Except for some early sales in the North, negotiated cash fed cattle trade remained undeveloped through Friday afternoon, based on USDA reports.
Early dressed sales in Nebraska were $2 higher than the previous week at $172/cwt. Early dressed sales also were trading for $172 in the western Corn Belt, but too few to trend. Live sales in the western Corn Belt were steady to $2 higher than the previous week at $109. Live sales were at $109-$110 in Nebraska, but too few to trend.
Feeder Cattle futures closed mostly narrowly lower, while Live Cattle moved higher, helped along by stronger cash prices, the uptick in wholesale beef values and outside market support.
Live Cattle futures closed an average of 70¢ higher.
Except for 12¢ and 5¢ higher toward the front of the board, Feeder Cattle futures closed an average of 12¢ lower.
Wholesale beef values were steady on Choice and higher on Select with moderate to fairly good demand and light offerings, according to the Agricultural Marketing Service.
Choice boxed beef cutout value was 3¢ higher Friday afternoon at $215.66/cwt. Select was $2.02 higher at $188.68.
Corn futures closed 14¢ to 17¢ higher through Jul ’20 and then mostly 1¢ to 4¢ higher.
Soybean futures closed 7¢ to 12¢ higher through Aug ’20 and then mostly 1¢ to 2¢ higher.
Major U.S. financial indices closed sharply higher Friday with various reports indicating the U.S. and China agreed to a phased trade deal that suspends tariff increases originally scheduled to begin next week.
The Dow Jones Industrial Average closed 319 points higher. The S&P 500 closed 32 points higher. The NASDAQ was up 106 points.
By all accounts, it’s going to take a long while for China to rebuild its pork supply in the wake of African Swine Fever (ASF). It likely will also take plenty of time to rebuild Chinese pork demand which faltered first due to fears of the disease— though it has no consequence for human health—and then from the high prices related to limited supplies.
“In Beijing, industry contacts observed a roughly 15% decline in consumption during the first half of the year,” explains agricultural economist, Lindsay Kuberka, in the recent Livestock and Poultry: World Markets and Trade, from USDA’s Foreign Agricultural Service (FAS). “They attributed much of the decline to voluntary shifts from pork to other proteins out of disease concern. In addition, food service operators sought to minimize exposure to pork price inflation by substituting other proteins like poultry meat.”
Preventive herd culling and lessened demand bolstered supplies and kept price increases at bay for the first half of this year. By the first week of October, though, Kuberka says pork prices in China were 84% higher than a year earlier.
For perspective, FAS estimates Chinese pork production 14% less this year than in 2018 and 25% less next year. China’s total swine herd is forecast to decline to 275 million head by the end of 2020, down nearly 40% since the beginning of 2018, before the crisis began.
“Consumers have reacted to high pork prices by cutting back purchases and pork prices are expected to reach record levels through the peak demand season—autumn holidays and Chinese New Year,” Kuberka says. “Supplies are expected to be released from the national pork reserve during this period to offset prices. In some areas, retail subsidies may also cushion the impact for consumers. Initiatives to lower pork prices will help some consumers but are expected to have limited impact overall.”
Moreover, Kuberka says high pork prices will encourage Chinese consumers and food service operators to purchase alternative proteins, such as beef, poultry, lamb and seafood.
“Retail prices for competing proteins are rising as a result, with chicken meat up 24% and beef up 20% year over year during the first week of October,” Kuberka explains. “Chicken meat is expected to benefit from the biggest boost in demand, given prices remain well below the cost of pork. Substitution to beef and lamb will be more limited as prices are close to double that of pork.”
Even so, China is projected to import 2.4 million metric tons (mt) of beef this year, which would be 63.6% more than last year and 146.4% more than in 2017. Forecasts see China’s beef imports increasing to 2.9 million mt next year, another 20.1% than this year.