Cattle futures burst higher on Tuesday, supported by higher outside markets, what some would call obscenely oversold conditions and likely short covering. There was also chatter about support coming from news that Brazil halted beef exports to China after confirming a case of atypical BSE. The ball will likely be in China’s hands because it seem doubtful the discovery will change Brazil’s OIE BSE risk status.
The rally came despite negotiated cash fed cattle sales opening in the Southern Plains a day earlier at $113/cwt., which was $2 less than the previous week.
Live Cattle futures closed an average of $1.35 higher (77¢ to $1.70 higher).
Feeder Cattle futures closed an average of $3.42 higher.
Wholesale beef values were steady to firm on moderate to fairly good demand and moderate to heavy offerings, according to the Agricultural Marketing Service.
Choice boxed beef cutout value was 20¢ lower Tuesday afternoon at $223.00/cwt. Select was 34¢ higher at $207.21.
Corn futures closed mostly 1¢ to 2¢ higher.
Soybean futures closed mostly 3¢ to 4¢ higher.
Major U.S. financial indices closed sharply higher Tuesday with hints that the Fed is willing to cut interest rates in an effort to sustain economic growth. At least that’s what the trade seemed to interpret from opening remarks made by Federal Reserve Chair, Jerome Powell at the Conference on Monetary Policy Strategy, Tools, and Communications Practices:
“I’d like first to say a word about recent developments involving trade negotiations and other matters,” Powell said. “We do not know how or when these issues will be resolved. We are closely monitoring the implications of these developments for the U.S. economic outlook and, as always, we will act as appropriate to sustain the expansion, with a strong labor market and inflation near our symmetric 2% objective.”
The Dow Jones Industrial Average closed 512 points higher. The S&P 500 closed 58 points higher. The NASDAQ was up 194 points.
The Purdue University/CME Group Ag Economy Barometer—a measure of producer sentiment—dropped 14 points in May to 101, the lowest level since October 2016.
“Ag producers are telling us the agricultural economy weakened considerably this spring as the barometer has fallen 42 points (29%) since the start of this year,” says James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture. “Farmers are facing tough decisions in the midst of a wet planting season and a lot of uncertainty surrounding trade discussions.”
Month to month, producer perspectives weakened considerably, relative to both current and future economic conditions. The Index of Current Conditions declined 15 points to 84. The Index of Future Expectations also declined 15 points to 108.
Unsurprisingly, producers continue to be concerned about agricultural trade issues. For instance, only 65% of respondents expect U.S. agriculture to see a favorable outcome to the U.S.-China trade dispute. That’s down from 77% in March and 71% in April.
The political football that was the supplementary disaster aid bill finally made it through the uprights Monday night. If signed by President Trump, as expected, it will start the ball rolling on $19.1 billion in aid for natural disasters going back a few years.
According to a statement from Iowa Secretary of Agriculture, Mike Naig, these are some of the highlights:
Approximately $3 billion is provided to the USDA Office of the Secretary to cover producers’ agricultural losses due to natural disasters.
$435 million will be provided to the Emergency Watershed Protection Program (EWPP) for rural watershed recovery.
$558 million will be provided to the Emergency Conservation Program (ECP) for repairs to damaged farm land.
$150 million will be allocated to repair Rural Development Community Facilities in towns affected by natural disasters.