Feeder Cattle futures led Live Cattle higher Monday. New-month positioning was likely a contributor. As well, the declining number of new coronavirus cases in China suggest the worst may be over in that nation, paving the way toward a resumption toward normal levels of commerce.
Other than 75¢ lower in recently minted away Aug, Live Cattle futures closed an average of $1.82 higher (62¢ higher toward the back to $2.77 higher toward the front).
Feeder Cattle futures closed an average of $2.09 higher ($1.32 to $2.45 higher).
Wholesale beef values were higher on good demand and light to moderate offerings, according to the Agricultural Marketing Service.
Choice boxed beef cutout value was $1.23 higher Monday afternoon at $206.53/cwt. Select was $2.25 higher at $201.16.
Corn futures closed 3¢ to 8¢ higher through Mar ’21 and then mostly fractionally higher to 1¢ higher.
Soybean futures closed 7¢ to 9¢ higher.
Major U.S. financial indices charged higher Monday, despite key indicators of slowing manufacturing growth in the U.S. and China.
Although manufacturing in the U.S. continued to grow in February, based on the Institute for Supply Management® (ISM) Purchasing Managers Index® (PMI), growth was slower than expected, down 0.8 percentage points in February to 50.1.
“Comments from the panel were generally positive, with sentiment cautious compared to January,” says Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee. “Global supply chains are impacting most, if not all, of the manufacturing industry sectors.”
A respondent to the survey from the computer and electronic products sector noted: “There are always supply chain challenges with Lunar New Year shutdowns, and this year is no different. Coronavirus is wreaking havoc on the electronics industry. Companies are delayed in starting up production, which is resulting in longer lead times, constraints and increased pricing. It’s a mad dash to dual source stateside in case China isn’t back online soon.”
The closely watched Caixin China General Manufacturing PMI™—a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy—dropped 10.8 points month to month to 40.3 in February, the lowest reading since it began in 2004.
“Production, new work and staffing levels all fell at the quickest rates since the survey began nearly 16 years ago as companies extended their usual Lunar New Year shutdowns to help stem the spread of the virus,” according to the report from Caixin and IHS Markit. “Supply chains were also hit heavily, with average delivery times increasing at the quickest pace on record, leading firms to increase their use of current stocks. However, firms anticipate a recovery in production over the next year due to expectations that production will be ramped up once any coronavirus-related restrictions are lifted. Notably, the degree of positive sentiment was the strongest seen for five years.”
Chatter late in the session about the potential of coordinated rate cuts among the world’s major central banks, in response to the economic impact of coronavirus, added optimism.
The Dow Jones Industrial Average closed 1,293 points higher. The S&P 500 closed 136 points higher. The NASDAQ was up 384 points.
Higher markets Monday were more than welcome, but likely speak more to the volatility ahead, due to unknowns associated with COVID-19, rather than a market bottom being established.
“Clearly, the uncertainty has not peaked yet and the best we can hope for, from a market perspective, is that there will come a time when it appears the worst is over and we can see a path to a lengthy recovery in markets,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “It seems unlikely that any definitive news is forthcoming, certainly not in the next few weeks, which would allow markets to bounce back with any confidence.”
Near term, at least the next 30-60 days, Peel believes producers should expect markets to remain weak, if not weaker.
“Obviously, the news about COVID-19 is changing constantly and may support brief short-lived market bounces,” Peel says. “Longer term, I don’t think we are ready yet to change the overall outlook for the year, but the prospect is growing that we might have to trim back our expectations for 2020.
“Producers probably should not make dramatic changes to production and marketing plans just yet, but it would be a good idea to think about how you will adjust things if we have to shift from offense to defense for the entire year.”