Daily Market Highlights

Cattle futures rallied a bit on Friday, buoyed by apparent short covering and likely a psychological lift from news late the previous day that USDA halted fresh Brazilian beef imports.

Live Cattle futures closed an average of 57¢ higher (32¢ to $1.00 higher).

Feeder Cattle futures closed an average of $1.52 higher ($1.25 to $2.07 higher).

Choice boxed beef cutout value was $3.13 lower Friday afternoon at $239.75/cwt. Select was 20¢ lower at $216.72.

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Major U.S. financial indices closed narrowly mixed on Friday. Higher oil prices provided support, while fewer May home sales than the trade expected added some pressure. The adjusted seasonal rate of new single-family houses (610,000) in May was 2.9% more than April, according to the U.S. Census Bureau and U.S. Department of Housing and Urban Development.

The Dow Jones Industrial Average closed 2 points lower. The S&P 500 closed 3 points higher. The NASDAQ closed 28 points higher.

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If anything, the monthly Cattle on Feed report released Friday will be viewed as a touch bearish, with May placements and the on-feed inventory June 1 at the upper end of estimates.

Feedlot placements in May (2.12 million head) were 12.2% more than a year earlier. That’s about 2% more than the average of some estimates and 2% less than some others. Cattle weighing 700-799 lbs. (529,000 head) and 800-899 lbs. (550,000) comprised 51% of the placements; another 11% for cattle weighing 900-99 lbs. (235,000).

Feedlot marketings in May (1.95 million head) were 8.7% more than a year earlier.

All told, the on-feed inventory June 1 (11.1 million head) was 2.7% more than last year.

Cattle futures continued lower on Thursday, pressured by lower wholesale beef values, sharply lower cash fed cattle prices and increasing skittishness about prices and demand through the summer.

Choice boxed beef cutout value was $2.54 lower Thursday afternoon at $242.88/cwt. Select was $1.98 lower at $216.92.

Live Cattle futures closed an average of 89¢ lower (57¢ to $1.15 lower).

Feeder Cattle futures closed an average of 96¢ lower across the front half of the board and then an average of 40¢ lower.

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Major U.S. financial indices closed narrowly mixed on Thursday.

The Dow Jones Industrial Average closed 12 points lower. The S&P 500 closed 1 point lower. The NASDAQ closed 2 points higher.

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USDA’s monthly Cold Storage report should provide no pressure to beef prices, maybe even a little support.

Total pounds of beef in freezers May 31 were 10% less than the previous month and 11% less than the previous year.

Frozen pork supplies were down slightly from the previous month and down 4% from last year.

All told, total red meat supplies in freezers were down 5% from the previous month and down 7% from last year.

Total frozen poultry supplies on May 31, 2017 were up 4% from the previous month and up 4% from a year ago.

In country trade on Wednesday, negotiated cash fed cattle sales were $8-$10 lower than last week on a live basis at $121-$123/cwt. Dressed trade was $4-$17 lower in Nebraska at $196-$198.

Those live sales mirrored the weekly Fed Cattle Exchange Auction earlier in the day, where the weighted average price was $123 for delivery at 1-9 days. Of the 2,147 head offered, only two lots sold, comprising 457 head—all steers, some from Texas and some from South Dakota.

Feeder Cattle futures eked out minimal gains on Wednesday, while Live Cattle turned lower after support early in the session.

Other than 2¢ higher in back Jun, Live Cattle futures closed an average of 46¢ lower (15¢ to 85¢ lower).

Feeder Cattle futures closed an average of 68¢ higher (47¢ to $1.15 higher).

Choice boxed beef cutout value was $1.57 lower Wednesday afternoon at $245.42/cwt. Select was 98¢ lower at $218.90.

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Other than tech stocks, Major U.S. financial indices closed lower on Wednesday, pressured once again by softer crude oil and energy prices.

The Dow Jones Industrial Average closed 57 points lower. The S&P 500 closed 1 point lower. The NASDAQ closed 45 points higher.

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There seems little doubt that Amazon will capture some of the current conventional grocery market with their acquisition of Whole Foods. On the other hand, it seems just as likely that plenty of food shoppers will opt for the tried and true physical store.

Consumers who tried grocery shopping online but didn’t go back (referred to as lapsed consumers), as well as those who have never shopped for groceries online point out a number of barriers to their adoption of online grocery shopping, the top reason being that they want to pick out their own fresh items. That’s according to the NPD Group (NPD), a leading global information company.

“Brick-and-mortar stores aren’t dead, they will just need to step up their game. There will continue to be a large percentage of the population who will prefer to shop at brick-and-mortar grocers,” says Darren Seifer, NPD food and beverage industry analyst. “Brick-and- mortar food retailers should market the unique consumer needs they meet that online grocers aren’t currently offering, experience being a key one. At the same time, they need to keep up with the times and leverage digital ordering via their own click-and-collect programs as well as partnering with third parties for delivery in order to expand their offerings.”

At the same time, the folks at NPD say there’s plenty of growth potential for grocery e-commerce, with only 7% of U.S. consumers saying they shopped online for groceries in the last month.

NPD predicts that online grocery shopping will grow at a faster rate than the early online pioneers since consumers have already experienced the convenience of online shopping. In fact, 20 million consumers who are current, lapsed, or new to online grocery shopping plan to increase their virtual shopping for foods and beverages over the next six months, according to the NPD study, The Virtual Grocery Store.

Cattle futures closed lower again on Tuesday with Feeder Cattle leading the way. There seems to be a growing belief that holders of non-commercial long positions will begin unwinding them within the next couple of weeks—arguably they’ve already started—as wholesale beef values and cash fed cattle prices swoon seasonally lower. News that JBS S.A. plans to sell JBS Five Rivers Cattle Feeding added uncertainty (see below).

Other than 35¢ higher in spot Jun, Live Cattle futures closed an average of 18¢ lower.

Feeder Cattle futures closed an average of $1.35 lower (95¢ to $2.67 lower).

Choice boxed beef cutout value was $2.47 lower Tuesday afternoon at $246.99/cwt. Select was $1.48 lower at $219.88.

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Major U.S. financial indices closed lower on Tuesday, pressured by softer energy prices, led by another step lower in Crude Oil.

The Dow Jones Industrial Average closed 61 points lower. The S&P 500 closed 16 points lower. The NASDAQ closed 50 points lower.

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JBS S.A. announced yesterday that it is selling Five Rivers Cattle Feeding as part of a divestiture program to reduce the company’s net debt.

You’ll recall that JBS announced a month ago that seven of its executives and its controlling entity—J&F Investimentos—entered into a plea bargain agreement with the Federal Public Prosecutor’s Office in Brazil, which came with a fine of about $67.6 million (US). Apparently, that’s besides the approximately $3.2 billion (US) that J&F agreed, in principle, to pay in fines. All of that was the result of a massive political and financial scandal reportedly involving thousands of bribes by JBS and J&F to government officials in Brazil.

Five Rivers is the largest cattle feeder in the United States with feedlots in six states and close to 1 million head capacity. As well, JBS will sell other assets including: shareholding interests in Vigor Almientos, S.A. (one of Brazil’s largest dairy companies) and Moy Park (one of the 10 largest food companies in the United Kingdom).

JBS executive directors estimate that the divestment program will result in a capital injection of approximately $6 billion (Brazilian Real), which is equivalent to about $1.8 billion U.S., based on the current exchange rate.

“Selling these assets is central to a strategy designed to reinforce JBS’ competitive advantage in the global food industry,” according to a JBS news release. “The sale of feedyard assets will more closely align the JBS business model with key U.S. competitors and allow the company to concentrate its efforts on its core food and value-added products businesses.”

If the announcement firms up the odds of JBS maintaining its beef packing plants in the U.S., the market will view it as positive. In the meantime, uncertainty increases with the fact that JBS had to liquidate Five Rivers and other assets, and that there is apparently no buyer for Five Rivers lined up and ready to go.

Cattle futures closed sharply lower on Monday, unable to maintain the foothold established at the end of last week. Pressure likely came from a variety of directions, including expectations for larger show lists of fed cattle this week and an anticipated break in wholesale beef values.

Live Cattle futures closed an average of $1.62 lower ($1.30 to $2.07 lower).

Feeder Cattle futures closed an average of $2.28 lower ($1.12 to $2.92 lower).

Choice boxed beef cutout value was 38¢ lower Monday afternoon at $249.46/cwt. Select was $1.56 higher at $221.36.

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Major U.S. financial indices closed sharply higher on Monday, with tech stocks helping fuel a record-high close for both the Dow Industrial Average and the S&P 500. Surging tech stocks included a record-high price for Amazon during the session, following Friday’s announcement that it intends to buy Whole Foods Market.

The Dow Jones Industrial Average closed 144 points higher. The S&P 500 closed 20 points higher. The NASDAQ closed 87 points higher.

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“Beef exports to China could be a very big deal in the future but will likely start fairly slowly,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments.

For one thing, in general terms, little is known about the composition of Chinese demand for U.S. beef. For example, it’s unclear how much preference the Chinese will have for middle meats versus end meats, let alone specific cuts, or what mix of USDA Quality Grades.

“It will likely be a moving target for many months,” Peel says. “However, given that unofficial flows of U.S. beef have been entering China in recent years, some beef packers may have insight, at least initially, into beef product demand in China.”

According to Peel, other likely challenges that could hamper beef exports to China at the outset include: understanding how official exports will affect the flow of unofficial U.S. beef exports that filtered into China during the ban, or vice versa; building U.S. supplies eligible for export to China.

“It is possible that unofficial flows will convert quickly into official exports, in which case, apparent initial volumes of exports to China may simply displace export volume currently being transshipped through other countries,” Peel explains. “It is possible that the unofficial flows will continue and be augmented by new official exports. It will be important to look comprehensively at export volumes across countries to understand the net effect. It is even possible that China will move quickly and aggressively to stop unofficial flows, which could happen before official flows have developed and could actually result in a temporary reduction in net beef exports. The next few weeks/months will no doubt be very dynamic.”

Peel expects exporters to move cautiously until market values and export procedures become more certain. He points out that typically the added costs of qualifying beef for export encompass the entire carcass, rather than the specific cuts that are shipped. That means the value of exporting what the Chinese ultimately demand will have to cover the cost of qualifying the entire carcass.

“There are many unknowns but it seems unlikely that beef exports to China will have a large noticeable effect on cattle and beef prices and beef production in the U.S. initially,” Peel concludes. “Over time, with growing market share, prices for particular products might be affected depending on the quantity, quality and specific products demanded in China. More general price effects on beef and perhaps cattle will depend on the dynamics of demand relative to supply for U.S. beef products in the Chinese market. The U.S. industry will benefit over time from some combination of higher prices and/or increased export volumes as the Chinese market grows.”

Cattle futures mostly edged higher on Friday, attributed by many analysts to position squaring and short covering. Stabilizing prices were welcome news, whatever combination of reasons.

After 80¢ lower in spot Jun, Live Cattle futures closed an average of 43¢ higher (2o¢ to 67¢ higher).

Feeder Cattle futures closed an average of 74¢ higher (42¢ to 95¢ higher).

Choice boxed beef cutout value was 10¢ higher Friday afternoon at $249.84/cwt. Select was 73¢ lower at $219.80.

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Major U.S. financial indices closed mixed on Friday. Amazon’s announced purchase of Whole Foods for $13.7 billion (see below) seemed to be the major news investors responded to, as the stocks of major grocers like Wal-Mart and Kroger declined on the news. Slower housing starts in May—5.5% fewer than in April and 2.2% less than a year earlier—also provided pressure.

The Dow Jones Industrial Average closed 24 points higher. The S&P 500 closed fractionally higher. The NASDAQ closed 13 points lower.

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Amazon and Whole Foods Market, Inc. announced on Friday that they have entered into a definitive merger agreement under which Amazon will acquire Whole Foods Market for $42 per share in an all-cash transaction valued at approximately $13.7 billion, including Whole Foods Market’s net debt.

Whole Foods Market will continue to operate stores under the Whole Foods Market brand. John Mackey will remain as CEO of Whole Foods Market and Whole Foods Market’s headquarters will stay in Austin, Texas.

Completion of the transaction is subject to approval by Whole Foods Market’s shareholders, regulatory approvals and other customary closing conditions. The parties expect to close the transaction during the second half of 2017.

Negotiated cash fed cattle trade and demand were light in Nebraska through Thursday afternoon. There were a few live purchases at mostly $124.00-126.50/cwt.; $6.00-$6.50 less than trades in the region earlier in the week. The few dressed sales there at $205-$208 were $5-$7 less than earlier-week sales, but too few transactions to trend in both cases. The bulk of live purchases in Nebraska for the week were on Monday at $132, while dressed purchases on Tuesday traded at $210-$215.

Following early support, front-month Live Cattle futures lost ground with bearish sentiment and a decline in wholesale beef values. Feeder Cattle futures, on the other hand, closed mixed with the strongest gains at the front of the board.

Live Cattle futures closed $2.00 lower in spot Jun, 37¢ and 10¢ lower in Aug and Oct, respectively, and then an average of 23¢ higher.

Feeder Cattle futures closed an average of 80¢ higher through the front three contracts, an average of 22¢ higher in the next three and then 25¢ lower and unchanged at the back.

Choice boxed beef cutout value was $1.29 lower Thursday afternoon at $249.74/cwt. Select was 13¢ lower at $220.53.

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Major U.S. financial indices closed lower on Thursday, pressured by renewed liquidation in tech stocks.

The Dow Jones Industrial Average closed 14 points lower. The S&P 500 closed 5 points lower. The NASDAQ closed 29 points lower.

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Dressed weights for steers and heifers slaughtered under Federal inspection declined 25 and 22 lbs., respectively, year over year (May NASS Livestock Slaughter report), according to the latest monthly Livestock, Dairy and Poultry Outlook from USDA’s Economic Research Service (ERS).

“The decrease in the average carcass weight more than offset the increase in the number of cattle slaughtered and kept production from increasing,” ERS analysts say. “The USDA report on beef production under Federal inspection for the week ending May 27 indicates that average dressed weights for steers and heifers continued to decline, falling another 9 and 13 lbs., respectively, from the week ending April 29. Weights are expected to move higher seasonally, but gains will likely be limited while there are incentives to market cattle as rapidly as possible.”

Third-quarter beef production is forecast at 6.8 billion lbs. after USDA revised projected commercial beef production down slightly for this year to 26.2 billion lbs.

“Relative price strength is likely to persist as demand for beef remains strong,” ERS analysts say. “However, as summer demand winds down, packer margins will likely decline and cattle prices will be pressured. Third-quarter fed cattle prices are expected to decline seasonally, averaging $118-$124 per cwt., up from $113.26 in third-quarter 2016.

So far this week, negotiated cash fed cattle trade is running $1-$7 lower than last week at $130-$133/cwt., except for $135 in the western Corn Belt. Dressed trade so far is reported at $208-$215, which is $5-$8 less than last week. There were some trades reported in Kansas and Nebraska yesterday—as low as $128 live and as low as $205 in the beef—but too few transactions to trend.

Although wholesale beef values have yet to make a major break to the downside, the lower cash fed cattle prices and fretting over demand as summer heat intensifies weighed heavy on Cattle futures.

Live Cattle futures closed an average of $2.45 lower ($1.87 lower to limit-down $3.00).

Feeder Cattle futures closed an average of $3.77 lower ($3.00 to $4.40 lower).

Choice boxed beef cutout value was 16¢ lower Wednesday afternoon at $251.03/cwt. Select was 79¢ lower at $220.66.

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Major U.S. financial indices closed mixed on Wednesday, amid lower oil prices and the expected increase in federal interest rates. The Federal Open Market Committee raised the target range for the federal funds rate by 0.25% to 1.00% to 1.25%.

The Dow Jones Industrial Average closed 46 points higher for a new record high. The S&P 500 closed 2 points lower. The NASDAQ closed 25 points lower.

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“Food sector sales growth has run below trends for the economy since last October, mostly due to a plateau in foodservice and restaurant sales,” say analysts with the Livestock Marketing Information Center (LMIC) in the most recent Livestock Monitor. “In April, food service, restaurant and drinking place sales were up 2.2% from the prior April. Grocery store sales were up 3.3%. This was the first time that grocery store sales growth outpaced that of foodservice, restaurant, and drinking places since April 2014.”

Overall, U.S. food sector retail sales were up 2.7% in April, compared to a year earlier, according to LMIC. Retail sales across the entire economy for April were up 3.1%.

Negotiated cash fed cattle trade was very limited on light demand in Kansas and Nebraska through Tuesday afternoon. There were a very limited amount of live purchases in Kansas at $130-$134/cwt. and a very limited number of dressed trades in Nebraska at $210-$216—too few transactions to trend in either region.

After early support, Cattle futures continued lower, helped along by scattered but lower early-week cash prices for fed cattle and the notion that wholesale values are due to break lower.

Live Cattle futures closed an average of 73¢ lower (45¢ to 90¢ lower).

Except for unchanged at the very back of the board, Feeder Cattle futures closed an average of $1.24 lower (80¢ to $1.60 lower).

Choice boxed beef cutout value was $1.33 lower Tuesday afternoon at $251.19/cwt. Select was 32¢ lower at $221.45.

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Major U.S. financial indices closed higher on Tuesday, with a rebound in tech stocks, which saw some liquidation in recent days.

The Dow Jones Industrial Average closed 92 points higher for a new record high. The S&P 500 closed 10 points higher. The NASDAQ closed 44 points higher.

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Lighter carcass weights, tied to aggressive feedlot marketing, continue to dilute the impact of increasing cattle numbers.

“Sharply lower carcass weights so far this year have held year-to-date beef production increases to roughly 4% over year-earlier levels…Beef production is currently projected to increase 3.4% year over year,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “Beef carcass weights appear to have bottomed seasonally but may remain below year ago levels for much of the remainder of the year…Cattle slaughter for the year to date is still running about 6% higher year over year, but slaughter rates for most classes of cattle have moderated recently and are expected to have smaller year-over-year increases in the second half of 2017.”

Combined with improving beef exports, Peel says per capita retail beef consumption is projected to increase less than 1% this year. Said another way, for the extra cattle numbers, domestic consumers will be faced with less than 1% more beef to consume this year.

Markets got the week off to a dreary start on Monday.

Although limited on light demand early cash fed cattle sales in Nebraska were $3-$5 lower than last week at $132/cwt.

By way of review, given the lateness of fed cattle trade last week, prices were $1 lower to $1 higher on a live basis at mostly $137. Dressed trade was $1-$4 higher at $216-$220.

Cattle futures closed sharply lower on Monday, though up from session lows, with a growing sense in the market that the seasonal top is near or already in for cash fed cattle and wholesale beef values.

Live Cattle futures closed an average of $1.92 lower ($1.32 to $2.90 lower).

Feeder Cattle futures closed an average $2.38 lower ($1.92 to $2.80 lower).

Choice boxed beef cutout value was $1.31 higher Monday afternoon at $252.52/cwt. Select was $1.48 higher at $221.77.

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Major U.S. financial indices closed lower on Monday, with tech stocks leading the way once again. There didn’t seem to be any overriding fundamental reason for the move. Part of it could have been investors playing defense against the Federal Reserve meeting scheduled for today and tomorrow.

The Dow Jones Industrial Average closed 36 points lower. The S&P 500 closed 2 points lower. The NASDAQ closed 32 points lower.

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The U.S. Department of Agriculture reached agreement with Chinese officials on final details of a protocol to allow the U.S. to begin beef exports to China, according to a USDA announcement yesterday.

USDA’s Agricultural Marketing Service posted the requirements for its Export Verification program for U.S. establishments shipping to China, which will enable packers to apply for approval to export to China. The Food Safety and Inspection Service also updated its online Export Library specifying China’s requirements.

Until being banned in 2003, the U.S. was China’s largest supplier of imported beef, providing 70% of their total intake, according to USDA. Chinese beef imports grew from $275 million in 2012 to $2.5 billion last year.