Cattle feeders ended up being rewarded for their marketing patience last week. Late-week trade was mostly $1-$2 higher on a live basis at $126/cwt. in Kansas, $126.50 in Nebraska and $124.50-$128.00 in the western Corn Belt. Dressed sales were $2 higher at $202. There was no trend reported for the Texas Panhandle.
Higher cash trade, stronger wholesale beef values and Friday’s friendly Cattle on Feed report offered support to Cattle futures Monday, but that was tempered by more erosion in Lean Hog futures.
Live Cattle futures closed from an average of 9¢ lower to an average of 13¢ higher.
Except for an average of 40¢ lower in spot Mar, Feeder Cattle futures closed an average of 24¢ higher.
Corn futures closed mostly 3¢ to 4¢ lower.
Soybean futures closed mostly fractionally lower to 1¢ higher.
Wholesale beef values were steady on Choice and sharply higher on Select with moderate to fairly good demand and light to moderate offerings, according to the Agricultural Marketing Service.
Choice boxed beef cutout value was 16¢ higher Monday afternoon at $219.55/cwt. Select was $2.22 higher at $214.57.
Major U.S. financial indices closed higher Monday, buoyed by merger and acquisition news, as well as President Trump indicating he would extend the Mar. 1 deadline for imposing more tariffs on Chinese imports, in light of current trade talk progress.
The Dow Jones Industrial Average closed 60 points higher. The S&P 500 closed 3 points higher. The NASDAQ was up 26 points.
There are no simple answers or strategies to address it, but Robert Johansson, USDA Chief economist, provided insight to the perennial dilemma of producing more than demanded.
“Our general expectation is for continued declines in real agricultural commodity prices over the next 10 years,” Johansson explained, at last week’s USDA Agricultural Outlook Forum. “Falling commodity prices are the result of continued production growth, which continues to outpace global demand. The remarkable increases in food production have resulted in large part from productivity growth, and have resulted in falling prices for agricultural commodities over the past half century.”
For instances, beef production today is 87% more than in 1960, according to Johansson, while the average steer prices is 44% less; 2005 is the economic base year.
During the same time, pork production increased by 143%, while hog prices declined 68%. Milk production increased 77%, while milk price declined 52%. Chicken production increased by 1,050%, while prices declined 56% (since 1964).
Obviously, the same trend applies to crops.
“Since 1960, soybean production has increased nearly 1,200%, while real soybean prices have fallen by 52%,” Johansson explained. “Corn production has grown by more than 400%, and prices have fallen by nearly 60%.” During the same time period, wheat production increased 215% and prices declined by 65%.
Overall, Johansson says the dramatic fall in net farm income in 2015 and 2016 seems to be leveling out, but at a lower level
“The current expectation of farm income at $66 billion in 2018 is a long way from the heights we saw when real net farm income peaked at $134 billion in 2013,” Johansson says. “Relative to the 10-year average, real net farm income is down 28%. Looking forward, net farm income is expected to rise slightly, remaining below $80 billion annually over the next 10 years.”