Negotiated cash fed cattle sales were mainly steady last week on a live basis at $114/cwt. ($112 in the western Corn Belt). Dressed trade was $1-$2 lower at $176-$178.
Except for the back half of Live Cattle, futures prices on Monday eked out minimal gains following pressure early in the session.
Live Cattle futures closed an average of 40¢ higher through the front five contracts, and then unchanged to 35¢ lower.
Feeder Cattle futures closed an average of 38¢ higher, amid extremely thin trade.
Wholesale beef values were firm to higher on moderate to good demand and moderate offerings, according to the Agricultural Marketing Service.
Choice boxed beef cutout value was 48¢ higher Monday afternoon at $213.39/cwt. Select was $1 higher at $198.57.
Major U.S. financial indices closed sharply lower Monday with tech stocks leading the sell-off.
Pressure also came from declining builder confidence, as measured by the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). The index was 8 points lower month to month in November, pressured by concerns about affordability—home prices and interest rates.
The Dow Jones Industrial Average closed 395 points lower. The S&P 500 closed 45 points lower. The NASDAQ was down 219 points.
“Beef markets have largely been a case of ‘so far, so good’ in 2018. I’m cautiously optimistic that this will continue in 2019 but the risks to beef demand will be higher in the coming year,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments.
Although slowing, Peel explains beef production next year is forecast to be 1.5-2.0% higher at a record 27.5 billion lbs., following the estimated 3.3% increase this year to 27.0 billion lbs.
“Through 2018, total beef production has increased 14.2% (3.4 billion lbs.) since the recent 2015 low,” Peel says. “Strong beef demand has supported prices and margins at all levels of the beef and cattle industry as beef production expanded. Continued strong beef demand will be critical in 2019 as beef production pushes to new record levels.”
Among the challenges to beef demand, Peel cites:
Record poultry and pork production
“Thus far, beef has maintained good demand relative to pork and poultry, as indicated by the fact that beef retail prices are at near record ratios compared to retail pork and poultry prices,” Peel says.
Likewise, Peel explains beef imports are about steady with last year, while U.S. beef exports are 13.3% higher.
Domestic and global economic conditions
“The U.S. economy has supported beef demand thus far, but recent stock market volatility highlights fragile macroeconomic conditions going forward,” Peel says. “Rising interest rates and growing budget deficits will add to inflationary pressures and contribute to a stronger dollar. A rising dollar could add to export headwinds in the coming months.”
“The uncertain global trade situation continues to hang over beef and other agricultural markets,” Peel explains. “There is general agreement that trade disruptions will likely reduce U.S. and global macroeconomic growth in 2019. While the beef industry has avoided most of the direct tariff impacts thus far, indirect tariff impacts will continue to grow unless the trade situation is resolved very soon. Consumers will see growing tariff impacts that may impact consumer spending and beef demand…Tariff-driven price increases could push consumers to cheap and abundant pork and poultry at the expense of beef demand.”