Cattle futures tried for gains early in yesterday’s session but quickly fell lower on Friday’s monthly Cattle on Feed report and general overall bearishness. Wonderments about trade wars continue to add uncertainty, although equity markets rebounded Monday, with reports of easing trade tensions with China.
Live Cattle futures closed an average of 89¢ lower (45¢ to $1.35 lower).
Except for 77¢ and 45¢ lower at either end of the board, Feeder Cattle futures closed an average of $1.41 lower ($1.22 to $1.95 lower).
Choice boxed beef cutout value was 56¢ lower Monday afternoon at $222.53/cwt. Select was 94¢ lower at $215.46.
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Major U.S. financial indices bounced sharply higher to start the week, with optimism stemming from weekend trade talks with China, according to a variety of reports. The upshot was that China might offer some give and take.
The Dow Jones Industrial Average closed 669 points higher. The S&P 500 closed 70 points higher. The NASDAQ closed 227 points higher.
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“Cattle producers need to closely monitor the broad range of macroeconomic and global conditions and be prepared to abruptly switch to a strongly defensive business strategy,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “Markets are increasingly volatile and it will be important to maintain as much short-term flexibility as possible to deal with rapidly changing conditions.”
On the one hand, Peel points to continuing fundamental strength for the time being—demand strength in the face of increasing supplies and higher cattle and beef prices year over year.
On the other hand, Peel cites the increasingly negative market tone stemming from looming supplies, as well as growing volatility associated with trade uncertainty. The wonderments include ongoing U.S. negotiations around several agreements, including NAFTA, the potential response from U.S. trading partners to recently imposed tariffs on U.S. imports of aluminum and steel, as well as last week’s announced increased duties on up to $60 billion worth of Chinese goods.
“It’s as though the economy has one foot on the accelerator and another foot on the brakes, making it extremely difficult to figure out what happens next or, perhaps more importantly, what happens after that,” Peel says. “Markets, in general, are increasingly scared and running for cover. The fear of the unknown may be the worst of it but the reality of the unknown could be far worse.”