Traders kept an eye on Wall Street as weakness in stocks and concerns about the economy can limit consumer demand for pricey beef, analysts said. Stocks closed lower amid signs of economic resiliency that could encourage the Federal Reserve to keep interest rates at a restrictive level for longer than expected.

CME December live cattle ended down 0.1 cent at 179.325 cents/lb., while February live cattle fell 1.1 cents to 180.4 cents/lb. (all figures US$). January feeder cattle dropped 1.475 cents to 235.075 cents/lb.

“I’d put this on the back of the stock market,” said Rich Nelson, chief strategist for agricultural brokerage Allendale.

Live cattle and feeder cattle futures reached their lowest prices since June on Monday and Tuesday after the U.S. government, in a report issued after markets closed on Friday, said that producers placed more cattle than expected into U.S. feedlots in September.

The large placements surprised some analysts because U.S. cattle inventories dropped to their lowest levels in decades after drought raised costs for feed.

“The first and second quarter of next year will have a few extra cattle than we expected,” Nelson said.

Tight supplies of cattle and high beef prices have cooled U.S. beef exports, though sales increased last week. Weekly U.S. beef export sales were 17,400 metric tonnes for 2023, up 72 per cent from the prior four-week average, USDA said.

For pork, weekly export sales of 28,200 tonnes for 2023 were down eight per cent from the prior four-week average.

Most-active December lean hog futures finished 1.125 cents higher at 68.625 cents/lb. at the CME. February hogs rose 1.125 cents to 71.825 cents/lb. after notching contract lows during the previous four sessions.

— Tom Polansek reports on agriculture and ag commodities for Reuters from Chicago.

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“Whenever canola rebounds, it doesn’t go as high,” analyst Errol Anderson of Pro Market Communications in Calgary said.

Anderson described the chart pattern as a “falling top,” with previous attempts at recovery in the November contract topping out at $900, then $880 and $850, with the latest bounce running into resistance at $820.

November canola settled Wednesday at just below $800 per tonne, and Anderson saw support to the downside at $750 and then $735.

“It’s not to say that there won’t be sudden rallies, but when a grower sees a rally it will be a (selling) opportunity,” said Anderson.

In addition to seasonal harvest pressure in Western Canada and expectations for increased soybean exports out of Brazil, Anderson was watching the global financial markets closely — especially given the meltdown in many equity markets on Tuesday.

He expected credit would become a larger issue over the winter, with the looming implosion of the debt crisis likely leading to defaults in the financial world that will affect global trade.

— Phil Franz-Warkentin reports for MarketsFarm from Winnipeg.

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“The cattle market really follows what is going on with equities, and equities are down near weekly lows,” said Brian Hoops, president of Midwest Market Solutions.

Chicago Mercantile Exchange April live cattle settled down 2.375 cents at 103.075 cents/lb. and most-active June cattle fell 2.275 cents to 97.25 cents/lb. after hitting a contract low at 97 cents (all figures US$).

The April contract briefly drew support from news that cash cattle traded in Kansas and Texas at $110 per hundredweight. That price was down $3 from the bulk of last week’s cash trade but higher than the equivalent April futures price.

“The futures are going to rally to meet where the cash is. (But) I think it will probably take the stock market stabilizing before that happens,” Hoops said.

CME April feeder cattle settled down 4.425 cents, at 123.525 cents/lb.

The dollar weakened and the Dow Jones industrials entered bear market territory on Wednesday on mounting worries about the global economy after world health officials declared a coronavirus pandemic.

Bearish sentiment on Wall Street also spilled into CME lean hog futures. The benchmark April lean hogs contract settled down 1.125 cents at 63.875 cents/lb.

However, firm cash hog markets underpinned futures. Cash hog prices in the closely watched Iowa and southern Minnesota market rose by $1.33 on Wednesday, according to the U.S. Department of Agriculture.

“Packers in pork are just as greedy as the beef packer, and they’ve been holding steady through all of this coronavirus mess, and now starting to pay up. So there has got to be some really big demand behind it,” said Dennis Smith, commodity broker for Archer Financial Services in Chicago.

Traders awaited Thursday’s weekly USDA export sales report, which will detail sales of shipments of U.S. beef and pork in the week ended March 5.

— Julie Ingwersen is a Reuters commodities correspondent in Chicago.

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The rally in global equity markets overshadowed bearish fundamentals in the cattle market, including declining cash cattle prices in recent weeks and uncertainty about consumer demand for steaks and other pricey cuts of beef given the threat of a global recession.

“It’s just a consolidation after the big sharp decline the last couple of days,” Altin Kalo, agricultural economist for New Hampshire-based Steiner Consulting, said of the bounce in cattle futures.

“It seems we’ve thrown the fundamentals out the window here for a minute,” Kalo said.

Equity markets jumped as hopes of government stimulus calmed investors’ fears surrounding the coronavirus and signs of imminent recession. U.S. President Donald Trump said he will take “major steps” to allay market fears by asking Congress for a fiscal stimulus package to include a payroll tax cut, among other measures.

Chicago Mercantile Exchange April live cattle settled up 2.6 cents at 105.45 cents/lb. and June cattle rose 2.425 cents at 99.525 cents/lb. (all figures US$).

CME April feeder cattle settled up 2.4 cents to end at 127.95 cents/lb., trading under expanded daily limits after Monday’s limit-down close. Daily limits for feeder cattle futures will revert to 4.5 cents for Wednesday’s trade.

CME lean hog futures followed the firm trend, closing higher along with cattle futures and equities. Steady to firmer cash hog markets lent support, traders said.

The benchmark April lean hogs contract settled up two cents at 65 cents/lb.

The U.S. pork cutout rose by a penny on Tuesday afternoon, and cash hog prices in the closely watched Iowa and southern Minnesota market rose by $1.17, according to the U.S. Department of Agriculture.

— Julie Ingwersen is a Reuters commodities correspondent in Chicago.

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Wheat futures also closed higher in technical moves after a choppy session, although weakness in global cash prices hung over the market, capping rallies.

Chicago Board of Trade May soybeans settled up 6-1/4 cents at $8.76-1/4 per bushel (all figures US$). May corn ended up 4-3/4 cents at $3.77-1/2 a bushel and May wheat finished up 3-1/2 cents at $5.22-1/4 a bushel.

Soybeans and corn took cues from advances in crude oil and U.S. equity markets, which bounced after Monday’s big sell-off.

“It’s (strength in) macro markets and a little bottom-picking after soybeans tanked yesterday,” said Terry Reilly, senior analyst with Futures International in Chicago.

“I think a lot of this is just investment buying. The fundamentals continue to be widely ignored,” Reilly said, noting that the U.S. Department of Agriculture in a monthly report on Tuesday raised its forecast of soybean production in Brazil and Argentina more than most analysts expected.

“We’ve got very large global (soy) stocks relative to previous years, and Brazil remains fairly cheap,” Reilly said.

Corn futures drew support from a jump in crude oil futures, which bounced from the biggest rout in nearly 30 years a day earlier. Corn is the main U.S. feedstock for ethanol fuel.

USDA, in its monthly report, left its forecast of U.S. 2019-20 corn ending stocks at 1.892 billion bushels, unchanged from February.

“People have been floating the idea that China might be picking up ethanol and DDGs eventually from the U.S., but we have not seen anything material out there yet,” Reilly said, referring to distillers’ dried grains, a byproduct of milling corn into ethanol. DDGs are used in livestock feed.

Oil prices and global equity markets recovered after the prior day’s rout as the world’s biggest economies moved to cushion the impact of the coronavirus, but stock gains in Europe failed to hold as investors remained skittish.

U.S. President Donald Trump said he would ask Congress for a payroll tax cut and other “very major” stimulus moves to ease the economic pain, but details were unclear.

“There is talk about stimulus, but we are not sure how stimulus is going to help at this point of time,” said Phin Ziebell, agribusiness economist at National Australia Bank.

— Julie Ingwersen is a Reuters commodities correspondent in Chicago; additional reporting by Gus Trompiz in Paris and Naveen Thukral in Singapore.

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Traders also cited spillover strength from record highs on Wall Street equity markets and forecasts for a winter storm this week that could stress cattle in portions of the U.S. Plains.

February live cattle futures on the Chicago Mercantile Exchange (CME) settled up 1.3 cents at 125.15 cents/lb. after reaching 125.825 cents, the contract’s highest since April 23 (all figures US$). Front-month December ended up 1.025 cents, at 119.7 cents.

CME January feeder cattle futures rose 2.7 cents, to finish at 141.975 cents/lb.

The U.S. Department of Agriculture on Friday reported October placements of cattle in U.S. feedlots at 2.477 million head, up 10 per cent from a year ago but just below the average trade estimate for an 11.4 per cent increase.

“The report did not come out as bearish as anticipated,” said Jeff French, analyst with Top Third Ag Marketing in Chicago.

Strength in outside markets lent support. Each of Wall Street’s three major averages kicked off the trading week with record closes as signs pointed to progress between the U.S. and China on a trade truce.

“When you have the outside markets as strong as they are, it tends to spill over into the cattle market,” French said, noting that consumers are more likely to buy pricey cuts of beef when stock markets are strong.

Also supportive was the U.S. National Weather Service’s forecast that a storm would bring snow and high winds on Tuesday to the central Plains including Nebraska and Kansas, two major cattle feedlot states.

CME lean hog futures closed mostly firm.

Benchmark February lean hogs closed up 0.1 cent at 67.75 cents/lb., with back months posting larger advances, including April hogs up 0.175 cent at 73.875 cents.

Hog futures drew support from expected increases in weekly U.S. pork export sales figures after USDA said on Monday that commodity exporters must disclose sales of hog carcasses, effective immediately.

Previously, USDA told exporters to report sales of “muscle cuts.” Traders said it was unclear whether that included different types of carcasses.

China’s pork imports have nearly doubled this year as a fatal pig disease has decimated its herd and pushed prices of the country’s favourite meat to record highs.

China is buying U.S. hog carcasses from companies like WH Group’s Smithfield Foods because Chinese meat processors need entire animals, not just certain cuts, during the disease outbreak, according to analysts.

USDA’s clarification of the reporting requirements should result in higher weekly pork sales figures, French said.

“I think that will affect exports drastically, when we get the new numbers with the carcasses in there,” French said.

— Julie Ingwersen is a Reuters commodities correspondent in Chicago.

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“(There is) a little concern that we might have posted the smallest supply of the year, and now we are facing higher numbers ahead,” said Rich Nelson, chief strategist for Allendale Inc.

Lacklustre cash cattle markets added to bearish sentiment. Cash cattle traded mostly at $126-$127/cwt this week at feedlots in Texas, Kansas and Nebraska, down $1-$2 from deals a week earlier.

“We are struggling on the cash side, on feeders and fats, so the market just struggled to carry a bid throughout the day,” said analyst Craig VanDyke of Top Third Ag Marketing.

Others noted malaise on Wall Street, where major indexes posted losses for the week as U.S. President Donald Trump’s threat to impose import tariffs on steel and aluminum rattled investors.

Declines in equity markets can influence consumer demand for high-end cuts of beef.

Most-active CME April live cattle settled down 1.15 cents at 122.175 cents/lb. after dipping to 121.9, the contract’s lowest since Jan. 17.

CME April feeder cattle settled down 1.475 cents at 145.275 cents/lb. and front-month March feeders fell 1.375 cents to 143.675.

CME nearby hog futures closed higher, gaining against back months, with April lean hogs up 0.6 cent at 67.575 cents/lb.

April hogs narrowed their discount to the June, one day after hitting the widest discount in the life of the spread, a move some saw as a supportive technical signal for futures.

“That is telling to me that we are trying to find a short-term low,” VanDyke said.

The pork cutout that tracks values of cuts such as hams and bellies was up $0.73 from the previous afternoon to $78.11/cwt.

— Julie Ingwersen is a commodities correspondent for Reuters in Chicago.

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Spot-August futures closed 1.05 cents/lb. lower at 145.425 cents, and October 2.475 cents lower at 143.85 cents (all figures US$).

“The elephant in the room is the outside equity markets. When beef is high compared to the other meats, the first thing you have to think about is demand,” said U.S. Commodities analyst Don Roose.

Friday morning’s wholesale choice beef price (cutout) slumped $1.69/cwt from Thursday, to $244.77. Select cuts shed 76 cents, to $234.82, the U.S. Department of Agriculture said.

The beef cutout pullback and futures’ steep drop weighed on prices for unsold market-ready (cash) cattle.

Friday morning, cash cattle in Kansas sold lightly at $147/cwt, $3 lower than a week ago, feedlot sources said. Texas cash bids held at $148 against $150 asking prices, they said.

Earlier this week, cattle in Nebraska fetched $145-$149, down as much as $6 lower form last week there.

Would-be futures buyers watched from the sidelines while waiting for Friday’s USDA monthly Cattle-On-Feed report at 2 p.m. CT.

Simultaneously, the government will issue its monthly cold storage report, which will include July beef and pork inventories.

A few analysts, on average, estimated last month’s cold storage total beef stocks at 464.5 million lbs., and pork at 613.4 million lbs.

Fallen live cattle futures sank most of CME’s feeder cattle contracts by their 4.5-cents/lb. price limit.

August, which will expire on Aug. 27, ended 1.2 cents/lb. lower at 212 cents. September and October closed limit down at 202.325 and 199.475 cents, respectively.

CME feeder cattle trading limits will be expanded to 6.75 cents on Monday following Friday’s limit-down settlement.

Cash prices undercut hog futures

Lower cash prices and outside-market angst wore down CME lean hogs, traders said.

The spot-October contract closed down 1.925 cents/lb., to 62.825 cents, and December 2.3 cents lower at 59 cents.

USDA reported the morning’s western Midwest average cash hog price at $71.11/cwt in light volume, $4.30 lower than on Thursday.

Hog prices typically come down this time of year as cooler weather promotes animal weight gain, a trader said.

Futures were further pressured by technical selling and neighbouring cattle market losses, he said.

— Theopolis Waters reports on livestock markets for Reuters from Chicago.

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