| September 8, 2018 Fall price outlook similar to last year Steamy exports continue to underpin beef prices Market Commentary Heading into the fall run of calf marketing, it’s hard to argue for prices much higher or lower than they were a year ago. Steers and heifers sold steady to $4 per cwt higher this week, according to the Agricultural Marketing Service (AMS). “The supply of feeders was light as several early-week auctions were dark in observance of the holiday and most others had limited offerings,” say AMS analysts. “Demand for feeders was good, although buyers are showing a stronger preference for cattle with good health programs as fall temperature swings become a concern.” Although fourth-quarter calf prices could average slightly below last year, analysts with the Livestock Marketing Information Center (LMIC), explained in August they should be similar. That’s with more cattle and more beef production. Beef production in July of 2.23 billion pounds was 6% more than a year earlier, according to USDA’s August Livestock Slaughter report. That was with 6% more total cattle slaughter (2.77 million head). For January through July, beef production was 4% higher. For price perspective, the August Livestock, Dairy and Poultry Outlook (LDPO) forecasts feeder steer prices at $147-$151 per cwt in the third quarter and at $143-$151 in the fourth. Though still range-bound, cattle futures provided some support, suggesting that perhaps the market is moving beyond the reality of heavy third-quarter supplies. Feeder Cattle futures closed an average of $3.21 higher week to week on Friday. Further down the road, the cattle cycle should become more supportive. “If the general trends of the first half of 2018 persist, as of Jan. 1, 2019, the U.S. cowherd likely will be up well less than 1.0% year over year,” say LMIC analysts. “That suggests cyclically stronger calf prices are ahead (e.g., calf prices in the fall of 2020). Pre-planning may position a cattle operation to take advantage of this market transition.” Likewise, Josh Maples, Extension livestock economist at Mississippi State University, explained in a recent issue of In the Cattle Markets, “Looking beyond 2018, slower herd growth numbers begin to paint a brighter price picture for 2019 and 2020. If the strong domestic economy maintains or grows and exports continue to gain steam, it is not difficult to project higher prices in the fall of 2019 compared to fall 2018.” Negotiated cash fed cattle trade was generally steady with the previous week, with live sales mostly $107 per cwt and dressed sales at $170. Live Cattle futures closed an average of $1.61 higher week to week on Friday. Even so, in his weekly market comments, Andrew P. Griffith, agricultural economist at the University of Tennessee, says, “The late summer market has held up very well with only two more weeks of summer based on the calendar. Live Cattle futures are calling for higher prices this fall and winter.” The August World Agricultural Supply and Demand Estimates (WASDE) projects fed steer prices (Five Area Direct) for the third-quarter at $107-$111 per cwt. Estimates for the fourth quarter are $109-$115; $116-$126 for the first quarter next year. Wholesale beef values continued their seasonal decline. Week to week, Choice boxed beef cutout value was $3.13 lower Friday afternoon at $206.56 per cwt. Select was $4.18 lower at $197.09. “Demand for beef can and likely will remain strong, but wholesale beef prices will still succumb to downward pressure,” Griffith explained a week earlier. “Lower wholesale prices should not be interpreted negatively as this is a seasonal trend and prices are expected to be relatively strong for the time of year and the quantity of beef products available.” “Beef trade has been supportive of beef prices (see “Beef exports continue record pace”). The bigger trade concern for cattle is the indirect effects from decreased trade opportunities for pork,” explains Brenda Boetel, Extension livestock economist at the University of Wisconsin-River Falls, in the latest issue of In the Cattle Markets. “Futures markets will react quickly and aggressively to political announcements that may or may not materialize into market changes. Increasing or decreasing market export opportunities is similar to increasing or decreasing the size of the cattle herd. It takes a long time to increase the number, but we can lose our markets very quickly.” Arguably, markets received a bump from the prior week’s announcement that the United States and Mexico signed a trade pact. But, Boetel notes the agreement is yet to be finalized. Trade talks also continue with Canada.
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In Other Market News “The strength in the cattle market is largely due to strong beef demand. If it were not for strong beef demand, prices of most classes of cattle would be moving lower and at a fairly quick clip,” explained Andrew P. Griffith, agricultural economist at the University of Tennessee, in recent market comments. Domestically, the all-fresh Beef Demand Index in the second quarter was 0.4% more than the same quarter a year earlier. Internationally, U.S. beef exports are nothing short of extraordinary. For January through July, beef exports were record large for both volume (779,450 metric tons) and value ($4.76 billion), according to data released by USDA and compiled by the U.S. Meat Export Federation (USMEF). That’s 10% more volume year over year and 20% more value. For July (the most recent data) U.S. beef exports climbed 12% in volume compared to the previous year at 116,575 metric tons (mt). Value for July was 16% more than the previous year at $722 million, just slightly below the May 2018 record of $722.1 million. Beef export value in July averaged $326.18 per head of fed slaughter, up 9% from a year ago. Through July this year, per-head export value was up 16% to $318.31. “The worldwide momentum for U.S. beef has rarely been as strong as it is today,” says Dan Halstrom, USMEF president and CEO. “To a large degree, our mainstay Asian markets are driving this growth, but emerging markets in Asia and in the Western Hemisphere are also displaying a tremendous appetite for U.S. beef and contributing significantly to the surge in export value. From high-end restaurants to convenience stores, U.S. beef is gaining new fans across the globe on a daily basis.” Beef exports in July accounted for 14% of total beef production and 11.8% for muscle cuts only (the highest since December 2016). For January through July, exports accounted for 13.5% of total beef production and 11.1% for muscle cuts, up from 12.8% and 10.1%, respectively, last year. U.S. beef exports to Japan were 15% more than a year earlier at 31,883 mt, reaching a post-BSE high for the month. Value was 12% more at $196.3 million. For January through July, exports to Japan were 7% more in volume at 191,237 mt and 12% more in value at $1.21 billion. Beef export growth to Korea continued at a remarkable pace in July, with volume up 51% from a year ago to 23,614 mt and value soaring 66% to $169.2 million. That shattered the previous monthly value record of $154.8 million, set a month earlier. For January through July, exports to Korea jumped 38% to 136,897 mt, valued at $971.2 million (up 54%). Despite recent trade tensions and uncertainty, July beef exports to Mexico were 2% more than last year in volume at 137,560 mt and 9% more for value $596.5 million. The late-August trade pact between the U.S. and Mexico should provide more support. As for China, while progress in trade talks is anyone’s guess, African Swine Fever (AFS) discovered in China last month and apparently spreading, could tip that nation’s hand when it comes to pork imports. Through the third week of August, Chinese authorities culled more than 24,000 pigs in four provinces, in efforts to control the spread of AFS, according to the UN's Food and Agriculture Organization. That organization warned that the rapid onset of the virus in China, and its detection in areas more than 1,000 kilometers apart, could mean AFS may spread to other Asian countries anytime. There is no effective vaccine to protect swine from the disease. And, while the disease poses no direct threat to human health, outbreaks can be devastating with the most virulent forms lethal in 100% of infected animals. China accounts for approximately half the global population of swine, estimated at 500 million. China is also the world’s largest pork importer. |
| | CATTLE MARKET WEEKLY by Wes Ishmael | |
Calf-Feeder Trade | Receipts | Auction | Direct | Video/Net | Total | Week-Sept. 7 | 122,200 | 47,800 | 57,200 | 227,200 | Week-Aug. 31 | 148,700 | 49,600 | 10,600 | 208,900 | Prior Year | 126,500 | 40,200 | 11,600 | 178,300 |
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Regional Steer Price Average | North Central Steers-Cash | Change from Prior Week | Sept. 7 | 600-700 lbs | ↑↑ $9.42 | $169.34 | 700-800 lbs | ↑↑ $2.59 | $159.56 | 800-900 lbs | ↑↑ $2.38 | $153.23 |
South Central Steers-Cash | Change from Prior Week | Sept 7 | 500-600 lbs | ↑↑ $9.81 | $163.15 | 600-700 lbs | ↑↑ $16.69 | $160.76 | 700-800 lbs | ↑↑ $10.36 | $154.08 |
Southeast
Steers-Cash | Change from Prior Week | Sept. 7 | 400-500 lbs | ↓↓ $0.23 | $158.52 | 500-600 llbs | ↓↓ $0.93 | $148.89 | 600-700 lbs | ↓↓ $3.52 | $138.93 |
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CME Feeder Index | Change from Prior Week | Sept. 6 | ↑↑ $1.34 | $151.32 |
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CME Feeder Cattle Futures | Month | Change from Prior Week | Sept. 7 | Sep | ↑↑ $3.525 | $152.975 | Oct | ↑↑ $3.825 | $152.950 | Nov | ↑↑ $3.725 | $152.725 |
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CME Live Cattle Futures | Month | Change from Prior Week | Sept. 7 | Oct | ↑↑ $1.175 | $109.950 | Dec | ↑↑ $1.450 | $114.425 | Feb '19 | ↑↑ $1.375 | $118.250 |
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CME Corn Futures | Month | Change from Prior Week | Sept. 7 | Sep | ↑↑ $0.032 | $3.542 | Dec | ↑↑ $0.020 | $3.670 | Mar '19 | ↑↑ $0.020 | $3.792 |
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CME Oil Futures (WTI) | Month | Change from Prior Week | Sept. 7 | Oct | ↓↓ $2.05 | $67.75 | Nov | ↓↓ $1.82 | $67.55 | Dec | ↓↓ $1.66 | $67.39 |
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