After early support, then pressure, then support again, Cattle futures continued to rebound from the recent selloff. Friday’s Cattle inventory report likely offered some support, with less estimated year-over-year feeder cattle supply outside feedlots Jan. 1: 26.45 million head, which was is 0.40% less (-105,300 head).
Live Cattle futures closed an average of 57¢ higher, from 30¢ to $1.05 higher.
Except for $1.25 lower in away-Jan, Feeder Cattle futures closed an average of 98¢ higher (57¢ to $1.12 higher).
Wholesale beef values were lower on Choice and sharply lower on Select with light to moderate demand and moderate to heavy offerings, according to the Agricultural Marketing Service.
Choice boxed beef cutout value was $1.44 lower Monday afternoon at $211.56/cwt. Select was $3.24 lower at $207.42.
Corn futures closed mostly 1¢ lower.
Soybean futures closed mostly 3¢ to 4¢ higher through Mar ’21 and then mostly 1¢ higher.
Major U.S. financial indices rebounded some on Monday. Although fears about the potential economic impact of novel coronavirus continued, positive economic news took the spotlight.
For instance, contrary to trader expectations, the manufacturing sector expanded last month.
“The January PMI® (Purchasing Managers Index) registered 50.9%, an increase of 3.1 percentage points from the seasonally adjusted December reading of 47.8%,” according to Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee. “Global trade remains a cross-industry issue, but many respondents were positive for the first time in several months.”
The Dow Jones Industrial Average closed 143 points higher. The S&P 500 closed 23 points higher. The NASDAQ was up 122 points.
“The inventory of beef replacement heifers is 18.4% of the beef cow inventory, a level that historically has not indicated significant liquidation” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, providing more perspective to Friday’s USDA Cattle report, in his weekly market comments. “However, in 2019, replacement heifers were 18.6% of the beef cow inventory, but sharply higher beef cow slaughter at the end of the year pushed the culling rate fractionally over 10% and resulted in modest reduction in the herd inventory. The number of beef heifers expected to calve in 2020 is 3.5 million head, 0.8% lower year over year.”
The USDA report pegged beef cows Jan. 1 at 31.31 million head, which was 1.18% less (-374,000 head) than the previous year.
“The peak beef cow inventory for 2019 was 31.7 million (revised down by 75,000 head from the previous report). This means that the total herd expansion in this cycle was an increase of 2.73 million head from the 2014 low of 29.0 million cows,” Peel says. “That is a total cyclical expansion of 9.4% or an average of 1.9% per year for the five years of expansion.”
Of course, there could be renewed expansion.
“Modestly higher prices projected in 2020, combined with improved international market potential, could restart herd expansion,” Peel says. “Alternatively, continued political and economic turbulence or shocks, such as coronavirus, could drag markets down and hold cattle inventories flat or fall into more liquidation.”