The five-area direct weighted average fed steer price last week was $124.21/cwt., which was $1.93 more than the previous week. The weighted average price of $198.60 in the beef was $3.38 higher.
Stronger cash prices, the promise of improving wholesale beef values and a return to full trade following the holidays all helped underpin the significant rally in Cattle futures Monday. Stabilizing outside markets were also positive.
Except for $1.70 lower in the back contract, Live Cattle futures closed an average of $1.66 higher (95¢ to $2.55 higher in spot Feb).
Feeder Cattle futures closed an average of $2.92 higher ($2.02 higher at the back to $4.07 higher in spot Jan).
Wholesale beef values were higher on good demand and heavy offerings, according to the Agricultural Marketing Service.
Choice boxed beef cutout value was $1.16 higher Monday afternoon at $209.65/cwt. Select was $1.41 higher at $206.80.
Corn futures closed fractionally lower to 1¢ lower through Sep ’21 and then mostly fractionally higher to 1¢ higher.
Soybean futures closed 2¢ to 3¢ higher.
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Major U.S. financial indices closed higher Monday, regaining some of the previous session’s selloff as reports indicated the U.S. military action in Iran was unlikely to hamper oil production or trade flows.
The Dow Jones Industrial Average closed 68 points higher. The S&P 500 closed 11 points higher. The NASDAQ was up 50 points.
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“The beef supply situation is expected to be more supportive in the coming year, with cyclical herd expansion over and beef production peaking,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “The current status of the cattle cycle will be confirmed in the Cattle inventory report to be released at the end of January. “In general, cattle numbers are expected to be down slightly year over year. Beef production is expected to peak fractionally higher in 2020, with heavier carcass weights offsetting a slight decline in cattle slaughter. Carcass weights finished 2019 above year-earlier levels and will bear watching in the coming year.”
Overall, Peel explains the anticipated increase in U.S. beef exports and reduction in U.S. beef imports should offset a significant portion of increased domestic production.
“The international market situation is somewhat clearer now after trade disruptions and uncertainty strangled many agricultural markets for much of the past two years,” Peel says. “The likely completion of the revised NAFTA agreement (USMCA) in the coming weeks removes a significant source of uncertainty for agricultural markets. A new bilateral trade agreement with Japan will restore a more competitive position for beef and should stop the erosion of U.S. market share, which became very apparent in that important beef export market in the second half of 2019. Though details are currently lacking, the anticipated phase-one trade agreement with China is expected to significantly improve the trade situation for numerous agricultural markets and may allow beef to begin building a meaningful market position in the rapidly growing beef market in China.”
As for challenges that could add market uncertainty and volatility, Peel cites ongoing geopolitical tensions, African Swine Fever, energy prices, currency values and the presidential election.
“In summary, 2020 offers better opportunities for cattle and beef markets, but producers are advised to keep an eye on a host of macro-economic and global factors, as well as evolving cattle market conditions, and proceed with caution,” Peel says.