Although overall market optimism continued last week, weather and market volatility surrounding trade issues created some price pressure for feeder cattle and calves. Nationwide, steers and heifers sold from $1/cwt. lower to $2 higher, according to the Agricultural Marketing Service (AMS).
“Colder weather conditions combined with moisture systems affected many areas of the country, constraining receipts in some areas as producers elected to wait for better conditions before bringing cattle to town,” say AMS analysts. “Feedlots in all regions remain at or near full capacity. Grazing wheat in areas of the Southern Plains remains challenging with the current conditions, which has caused many cattle to be placed in grow yard or feedlots earlier than planned.”
Feeder Cattle futures closed an average of $1.53 lower week to week on Friday, from 45¢ lower at the back to $2.45 lower toward the front.
Regionally speaking, Andrew P. Griffith, agricultural economist at the University of Tennessee says, “The mild temperatures that have been experienced in the Southeast United States may have calf prices escalating more quickly than is typical because some stocker operations may have more grass available this time of year than they normally would. The warmer than average temperatures and adequate moisture has definitely supported winter annual forage production, and producers who graze these species are definitely looking for animals to graze and manage the growth.”
In his weekly market comments, Griffith also notes increasingly strong demand for calves with less health risk.
“Based on weekly auction market price averages, 525-pound value-added steers brought $12/cwt. more than non-value-added steers,” Griffith says. “This equates to the value-added steers bringing about $60 more per head, which more than pays for the vaccines and extra labor. This does not include the additional weight a producer may have achieved from a preconditioning program.”
Fed Cattle Prices Wobble
Negotiated cash fed cattle trade through Friday afternoon was steady on a live basis in the Southern Plains and Nebraska at $124/cwt., but $1 lower in the western Corn Belt at $123-$125. Dressed sales were steady to $2 lower at $198-$200.
“Following the strong run in finished cattle prices in December and a strong start to January, fed cattle prices have stagnated the past couple of weeks,” Griffith says. “Despite the appearance that prices stalled, this should still be considered positive for cattle feeders. January and February are not known as strong beef demand months, nor are they known for having the best finished cattle prices. The upside to current prices is that beef and cattle demand are strong in the spring, which should bode well for the price of finished cattle. There remains potential for the cash market to trade over $130 at some point, but cattle feeders are more concerned with maintaining strong prices over a longer period.”
Live Cattle futures closed an average of 57¢ lower, from 25¢ lower to $1.07 lower in spot Feb.
Wholesale beef values continued to crawl up from the seasonal ebb. Choice boxed beef cutout value was $4.13 higher week to week on Friday at $214.17/cwt. Select was $6.20 higher at $212.75.
Positive Trade Deals and Lots of Questions
U.S. agriculture, including cattle and beef, scored long-sought trade victories last week with the signing of the phase-one trade deal between the U.S. and China, as well as Senate approval of the U.S.-Mexico-Canada Agreement (USMCA). Market reaction was muted to negative, though, given the lack of clarity regarding timing and potential purchase volume.
China agreed to purchase and import, on average, at least $40 billion of U.S. food, agricultural, and seafood products annually for a total of at least $80 billion over the next two years, according to a factsheet from the U.S. Trade Representative.
“It is not likely that beef will be the big winner in the trade agreement with China as it relates to direct shipments of beef to China,” Griffith explains. “The United States ships very little beef to mainland China, and it is unlikely this agreement will change that. It is most likely that pork will witness the largest increase in purchases from China, given their depleted pork supplies from African Swine Fever, while the purchase of soybeans will also be on the top of the list. Despite the expectation that direct beef trade will not escalate quickly, moving more pork should support domestic meat protein prices and thus beef prices.”
Part of the phase-one trade deal does remove key Chinese non-tariff trade barriers to U.S. beef, which could prove to be the major win. The deal eliminates the 30-month age restriction, provides acceptance of current U.S. traceability and removes the ban on U.S. beef from cattle grown with commonly used and safe-proven growth hormones.
As for the USMCA, Canada and Mexico are the first and second largest export markets for U.S. food and agricultural products, totaling more than $39.7 billion food and agricultural exports in 2018, according to USDA. Mexico and Canada account for about one-third of all U.S. red meat exports, according to the U.S. Meat Export Federation. Shipments to Mexico and Canada in 2019 totaled about 1.25 million metric tons valued at $3.8 billion.
Before ratification and signing of the latter two agreements, ERS forecast total U.S. beef exports in 2020 to increase about 6% year over year to a record 3.3 billion lbs.
Friday to Friday Change
Weekly Auction Receipts
| Jan. 17 | Auction | Direct |
Video/net |
Total |
|
281,400 (-96,100) |
49,300 (-10,600) |
61,700 (-32,600) |
392,400 (-139,300) |
CME Feeder Index
| CME Feeder Index* | Jan. 16 | Change |
| $145.67 | – $1.16 |
*Thursday-to Thursday for CME Feeder Index
Cash Stocker and Feeder
North Central
| Steers-Cash | Jan. 17 | Change |
| 600-700 lbs. | $160.77 | + $2.03 |
| 700-800 lbs. | $149.77 | – $1.09 |
| 800-900 lbs. | $145.81 | + $1.21 |
South Central
| Steers-Cash | Jan. 17 | Change |
| 500-600 lbs. | $164.28 | + $1.36 |
| 600-700 lbs. | $150.06 | + $0.01 |
| 700-800 lbs. | $143.76 | – $1.93 |
Southeast
| Steers-Cash | Jan. 17 | Change |
| 400-500 lbs. | $159.36 | + $2.10 |
| 500-600 lbs. | $147.91 | + $2.45 |
| 600-700 lbs. | $137.06 | + $0.82 |
(AMS National Weekly Feeder & Stocker Cattle Summary)
Wholesale Beef Value
| Boxed Beef (p.m.) | Jan. 17 ($/cwt) | Change |
| Choice | $214.17 | + $4.13 |
| Select | $212.75 | + $6.20 |
| Ch-Se Spread | $1.42 | – $2.07 |
Futures
| Feeder Cattle | Jan. 17 | Change |
| Jan ’20 | $145.350 | – $2.250 |
| Mar | $145.000 | – $2.450 |
| Apr | $147.875 | – $2.175 |
| May | $149.450 | – $1.750 |
| Aug | $154.875 | – $1.425 |
| Sep | $155.950 | – $1.025 |
| Oct | $156.200 | – $0.700 |
| Nov | $156.225 | – $0.450 |
| Live Cattle | Jan. 17 | Change |
| Feb ’20 | $126.350 | – $1.075 |
| Apr | $127.250 | – $0.700 |
| Jun | $119.200 | – $0.575 |
| Aug | $116.775 | – $0.500 |
| Oct | $118.900 | – $0.500 |
| Dec | $121.750 | – $0.250 |
| Feb ’21 | $123.450 | – $0.375 |
| Apr | $124.000 | – $0.450 |
| Jun | $117.125 | – $0.725 |
| Corn | Jan. 17 | Change |
| Mar ’20 | $3.892 | + $0.036 |
| May | $3.952 | + $0.026 |
| Jul | $4.010 | + $0.016 |
| Sep | $4.002 | – $0.002 |
| Dec | $4.026 | -0- |
| Mar ’21 | $4.124 | -0- |
| Oil CME-WTI | Jan. 17 | Change |
| Feb | $58.54 | – $0.50 |
| Mar | $58.58 | – $0.41 |
| Apr | $58.51 | – $0.34 |
| May | $58.30 | – $0.33 |
| Jun | $57.96 | – $0.36 |
| Jly | $57.54 | – $0.38 |
Equities
| Equity Indexes | Jan. 17 | Change |
| Dow Industrial Average | 29348.10 | + 524.23 |
| NASDAQ | 9388.94 | + 210.08 |
| S&P 500 | 3329.62 | + 64.27 |
| Dollar (DXY) | 97.64 | + 0.29 |