Negotiated cash fed cattle trade ended up mostly $1-$2 higher on a live basis last week at $118/cwt. in the Southern Plains, $114-$116 in the western Corn Belt and $116-$118.50 in Nebraska. Dressed trade was $3-$6 higher in the western Corn Belt at $183-$186. In Nebraska, it was steady to $2 less than the bulk of the previous week’s trade at $183-$185.
Despite stronger cash prices, firmer wholesale beef values and positive news regarding U.S.-China trade (see below), Cattle futures softened to start the week. Pressure included the decline in Lean Hog futures, as well as recently strengthening grain prices, where Feeder Cattle are concerned.
Live Cattle futures closed an average of 49¢ lower (5¢ to 72¢ lower).
Feeder Cattle futures closed an average of $1.40 lower, (72¢ lower in spot Jan to $1.72 lower at the back).
Wholesale beef values were firm to higher on fairly good demand and heavy offerings, according to the Agricultural Marketing Service.
Choice boxed beef cutout value was 47¢ higher Monday afternoon at $213.08/cwt. Select was 77¢ higher at $199.18.
Major U.S. financial indices closed higher Monday, boosted by comments following the weekend meeting between President Trump and President Xi Jinping of China, during the G20 Summit in Argentina.
Included in a statement from President Trump’s press secretary:
“On Trade, President Trump has agreed that on Jan. 1, 2019, he will leave the tariffs on $200 billion worth of product at the 10% rate, and not raise it to 25% at this time. China will agree to purchase a not-yet-agreed-upon, but very substantial, amount of agricultural, energy, industrial, and other product from the United States to reduce the trade imbalance between our two countries. China has agreed to start purchasing agricultural product from our farmers immediately.
“President Trump and President Xi have agreed to immediately begin negotiations on structural changes with respect to forced technology transfer, intellectual property protection, non-tariff barriers, cyber intrusions and cyber theft, services and agriculture. Both parties agree that they will endeavor to have this transaction completed within the next 90 days. If at the end of this period of time, the parties are unable to reach an agreement, the 10% tariffs will be raised to 25%.”
The Dow Jones Industrial Average closed 287 points higher. The S&P 500 closed 30 points higher. The NASDAQ was up 110 points.
Cull cow prices likely reached their seasonal low in November, according to Derrell Peel, Extension livestock marketing specialist at Oklahoma State University. However, he emphasizes making sense of the cull market has been challenging this year.
From May through October this year, Peel says cull cow prices averaged 13-15% less than the previous year. In his weekly market comments, he explains, Cull cow prices typically begin a slight recovery in December following the November seasonal low.
From current levels, he says seasonal trends suggest breaking cow prices of $53.47/cwt. in January; $58.26 in February; $59.53 in March; $59.94 by April; and $60.85 by May.
“One of the big factors contributing to weak cull cow prices has been weak cow boxed beef prices in the second half of 2018,” Peel says. “In the last week of November, cow boxed beef prices were 7.8% lower than year-earlier levels and have averaged 8.3% lower year over year since mid-year.”
Although overall beef demand remains strong, Peel explains cow beef demand is more uncertain, with most going into ground beef. So, along with total cow slaughter being 7.2% more than last year, he says it’s possible that large supplies of pork and poultry are applying more pressure to ground beef demand.
Even so, Peel expects a relative tightening of cow beef supplies to support a near-normal increase in cull cow prices heading into the new year.