Equity and commodity markets have one thing in common, each hates uncertainty, but this is what the cattle and beef markets are dealing with now.
As a result, cattle and beef markets have decreased from April highs as a variety of factors weigh on markets, said Oklahoma State University Agricultural Economist Derrell Peel in a letter to Extension Agents called Cow/Calf Corner.
TARIFF THREATS NOT FRIENDLY
The latest threat of additional tariffs on Mexico rattled many markets last week, including cattle and beef markets, Peel said. The threat was removed last weekend, so cash and futures markets stabilized somewhat this week.
But ongoing uncertainty about trade and the politics of trade continue to take a toll on agricultural and other markets, he said.
WEATHER ALWAYS A CONCERN
Weather is another source of uncertainty pressuring cattle markets, Peel said. While good moisture conditions bode well for forage growth in general, ongoing flooding and excessively wet conditions are limiting grazing and hay production in some regions.
Sloppy feedlot conditions also continue to hamper feedlot production in some areas, Peel said. Additionally, the record-late planting of corn and soybeans this year is adding uncertainty about acreage and yield and is pushing corn prices.
There is little doubt the corn crop will be smaller than anticipated just a few weeks ago but carryover levels still are expected to be adequate, he said. While significantly higher feed prices are not anticipated at this time, the uncertainty remains.
BEEF DEMAND WEAKER
Weaker beef demand may be the biggest threat to cattle and beef markets this year, Peel said. Strong beef demand supported cattle and beef markets the last two years, but there are signs of weakness in domestic and international markets.
While unemployment remains very low, other indications of weakness in the macro-economy have led to reduced forecasts for US economic growth in 2019, largely because of ongoing trade disruptions, he said.
Relatively slow domestic income growth and higher prices for major consumer items, like gasoline, combined with record-large supplies of beef, pork and poultry may be limiting domestic beef demand.
Relatively wet, cold weather this year likely stifled summer beef demand and probably contributed to an early seasonal peak, and weakness in, wholesale beef values, Peel said.
Reduced beef exports and higher imports through the first four months of the year, combined with weak pork and broiler exports suggest the meat complex is struggling in international markets, he said.
The uncertain, but undoubtedly large, effect of African Swine Fever in China and other countries may provide some boost to protein markets in coming months, Peel said. Increased Chinese demand for pork, poultry and beef likely will provide some support to protein markets around the world.
The US exports little beef to China, which is not likely to change anytime soon, but US beef markets may see some indirect support result.
CATTLE, BEEF RECAP
Cash cattle trading was reported in the Plains this week at $112 to $114 per cwt on a live basis, steady with last week’s action, and at $185 to $186 dressed, up $1 to $2.
The USDA choice cutout Thursday was down $0.05 per cwt at $222.10, while select was down $2.02 at $204.71. The choice/select spread widened to $17.39 from $15.42 with 100 loads of fabricated product sold into the spot market.
No contract delivery notices were served for the Jun live cattle futures contract on Thursday.
The CME Feeder Cattle index for the seven days ended Wednesday was $133.36 per cwt, up $0.07 from the previous day. This compares with Thursday’s Aug contract settlement of $136.22, down $1.57.