter carcass weights,” say analysts with USDA’s Economic Research Service (ERS). “Beef production is little changed from last month, although first-half production is lowered as pasture conditions are expected to slow the pace of placements in the latter part of 2017. However, heavier carcass weights are expected to offset a portion of the decline.”

ERS estimates beef production this year at 26.5 billion lbs.; 27.3 billion lbs. next year.

The fourth-quarter steer price is estimated at $108-$112/cwt. Average for this year is projected at $119.55. Prices for the first quarter of next year are projected at $111-$119; $109-$119 in the second quarter; average 2018 annual of $111-$120.

Cash fed cattle trade for the week remained in neutral on Wednesday with cattle feeders growing more confident in the potential for higher prices.

Slaughter steers sold $2-$4/cwt. higher at Sioux Falls Regional Livestock in Worthing, SD yesterday. Slaughter heifers sold $2-$3 higher.

There were no sellers in the weekly Fed Cattle Exchange auction on Wednesday. Of the 1,444 head offered there were no sales, but several POs at $110.00-$110.75, which was the upper end of last week’s country trade.

Cattle futures closed little changed on Wednesday.

Live Cattle futures closed mostly 15¢ to 27¢ lower.         

Feeder Cattle futures closed mostly 12¢ to 47¢ lower.

Choice boxed beef cutout value was $1.08 lower Wednesday afternoon at $196.32/cwt. Select was $1.26 lower at $188.76.

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Major U.S. financial indices closed higher on Wednesday. Presumably, part of the support came from hints in the minutes of the most recent Fed meeting that plans for another hike in interest rates this year remain intact.

“Consistent with the expectation that a gradual rise in the federal funds rate would be appropriate, many participants thought that another increase in the target range later this year was likely to be warranted if the medium term outlook remained broadly unchanged,” according to the minutes. “Several others noted that, in light of the uncertainty around their outlook for inflation, their decision on whether to take such a policy action would depend importantly on whether the economic data in coming months increased their confidence that inflation was moving up toward the Committee’s objective…”

The Dow Jones Industrial Average closed 42 points higher. The S&P 500 closed 4 points higher. The NASDAQ closed 16 points higher.

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Overall, 41% of the nation’s pasture and range remained in Good (37%) or Excellent (4%) condition compared to 49% at the same time a year ago, according to the latest USDA Crop Progress report. 25% is rated as Poor (16%) or Very Poor (9%), compared to 19% a year earlier.

48% of winter wheat is planted, which is 9% less than last year and 10% less than average. Only 27% is planted in Kansas compared to 59% for average. 42% is planted on Oklahoma, 20% behind the average pace. Planting in Texas is 2% ahead of the average pace at 54%. 25% has emerged, compared to 32% last year and 30% for average.

Last week’s steady to higher cash fed cattle trade and firmer recent wholesale beef values helped push Live Cattle futures higher on Tuesday, sharply higher in the nearby contracts. Feeder Cattle futures closed a little higher, too, but shy of early support.

Live Cattle futures closed an average of $1.11 higher (65¢ to $2.27 higher in spot Oct).      

Feeder Cattle futures closed an average of 55¢ higher (30¢ to 70¢ higher).

Choice boxed beef cutout value was 73¢ lower Tuesday afternoon at $197.40/cwt. Select was $1.36 higher at $190.02.

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Major U.S. financial indices closed higher on Tuesday, supported by Walmart’s announcement that it would buy back up to $20 billion worth of stock in a share repurchase program over the next to years.

The Dow Jones Industrial Average closed 69 points higher. The S&P 500 closed 5 points higher. The NASDAQ closed 7 points higher.

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Heavy native steer hide values account for most of the recent decline in beef byproduct values, according to the Livestock Marketing Information Center (LMIC).

“Typically, hides account for about a half of the total value of the non-conventional meat products coming from the slaughter process,” LMIC analysts say, in the most recent Livestock Monitor. They explain hide prices declined about $6 since late June to $60 currently. Last year, they say the same grade of hide was valued at $75 in June (AMS reports) and declined only $1 heading into early October.

LMIC analysts say the $10.35/cwt. byproduct value in early October was the lowest for any week since April of 2010. Other key byproducts are liver, tallow (edible and inedible), tongues, oxtails, and tripe.

It took all week, and then some, but cash fed cattle trade ended up moderate on moderate demand in all major cattle feeding regions late on Friday. Prices were steady to $2 higher on a live basis at $108/cwt. in the western Corn belt, to $109 in the Southern Plains, to $110 in Colorado; as high as $110.50 in Nebraska. Dressed trade was steady to $2 higher at $172-$174.

Cattle futures mostly treaded water to start the week, amid sluggish trade tied to Columbus Day, which was a holiday for some.

Except for unchanged in Dec and 2¢ lower in April, Live Cattle futures closed an average of 34¢ higher (7¢ to 55¢ higher).      

Feeder Cattle futures closed narrowly mixed but mostly marginally higher (25¢ lower to 25¢ higher).

Choice boxed beef cutout value was 91¢ higher Monday afternoon at $198.13/cwt. Select was $1.43 higher at $188.66.

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Major U.S. financial indices closed marginally lower on Monday as investors positioned ahead of quarterly earnings reports.

The Dow Jones Industrial Average closed 12 points lower. The S&P 500 closed 4 points lower. The NASDAQ closed 10 points lower.

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Net live cattle imports to the United States continue higher year over year, according to Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments.

Those imports are feeder cattle and fed cattle from Canada and mainly feeder cattle from Mexico.

“For the year to date, total cattle imports are up 3.9%, with imports from Canada down 16.5% and imports of Mexican cattle up 21.7%,” Peel says. “Canadian feeder cattle imports were down 34.0% through August and slaughter cattle imports were up 9.7%. Slaughter cattle imports from Canada for the year to date consist of 68.8% slaughter steers and heifers and 31.2% slaughter cows and bulls.”

Total feeder cattle imports from Canada and Mexico were up 9.7% for the January through August period, Peel says.

“Year to date, feeder heifer imports from Mexico have more than doubled from last year with heifers making up 15.3% of feeder cattle imports from Mexico,” Peel explains. “Increased heifer imports from Mexico may be a reflection of stronger domestic Mexican demand for steers to support growing feedlot production in Mexico, leaving heifers to make up a bigger share of cattle exports. It may also signal slowing heifer retention and herd growth in Mexico as heifer exports compete with domestic breeding demand for heifers.”

Steers imported from Mexico are up 13.6% year over year through August, Peel says.

Cash fed cattle trade remained a no-go through Friday afternoon. Cattle feeder confidence and logic both suggested ultimate trade of steady money at worst, but perhaps $1-$2 higher.

Except for unchanged and 17¢ higher at the back of the board, Live Cattle futures closed an average of 76¢ higher (50¢ to 95¢ higher).       

Feeder Cattle futures closed an average of 68¢ higher (32¢ to $1.12 higher).

Choice boxed beef cutout value was 3¢ lower Friday afternoon at $197.22/cwt. Select was $1.55 lower at $187.23.

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Major U.S. financial indices closed narrowly mixed on Friday. Pressure included fewer new jobs than anticipated in the monthly employment report. There was 33,000 less non-farm employment in September than the previous months. Keep in mind that a couple of hurricanes affected the number.

The Dow Jones Industrial Average closed 1 points lower. The S&P 500 closed 2 points lower. The NASDAQ closed 4 points higher.

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So far this year, U.S. beef exports are 10% more in volume compared to last year and 16% more in value at $4.65 billion. That’s through August, the most recent month for statistics released by USDA and compiled by the U.S. Meat Export Federation (USMEF).

For the month of August, volume was 5% more year to year at 112,069 metric tons (mt) and value was the second-highest on record at $679.1 million, up 20% from a year ago. The record high is $688.8 million established in October 2014.

“As we head into the final quarter, 2017 is shaping up as a very solid year for red meat exports but one in which the U.S. industry still faces significant challenges,” says USMEF CEO Philip Seng. “We have new pork plants coming on line and strong cattle-on-feed numbers, which sends a positive signal to our international customers about product availability. But the international markets are increasingly competitive, so we must continue to aggressively pursue new opportunities for U.S. red meat products in both our traditional mainstay destinations and in emerging markets.”

Export value per head of fed slaughter averaged $290.05 in August, up 13% from a year ago. Through August, per-head export value was up 9% to $275.81.

August beef exports to leading market Japan were 22% higher than a year ago at 31,001 mt, the most of the post-BSE era. Export value to Japan increased 35% and broke the $200 million mark ($200.05 million) for the first time since May 1996. For January through August, exports to Japan were up 23% percent in volume (209,502 mt) and 30% in value ($1.28 billion).

Keep in mind that Japan’s frozen beef safeguard was triggered in late July, increasing the duty on frozen beef imports from the U.S. and other suppliers without a trade agreement with Japan. The duty increased from 38.5% to 50%.

“The true impact of the higher duty rate will be revealed over the next few months, but August demand was not significantly affected,” according to USMEF.

Cash fed cattle trade for the week continued at an impasse on Thursday, as Cattle futures crawled higher—continuing the week’s two-sided action—helped along by firming wholesale beef values and steady to stronger cash fed cattle prices at auction.

Except for 20¢ higher at the back of the board, Live Cattle futures closed an average of 83¢ higher (45¢ to $1.12 higher).        

Except for 2¢ higher at the back of the board, Feeder Cattle futures closed an average of $1.50 higher ($1.35 to $1.70 higher).

Choice boxed beef cutout value was 16¢ lower Thursday afternoon at $197.26/cwt. Select was 77¢ lower at $188.78.

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Major U.S. financial indices closed higher again on Thursday as investors deemed the House budget approval another stepping stone to tax reform.

The Dow Jones Industrial Average closed 113 points higher. The S&P 500 closed 14 points higher. The NASDAQ closed 50 points higher.

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“While we have seen increases over the past few months, cold storage inventories have remained below 2016 levels on a monthly basis since February despite increases in beef production,” says Josh Maples, livestock economist at Mississippi State University, in the latest issue of In the Cattle Markets. “Beef production in July was 4% higher than July 2016. The large increase from July to August still leaves inventories (cold storage) just below the August 2016 total (less than 1% lower). Granted, cold storage inventories were large in 2016. While beef in cold storage is only a small component of the total beef supply picture, year-over-year stocks are not increasing even with larger beef production.”

Although most of the beef produced in the U.S. never enters cold storage, Maples explains inventories can be an indicator of overall market conditions.

“Cold storage inventories are primarily driven by the ground beef market and international trade,” Maples says. “Stocks may build up due to larger imports or to support larger exports as pointed out in the latest Livestock Monitor. “…The Cold Storage report indicated that frozen stocks were at 476.3 million lbs. Aug. 31. This represented a 10.3% increase in stocks compared to July. On a percentage point basis, this was the largest increase for August stocks over July since 2002. It also followed moderate month-over-month increases for the previous three months. Cold storage inventories typically increase seasonally near the end of the year and then decline into the summer grilling-season months.”

The weekly Fed Cattle Exchange auction on Wednesday offered hope that cash fed cattle trade this week might be no worse than steady. Out of 1,732 head offered, 784 head sold for a weighted average price of $108/cwt. for delivery at 1-9 days and 1-17 days. That’s about even with last week’s country trade. There were no sales at the auction the previous week.

Similarly, slaughter steers sold mostly steady to $1 higher at Sioux Falls Regional Livestock on Wednesday. Slaughter heifers traded steady to $3 higher.

Cattle futures closed mixed on Wednesday after an up and down day of trading.

Live Cattle futures closed narrowly mixed (30¢ lower to 40¢ higher). 

Feeder Cattle futures closed an average of 82¢ lower (32¢ to $1.17 lower).

Choice boxed beef cutout value was 46¢ lower Wednesday afternoon at $197.41/cwt. Select was 53¢ higher at $189.55.

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Major U.S. financial indices closed higher again on Wednesday. Support included positive employment and non-manufacturing numbers.

The Dow Jones Industrial Average closed 19 points higher. The S&P 500 closed 3 points higher. The NASDAQ closed 2 points higher.

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Although the September Purdue University/CME Group Ag Economy Barometer held steady from August to September, the sub-index for future expectations declined by seven points. Conversely, the sub-index for current conditions increased 10 points month to month.

“Although the decline in the Index of Future Expectations was modest, it could be an indication that some of the optimism that surfaced among producers in late 2016 and early 2017 is eroding,” says Jim Mintert, director of Purdue’s Center for Commercial Agriculture and principal investigator for the barometer. “One of the drivers of the jump in producer sentiment after the 2016 U.S. presidential election was a sharp increase in expectations about the U.S. economy. But the last two times the barometer survey has posed questions about the overall economy, respondents were noticeably less optimistic.”

For example, on the September survey, just 40% of the respondents said the U.S. economy was likely to expand, a decline of almost one-third from March when nearly 60% said they expected expansion.

Another topic on the September survey was trade agreements and negotiations, specifically the North American Free Trade Agreement (NAFTA). The survey asked respondents whether NAFTA has been good or bad for the U.S. economy, and separately, for U.S. farmers and ranchers. In both cases, more producers than not reported that the agreement had been good. In the case of the U.S. economy, 52% of respondents said they thought NAFTA had been good. Fifty-nine percent reported that they thought the agreement had been good for U.S. farmers and ranchers.”

“An unusually large percentage of survey participants—24% in the case of the U.S. economy and 20% in the case of farmers and ranchers—opted not to answer these two questions,” Mintert says. “Although we can’t say for sure why producers opted not to respond to these two questions, it might also reflect a relatively high degree of uncertainty regarding NAFTA’s impact.”

The Ag Economy Barometer is based on a monthly survey of 400 U.S. agricultural producers.