There were only four lots—all from Kansas—offered in the weekly Fed Cattle Exchange auction Wednesday. None sold.
Choice 2-4 steers sold for just a touch higher than $111/cwt. at Tama, IA. The same grades brought $108.00-$111.50 at Sioux Falls Regional in South Dakota.
Cattle futures followed outside markets and other commodities—including hogs, soybeans and corn—sharply lower Wednesday, in anticipation of more tariffs from China, following the Trump administration publishing a list of $200 billion worth of Chinese imports that will be subject to 10% tariffs (see below).
Except for 50¢ lower in the back contract, Live Cattle futures closed an average of $1.32 lower (97¢ to $1.60 lower).
Feeder Cattle futures closed an average of $1.50 lower (62¢ to $2.62 lower)
Wholesale values were steady on Choice and lower on Select, with light to moderate demand and offerings, according to the Agricultural Marketing Service.
Choice boxed beef cutout value was 12¢ higher Wednesday afternoon at $207.44/cwt. Select was $1.25 lower at $197.14.
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At the end of June, U.S. Agriculture Secretary Sonny Perdue said President Trump instructed him to develop a strategy to support U.S. agriculture producers in the face of retaliatory tariffs. Although no details were provided, odds are increasing for the testing of that strategy.
Late Tuesday night, Robert Lighthizer of the U.S. Trade Representative released a statement saying, that given China’s retaliation to U.S. tariffs, when they were imposed at the end of last week, the President has ordered the U.S Trade Representative to begin the process of imposing tariffs of 10% on an additional $200 billion of Chinese imports…” That’s in addition to the previously announced 25% tariff on $34 billion worth of Chinese imports to the U.S.
As with most commodity markets, the news pressured Major U.S. financial indices sharply lower Wednesday.
The Dow Jones Industrial Average closed 219 points lower. The S&P 500 closed 19 points lower. The NASDAQ closed 42 points lower.
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“Until the trade disputes are resolved, expect cattle and other livestock price volatility to continue,” says Tim Petry, Extension livestock economist at North Dakota State University (NDSU).
In an NDSU Spotlight on Agriculture column published yesterday, Petry explains cattle price volatility in recent months revolves around uncertainty created by several factors.
There’s the drought, for one.
“By the end of June, expanding drought conditions caused about 26% of the U.S. beef cowherd to be in an area experiencing drought,” Petry says. “Last year, only 6% of the beef herd was in drought, with the far northern Plains the hardest hit…Drought conditions pose the threat of forced beef cowherd liquidation and early movement of calves to market. Beef cow slaughter was up more than 12% from last year during the first six months of 2018.”
Those same drought conditions, inducing earlier feedlot placements since last fall, contributed to the seasonal surge in fed cattle supplies this summer.
On the other side of the coin, feed is getting cheaper with a near-perfect start to the growing season for major crops, and with trade concerns pressuring those markets.
“Record highs also create market uncertainty,” Petry says. “U.S. pork, broiler (chicken) and total meat production were all record high in 2017. Those three categories are projected to be record high again in 2018. U.S. beef production likely will follow suit in 2018 with record high production, so record amounts of meat will be available to consume domestically or in the export market. The previous record high beef production occurred in 2002.”
Then throw in the simmering trade issues between the U.S. and what seems like the rest of the world.
“A major reason for increased market volatility in the livestock and grain markets in the last few months revolves around seemingly ever-changing trade negotiations with several important trade countries,” Petry explains. “Positive outcomes with trade agreements are important to the U.S. beef industry so record beef exports, along with robust exports of competing meats, can continue.