Cattle futures surged higher Friday, recovering much of the week’s decline. Perhaps bears are finally convinced the bad news of stout summer supplies took the last train out a while back.
Live Cattle futures closed an average of $2.34 higher through the front four contracts and then an average of $1.45 higher.
Negotiated cash fed cattle trade remained undeveloped through late Friday afternoon. The previous week’s stronger prices, as well as the surge in Cattle futures Friday likely added to seller reluctance. On the other end of the trade, it could be that heavy out-front purchases in recent weeks enabled packers to be more patient.
Except for 82¢ higher in the back contract, Feeder Cattle futures closed an average of $3.12 higher ($2.62 higher to $4.30 higher in spot Aug).
Boxed beef cutout values were weak on Choice and higher for Select with light to moderate demand and offerings, according to the Agricultural Marketing Service.
Choice boxed beef cutout value was 49¢ lower in the afternoon at $221.59/cwt. Select was 76¢ higher at $202.73.
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Major U.S. financial indices closed lower Friday, but well off of session lows. Primary pressure was attributed to President Trump saying the U.S. will impose a 25% tariff on up to $50 billion of Chinese imports, followed by Chinese officials vowing retaliation in kind.
The Dow Jones Industrial Average closed 84 points lower. The S&P 500 closed 2 points lower. The NASDAQ was down 14 points.
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Odds of an all-out trade war between the U.S. and China spiked higher Friday with the White House saying it will impose new tariffs—first threatened in April—on Chinese imports beginning July 6.
“In light of China’s theft of intellectual property and technology and its other unfair trade practices, the United States will implement a 25% tariff on $50 billion of goods from China that contain industrially significant technologies,” said President Trump Friday. “The United States will pursue additional tariffs if China engages in retaliatory measures, such as imposing new tariffs on United States goods, services, or agricultural products; raising non-tariff barriers; or taking punitive actions against American exporters or American companies operating in China.”
The news contributed to strong pressure on domestic grain markets Friday, especially soybeans.
By Saturday morning, China did retaliate. Citing a statement from the Ministry of Finance of the People’s Republic of China, various reports explained China is imposing new tariffs on about $50 billion worth of U.S. imports, including soybeans and pork.
“We must take strong defensive actions to protect America’s leadership in technology and innovation against the unprecedented threat posed by China’s theft of our intellectual property, the forced transfer of American technology, and its cyber attacks on our computer networks,” said Ambassador Robert Lighthizer.
In the meantime, hopefully negotiators will heed market comments made in early April by Derrell Peel, Extension livestock marketing specialist at Oklahoma State University: “As we work through the escalating trade tensions that are currently roiling markets, it will be beneficial if all sides remember that trade adds value and is not a zero-sum game.”
Domestically, Andrew P. Griffith, agricultural economist the University of Tennessee points out in his weekly market comments that consumer beef demand was 3.2% more year over year in the first quarter this year.
Although beef production continues to increase, Griffith explains retail beef prices continue at similar levels to last year.
Beef production year to date is 3.7% higher than the same time period in 2017 and 8.3% greater than the same 23-week period in 2016, according to Griffith.
“The all-fresh beef retail price for May was $5.68/lb., which is 7¢ lower than April and 5¢ higher than May one year ago. In the past 24 months, the all-fresh beef retail price has averaged $5.66/lb., with a low of $5.49 in January 2017 and a high of $5.85 in June 2016,” Griffith says.