Cash fed cattle trade remained undeveloped through Wednesday afternoon, but early indicators were for at least steady prices.
For instance, Choice steers and heifers sold $2 higher at the fat auction in Tama, IA. Ch 2-4 steers (144 head) weighing an average of 1,416 lbs. sold for an average of $126.26/cwt.
Similarly, slaughter steers and heifers sold $2-$3 higher at Sioux Falls Regional in South Dakota. There were 201 Ch 2-3 steers weighing an average of 1,440 lbs. and bringing an average of $122.41.
Country trade in the western Corn Belt last week was at $124-$126.
There were 734 head offered in Wednesday’s Fed Cattle Exchange auction, with 435 head—two lots of steers in the Southern Plains—selling for a weighted average price of $124.22 for delivery at 1-9 days. The price was a tick higher than last week’s country trade in the region.
Futures market reaction to signing of the phase-one trade deal between the U.S. and China (see below) was largely muted Wednesday, likely a combination of some betting on the come ahead of the deal and the fact that details remain sketchy.
Live Cattle futures close an average of 19¢ lower.
Feeder Cattle futures closed an average of 35¢ lower through the front five contracts and then an average of 44¢ higher.
Wholesale beef values were steady to weak on light to moderate demand and moderate to heavy offerings, according to the Agricultural Marketing Service.
Choice boxed beef cutout value was 23¢ lower Wednesday afternoon at $212.53/cwt. Select was 63¢ lower at $209.67.
Corn futures closed mostly 1¢ lower.
Soybean futures closed 10¢-13¢ lower through Sep ’21 and then 8¢ lower.
Major U.S. financial indices edged higher Wednesday. While there appeared to be optimism for the signed phase-one trade deal between the U.S. and China, as mentioned earlier, details were scant.
The Dow Jones Industrial Average closed 90 points higher. The S&P 500 closed 6 points higher. The NASDAQ was up 7 points.
There are plenty of questions to be answered, but Wednesday’s signing of the phase-one trade agreement between the U.S. and China appears to be a massive win for U.S. agriculture, as well as the nation as a whole.
“China will purchase and import on average at least $40 billion of U.S. food, agricultural, and seafood products annually for a total of at least $80 billion over the next two years,” according to a factsheet from the U.S. Trade Representative (USTR). “Products will cover the full range of U.S. food, agricultural, and seafood products.”
In 2017, before the trade war, U.S. agricultural exports to China were $23.8 billion, representing more than 17% of total U.S. agricultural exports, according to the Minnesota Department of Agriculture.
Although there are no details about the specific allocation of China’s agricultural purchases, the agreement paves the way to historic access for U.S. beef, via the removal of non-tariff trade barriers that hamstrung U.S. beef exports for years. Arguably, these were the primary ones:
**China continued to restrict U.S. beef imports from cattle 30 months of age or older. That restriction was imposed when bovine spongiform encephalopathy was discovered in this nation in 2003, but it remained in place, despite the “Negligible” risk status assigned to the U.S. by the World Organization for Animal Health.
**China banned beef from cattle grown with commonly used and safe-proven growth hormones (implants) and beta agonists.
**China demanded a bookend traceability system, knowing where cattle were born and where they were slaughtered.
The new agreement lifts those barriers, according to Kent Bacus, senior director of international trade and market access for the National Cattlemen’s Beef Association (NCBA), in a media call Wednesday afternoon.
“China will expand the scope of beef products allowed to be imported, eliminate age restrictions on cattle slaughtered for export to China, and recognize the U.S. beef and beef products’ traceability system,” according to the USTR factsheet. “China will establish maximum residue levels for three synthetic hormones legally used for decades in the United States, consistent with Codex Alimentarius Commission (Codex) standards and guidelines. Where Codex standards do not exist, China will use MRLs (maximum residue limits) established by other countries that have performed science-based risk assessments.”
Presumably, the latter ultimately could open the door to U.S. beef grown with use of beta agonists.
Further, according to USTR, “The Parties agreed to not implement food safety regulations that are not science-and risk-based and shall only apply such regulations to the extent necessary to protect human life or health…”
USDA estimates U.S. beef and beef product exports to China could reach $1 billion annually. According to Bacus, U.S. beef exports to China totaled $60 million in 2018 and $70 million through the first 11 months of last year.
NCBA president, Jennifer Houston calls the agreement a game changer for U.S. beef.
“When you’ve got a country (China) with 1.4 billion people, and their middle class is larger than the U.S. population, I’m not sure that there is any other event in the past that has more potential to grow our markets like this does,” Houston explained, during the media call.