Cash fed cattle trade picked up earlier last week than it has recently. By Wednesday, almost 12,000 head of negotiated cash fed cattle had been confirmed sold for the week at $110-112.50 live and $180-181 dressed. By close of trade Thursday, that volume had almost doubled with prices slipping to $112 live and averaging $177.12 dressed.
“Last week’s trade is proving to be a one-week wonder,” commented Andrew Gottschalk of Hedgers Edge, referencing the week of June 4-8, where the bulk of a 131,000-head negotiated cash cattle buy happened on Friday at much higher than expected prices.
“Increasing supplies will be realized as this industry proceeds through the summer period. Cash and product values should trend lower during this period. The initial cash price target is for a retest of $110, followed by $102-103.”
The near-term live cattle futures were in a mostly slow-motion freefall last week. The contracts bled lower throughout the week, until losing roughly $2 on Thursday’s trade alone. By Thursday’s settlement, the June contract stood at $106.25 and the August contract stood at $101.87.
“The fatigue of the too-frequent threat of global agricultural trade disruption seems to be wearing on U.S. agricultural commodity prices today,” quipped Cassie Fish of the Beef Report on Thursday.
“Losses are substantial as bottom pickers keep hands in pockets and the action and overall climate bring on nervous selling. Rotten charts and this ‘leaking lower’ behavior is dominate and conversations about all else seem unimportant.”
As with the cattle futures, the beef cutouts continued to bleed lower throughout the week. Unlike in past weeks, however, the rate had increased. By June 14, the Choice cutout had lost over $4 to close at $222.08. The Select cutout lost only slightly more than $1, closing Thursday at $201.97.
“As beef cutout values decline, retail beef margins will expand, allowing more aggressive beef features this summer and fall,” noted Gottschalk. “As previously indicated, demand factors remain positive.”
Earlier in the week, Gottschalk outlined what those positive demand factors really looked like on a global scale.
“Bolstering domestic beef and meat demand is the continued growth in Household Net Worth. It now exceeds $100 trillion. This is 6.83 times disposable income and approximately five times annual GDP [gross domestic product] and national debt. U.S. absolute GDP growth this year will exceed China’s absolute annual GDP growth. In short, China’s economy will shrink relative to the U.S. If 4 percent annual GDP growth occurs this year, U.S. GDP will increase by approximately $800 billion. Point: Demand factors remain very positive.”
Feeder cattle
Despite the downward direction of just about everything in the cattle and beef markets, the feeder cattle market seemed to be doing well. Almost all of the surveyed feeder cattle auctions saw larger sales volumes and higher prices.
Medium and large #1 steers weighing between 700-800 lbs. were widely available in most sales and commanding better prices than in recent memory.
California: Everything was steady, as usual, at the Cattlemen’s Livestock Market in Galt last week, save for the volume, which was up. Number 1, 7-weight steers ranged from $120-146.
Kansas: The Winter Livestock Auction of Dodge City was fairly steady on volume, but prices were down considerably. Mid- and heavyweight steers were down $1-5 while heifers in the same weight groups were steady to down $4 on an extremely light test. Calves were poorly tested as most of the offering was on the heavier end. Benchmark steers ranged in price from $138.50-149.
Missouri: Volumes were down at the Joplin Regional Stockyards, but prices were mixed. Calves were called unevenly steady, yearling steers under 800 lbs. and heifers under 700 lbs. were steady, and heavier yearlings were called steady to $3 higher. Prices on benchmark steers ranged from $136-$155.55 with the calf lot setting the base.
Nebraska: The Huss Platte Valley Auction sold steers and heifers over 550 lbs. steady to $8 higher. Demand was called good and prices were high. The price range on #1, 7-weight steers was $152.50-169; the highest range seen across the surveyed auctions in weeks.
New Mexico: The Clovis Livestock Auction sold fewer cattle last week, but at higher prices. Steers under 600 lbs. were up $1-5, while heavier steers were up $2-4. Heifers under 600 lbs. were steady to up $5, and heavier heifers were steady to up $2. One 141-head lot of benchmark steers averaging 792 lbs. brought $137.47.
Oklahoma: Last week, the OKC-El Reno sale came close to matching its massive 15,371-head sale volume of early June. Prices were steady on most feeders, but feeders over 800 lbs. were up $1-2. Despite the large volume of sales, there were not many sales of #1, 7-weight steers. Those that did sell ranged narrowly in price from $144-148.
South Dakota: The Hub City Livestock Auction sold mostly heavy (900 lbs.+) feeders last week, with prices being steady to down $6. Heavy steers saw larger discounts than did heavy heifers. Lighter classes of feeders were poorly tested. The two small lots of benchmark steers averaged $153.75 and $152.79.
Like the live cattle futures, the near-term feeder futures bled lower last week and lost about $2 in Thursday’s trade alone. By Thursday’s settlement, both the August and September contracts lost about $3.50 over the course of the week. August settled at $143.67 and September at $144.80.
“Strong pressure has swept through feeder cattle trade,” said DTN’s Rick Kment on Thursday afternoon.
“The overall lack of support in the market is likely to lead to additional late-week softness through the entire cattle complex. It will be important to see if buyers are able to return early next week and stage a moderate to strong recovery to what has been a disappointing shift lower in the last couple of days.”
G7 and tariff impacts
Last week started on the heels of the weekend meeting of the 44th G7 Summit, a meeting of the world’s top seven economies to discuss global economic matters. During that meeting, President Donald Trump refused to sign a joint agreement that had been drafted collectively. The agreement voiced the group’s commitment to several different economic, social, and ecological issues and condemned the actions of several nations and groups.
In a tweet after the summit, Trump pointed to Canada’s tariffs as a reason he refused to sign the agreement.
“Based on Justin [Trudeau]’s false statements at his news conference, and the fact that Canada is charging massive Tariffs to our U.S. farmers, workers and companies, I have instructed our U.S. Reps not to endorse the Communique as we look at Tariffs on automobiles flooding the U.S. Market!”
In a press conference following the summit, Trump criticized Canada’s Prime Minister Justin Trudeau and made frequent references to Canada’s tariffs on U.S. dairy products. Despite this, he said that ultimately, free trade would be the ideal.
That ideal has not yet been reached, and new retaliation against U.S. tariffs was announced last week. Following Canada’s and Mexico’s lead in reaction to the steel and aluminum tariffs leveled against them, the European Union (EU) announced June 14 that it would implement tariffs against the U.S., targeting corn and rice among other things. These tariffs will go into effect towards the end of June or beginning of July.
In a related matter, Mexico joined Canada, the EU, China, and India in initiating a dispute complaint to the World Trade Organization (WTO) regarding the U.S. steel and aluminum tariffs. The Mexican complaint was filed on June 7. China was the first to submit a complaint back in April.
The Mexican complaint, like those submitted before, claims the tariffs are protectionist and not in keeping with the U.S.’ responsibilities as a member of the WTO. It additionally noted that the tariffs are “not administered in a uniform manner,” pointing out that several countries have been exempted. — Kerry Halladay, WLJ editor
