Cattle Market Notes: Week Ending Sept 26, 2014

Cash Cattle:

Cash fed cattle prices were lower this week. The five-area live and dressed steer prices were $153.12 and $242, respectively, down $0.63 and $3.23. Once again, negotiated cash trading was too thin through Friday for any prices to be called.

Reported Mississippi steer calf prices were steady and feeder steers were mostly $10 lower. Heifers were mostly steady. Cull cows were $3 lower and bulls were steady. Feeder steers and heifers in Oklahoma City were steady to $3 higher while calves were steady to $8 lower.

[ … For Livestock Prices and Production data and trends CLICK HERE … ]

Futures:

Live cattle futures contracts through the first few months of 2015 were poised to finish the week mostly even with last Friday’s close, but received a boost on Friday (longer term contract months were slightly higher until Friday’s bump). There is little indication of the reason for the jump in price on Friday, but steadiness in cash markets – excluding beef – coupled with a seasonal price increase heading into October could be the justification. Feeder futures followed live prices higher on Friday, but also saw mildly higher prices during the week.

Corn futures moved lower once again this week.

Beef:

Wholesale Choice boxed beef prices moved lower again this week. Choice boxes averaged $239.62, down $6.61. Select boxes ended the week at an average of $226.58, down $5.47.

Note: all cattle and beef prices are quoted in dollars per hundredweight and corn prices are quoted in dollars per bushel, unless stated otherwise.

Can I pay you not to harvest that timber?

From BBC News, Norway is going to pay Liberia to cease all harvesting of trees from its rainforest by 2020:

Liberia is to become the first nation in Africa to completely stop cutting down its trees in return for development aid.

Norway will pay the impoverished West African country $150m (£91.4m) to stop deforestation by 2020.

Why would Norway want to do that? Apparently…

Liberia’s forests are not as big as other countries but the country is home to a significant part of West Africa’s remaining rainforest, with about 43% of the Upper Guinean forest.

It is also a global diversity hotspot, home to the last remaining viable populations of species including western chimpanzees, forest elephants and leopards.

“We hope Liberia will be able to cut emissions and reduce poverty at the same time,” said Jens Frolich Holte, a political adviser to the Norwegian government, speaking to the BBC on the sidelines of the UN climate summit in New York.

So apparently (assuming “Norway” is acting on behalf of its citizens) Norwegians value the forest because it provides habitat for endangered species and because it acts as a carbon sink. Well, that’s not really that surprising – plenty of studies have shown that residents of one nation value ecosystem services provided by forests and other kinds of habitat in other nations.

But what is surprising is that the two nations were able to strike a deal. Here’s why: typically, the benefit to the nation owning the forest (here, Liberia, whose harvesters can sell the timber) of harvesting from it is greater than the cost of harvesting, which includes not only costs of equipment and labor, but also costs of giving up carbon storage and the costs of harming wildlife habitat. Let’s call the benefits of harvesting to Liberia Bl, and the Costs of harvesting to Liberia Cl. However, forests provide services like carbon storage and wildlife habitat that benefit not only the nation which controls the forest, but residents of other nations as well. So let’s say we have some nations whose names start with a, b, and c. The typical problem is that, even though Bl > Cl, Bl is yet less than Cl + Ca + Cb + Cc. So, from the perspective of the entire world, it’s economically inefficient to harvest from the forest, but from the perspective of the owning nation, it’s economically efficient to harvest from the forest.

This problem comes up repeatedly with the Amazon rainforest which is primarily controlled by Brazil. As far as I know, Brazil has never entered any similar deal with another nation or group of nations to receive payments to not harvest from its rainforest.

In the case of Liberia and Norway though, a deal was struck because the benefits to Norway of not harvesting the forest are greater than the $150m payment it gives to Liberia, and the $150m that Liberia receives is greater than its costs of not harvesting from the forest (i.e. forgone profits from selling timber). And, again, this assumes that each nation has made a decision that is actually best for its own nation.

As the article mentions, success of the deal will depend on being able to enforce the ban on logging, and Norway is prepared to help with that.

By the way, this is also the same exact problem that makes coordinating a global effort to curb greenhouse gas (ghg) emissions difficult (e.g. the Kyoto protocol). For each individual nation, the costs of cutting down on ghg are greater than the benefits of doing so. But from a global perspective, the costs are less than the benefits of doing so because curbing ghg emissions in one nation benefits all other nations.

You don’t see this kind of deal that Liberia and Norway struck very often, if ever. And one of the nice things about it is that residents of other nations besides Norway benefit as well, for example, the U.S. Many U.S. citizens would be happier protecting the habitat of the chimps, elephants, and leopards than allowing the habitat to be cut down. That increase in happiness? Economists would consider that to be a benefit that should be accounted for in any economic analysis of the decision – but most non-economists aren’t used to thinking about these kinds of benefits.

That’s why I describe economics in my principles class as the study of how to make the best decisions by comparing all the costs and all the benefits of an action.

Cattle Market Notes: Week Ending Sep 19, 2014

Cash Cattle:

Cash fed cattle prices were lower this week. The five-area live and dressed steer prices were $153.75 and $245.23, respectively, down $4.95 and $4.60. Cash trading was too light this week for any prices or trends to be determined.

Reported Mississippi steer prices were steady for heavy weights but $5-$10 lower for light steers. Heifers were mostly steady. Cull cows and bulls were steady. Feeder steers and heifers in Oklahoma City steady while calves were steady to $5 higher.

[ … For Livestock Prices and Production data and trends CLICK HERE … ]

Futures:

Nearby live cattle were lower this week with the only bright spot coming Wednesday. Cash cattle and boxed beef prices moved lower most of the week which added pressure. More deferred contracts fared better and ended the week in positive territory. Feeder futures were steady to higher. USDA-NASS released their monthly Cattle on Feed report Friday afternoon after the market closed. The report revealed that 9.8 million head of cattle were on feed Sept. 1, 2014 and 1.72 million head were placed into feedlots during August. Both numbers were near expectations, but placements were a tad higher than the average of pre-report analyst predictions which could put a cloud over the market Monday. For more detail on the report CLICK HERE.

Corn futures moved lower again this week as harvest results become clearer. Yields being touted in coffee shops and producer meetings here in Mississippi are strong and point to higher year-over-year gains. The same appears to be true in other states. Dr. Brian Williams has more details on crop markets HERE.

Beef:

Wholesale Choice boxed beef prices switched direction and moved lower this week. Choice boxes averaged $246.23, down $4.85. Select boxes ended the week at an average of $232.05, down $5.07.

Note: all cattle and beef prices are quoted in dollars per hundredweight and corn prices are quoted in dollars per bushel, unless stated otherwise.

September Cattle On Feed Recap

The United States Department of Agriculture’s National Agricultural Statistics Service (USDA, NASS) released their monthly Cattle on Feed report Friday afternoon (Sept 19). The report revealed that 9.799 million head of cattle were in U.S. feedlots with a capacity of 1,000 head or larger on September 1, 2014. Placements into feedlots during the month of August totaled 1.720 million head while marketings during the same month totaled 1.692 million head.

[ … For detailed numbers and charts CLICK HERE … ]

Placements totaled 1.720 million head, a decrease of 2.9% from August 2013 and a 17.4% decrease from the five-year average from 2009 to 2013 and now the smallest August placement on record since the data began in 1996. The average of analysts’ expectations called for a decrease of 4.0% from the August 2013 number and the range of expectations ran from -7.5% to -0.4%. Placements typically increase going into the Fall and typically peaks in October as cattle coming off summer pastures are placed. This month’s number is a bit stronger than expected which could indicate fewer supplies in the next few month’s. Given the continued record prices this would be understandable.

Placements of cattle under 600 pounds and over 800 pounds were higher in August while placements of cattle from 600 to 800 pounds were lower. Lightweight placements have been trending higher as feed prices have dropped over the past number of months. Feedlot costs to add weight to cattle were in the neighborhood of 90 cents per pound back in May but that has dropped to near 70 cents lately. This makes feeding lightweights much more enticing and the decision to feed vs graze more difficult.

Cattle marketed in August totaled 1.692 million head, down 9.6% versus last year and down 11.9% compared to the average from 2009 to 2013. Like placements, this marketings number is now the smallest on record for the month of August. Pre-report expectations called for marketings to come in at a 9.4% drop.

The total number of cattle in feedlots with 1,000 head or larger capacity totaled 9.799 million head, down 0.8% versus September 2013 and 4.5% lower than the five-year average.  The number of cattle on feed remained close to pre-report expectations, but still on the high side. Pre-report analysts looked for a drop of 1.0% on average.

The report will most likely be viewed as bearish and send prices falling when markets re-open Monday. More specifically, higher heavy placements could put a dent in the December 2014 and February 2015 live cattle contract, while the higher light placements number could spell trouble for more deferred contract months.

A break down on the numbers can be found at this link: http://goo.gl/1M4YXv

Crop Market Update: September 19, 2014

Mississippi’s corn harvest continues to progress well with 76% of the crop in the bins, behind the 5-year average of 88 percent, but up 15% from a week ago. The USDA left U.S. corn condition ratings unchanged at 74% good or excellent condition with 27% of the U.S. crop mature and 82% of the crop dented. Corn prices continue to slowly trend lower, with Greenville cash corn trading eight cents lower than a week ago and December corn futures trading 21 cents lower than last week. With harvest quickly approaching across the U.S. and record production numbers expected, look for prices to continue to be pressured downward. There is some potential for upward movement in the corn markets this fall if acres are revised lower, but we will not know if that will happen until the October crop production reports are released.

The U.S. soybean crop progress is trending slightly behind average with 24% of the crop dropping leaves compared to an average of 32%. The soybean crop is maintaining its favorable condition with 72% of the U.S. crop rated in good or excellent condition, unchanged from a week ago. Mississippi’s soybean crop condition is lower than a week ago with 80% of the crop rated in good or excellent condition compared to 82% last week. Although the crop is in good condition, soybean progress in Mississippi is slightly normal with 55% of the state’s soybeans dropping leaves and 29% of the crop harvested compared to 5-year averages of 58% and 31%, respectively. Soybean prices continue to fall with Greenville cash soybeans currently selling for $10.13, 41 cents lower than last week. November soybean futures are trading 28 cents lower than a week ago at $9.57. A record U.S. crop combined with potential for another large South American crop has continued to pressure soybean prices lower.

Winter wheat has begun to go into the ground across the Midwest and Northern areas of the country with 12 percent of the winter wheat crop in the ground. Most states are trending near their 5-year average on planting progress, with the U.S. progress about one percent ahead of average. Wheat prices have been following corn and soybeans lower, with December wheat futures currently trading at $4.74/bu, 28 cents lower than a week ago. Global competition on the wheat market has been bringing wheat prices lower as many of the world’s top producing countries are facing favorable growing conditions.

For more detail on crop futures and Mississippi local cash prices click here. Detailed information on crop progress can be found here.

Cattle Market Notes: Week Ending Sep 12, 2014

Cash Cattle:

Cash fed cattle prices were stable this week. The five-area live and dressed steer prices were $158.70 and $249.83, respectively, down $0.52 and $0.11. Light cash trade volumes continue to be reported throughout the region. In Texas and Kansas live trade was reported at $161-$162, while Nebraska live prices ranged from $160 to $162 on Friday. Dressed cash cattle in Nebraska came in at $248-$250. Western Cornbelt cattle traded at $158-$160, live, and $248-$250 for dressed.

Reported Mississippi steer prices were steady to higher with heavy feeders up $5. Lightweight heifers were about $2-$12 higher, while heavy feeder heifers were down about $4-$7. Cull cows and bulls were steady to $1 higher. Compared to the week prior to Labor Day, Oklahoma City feeder steers were called $8-$12 higher, feeder heifers were $3-$8 higher, and all calves were steady.

[ … For Livestock Prices and Production data and trends CLICK HERE … ]

Futures:

Nearby live cattle futures lost some ground this week compared to last week. Contract prices were building through Wednesday but moved lower to close the week out. The value of the U.S. dollar continues to move higher. Also, equity markets were under the gun much of the week and finished lower for the first time in six weeks. A lot of this is likely attributable to nervousness on Wall Street. Retail sales in August were 0.6% higher, but slightly below expectations, while the Michigan/Reuters Consumer Sentiment Index registered 84.6 for August compared to an 83.5 expectation and an 82.5 index value in July. All of this provides underlying support for a rebuilding economy but similar to cattle markets, when prices get to record levels, uneasiness creeps in. On Thursday USDA’s World Ag Outlook Board released their monthly supply and demand expectations for agricultural commodities. The Board cut 2014 beef supplies by 240 million pounds and 2015 supplies by 685 million pounds, both somewhat drastic moves.

Corn futures moved lower as a result of the supply and demand report. USDA now forecasts national corn yield at 171.7 bushels per acre and total production at 14.395 billion bushels (both would be records). These were higher than the 170.7 bu/acre  yield and 14.288 production levels expected by analysts. For more on the report check out Dr. Brian Williams’ commentary HERE.

Beef:

Wholesale Choice boxed beef prices were higher this week, but began to slip as the week ended. Choice boxes averaged $251.08, up 3.46. Select boxes ended the week at an average of $237.12, up $2.44.

Note: all cattle and beef prices are quoted in dollars per hundredweight and corn prices are quoted in dollars per bushel, unless stated otherwise.

Yields Revised Up Again for Corn and Soybeans in September Supply and Demand Estimates

Tuesday’s World Agricultural Supply and Demand Estimates (WASDE) made several changes to the balance sheet for new crop U.S. corn, ultimately leaving ending stocks 194 million bushels higher than a month ago and yields revised up 4.3 bu/acre to 171.7. Yields were higher than expected with yield expectations falling around 170.7 bu/acre, but were still not surprising given that corn crop conditions are the best they have been since 1990. U.S. new crop corn production is higher at a record 14.395 billion bushels, higher than the expected 14.276 billion bushels. Corn use is revised upward nearly across the board, with the biggest increase coming in feed use with a 75 million bushel increase in consumption as a result of the lower prices. There was a 25 million bushel upward revision for exports, a 50 million bushel increase in ethanol use, and a 70 million bush increase in food, seed, and industrial use. Record corn production for 2014/15 will be accompanied by a record total use, besting last year’s record by 5 million bushels. On the global corn market, ending stocks for the 2014/15 crop are increased by 2.09 million metric tons from last month, a result of an increase in global production. Global production is revised up by 2.13 million metric tons with much of the increase coming from higher yields in the U.S. despite lower production in Argentina, China, and Ukraine. Today’s Crop Production report has increased corn yields in several states. Mississippi is expected to top last year’s record yield at 180 bu/acre, 4 bu/acre higher than a year ago and 2 bu/acre higher than last month’s estimate. Yields were also increased in all but one of the top five corn producing states with an increase in Illinois, Indiana, Minnesota, and Nebraska while Iowa’s yield is unchanged from a month ago. Overall, the report has had a bearish impact on corn markets with December futures trading about six cents lower than before the report’s release.

Soybeans also saw upward revisions in yield and production compared to a month ago. Yields were revised up by 1.2 bu/acre and production was increased by 97 million bushels. Both the yield and production estimates were slightly higher than the average trade expectation, but were still well within the range of expectations. Old crop ending stocks were revised down by 10 million bushels as demand increases in response to lowering prices. New crop ending stocks are 45 million bushels lower than a month ago and 22 million bushels higher than pre-report expectations. Demand for new crop soybeans was increased with a 15 million bushel boost in soybean crush compared to last month and a 25 million bushel increase in soybean exports. Global soybean ending stocks are 4.55 million metric tons higher than last month’s numbers while global production for the new crop year is increased by 6.44 million metric tons, reflecting increases in production from the U.S., Argentina, and Brazil. Mississippi is expecting another record yield for soybeans this year, with current estimates coming in at 49 bu/acre, topping last month’s yield estimate by 1 bu/acre. As with corn, soybean yields were revised up in all but one of the top five soybean producing states. The report is considered bearish for the soybean market, with production and yields surpassing many pre-report expectations. September futures are trading 12 cents lower than they were just before the report’s release.

The new crop 2014/15 wheat ending stocks were raised by 35 million bushels from the August report based on decreased exports and a slight bump in imports. Wheat yields and production were unchanged from a month ago. Global wheat production was revised up by 3.86 million metric tons from last month and ending stocks were revised up by 3.42 million bushels. The increase in global production is a result of increased production in the European Union, Ukraine, and from the twelve countries that make up the former Soviet Union. The report is considered bearish for the wheat market, with December wheat futures dropping 4 cents in the minutes following the report’s release.

For more detail on crop futures and Mississippi local cash prices click here. Detailed information on crop progress can be found here.

Cattle Market Notes: Week Ending Sep 05, 2014

Cash Cattle:

Cash fed cattle prices made noticeable gains this week. The five-area live and dressed steer prices were $159.22 and $249.94, respectively, up $4.66 and $6.96. The holiday shortened week resulted in smaller volumes across the entire region. Texas and Kansas live trade was reported at $163, while Nebraska prices ranged from $160 to $163. Dressed cash cattle in Nebraska came in at $250-$252. Western Cornbelt cattle traded at $158-$160, live, and $250 for dressed.

Reported Mississippi steer prices look to be mostly steady. Lightweight heifers were down about $5, while heavy feeder heifers were up about $7-$15. Cull cows were up $2-$3 and bulls were steady to higher. Oklahoma City’s calf sale did not take place this week since it occurs on Monday, which was Labor Day.

[ … For Livestock Prices and Production data and trends CLICK HERE … ]

Futures:

Well, it took a little longer this time, but feeder and live cattle futures have largely returned to the levels they were at prior to the Russian import ban which pressured prices. The recovery took approximately one full month, compared to the previous dip in prices (in early July) that took about two weeks to recover. A stronger U.S. dollar attempted to beat back the higher momentum, but the pressure was short lived as prices stayed strong most of the week. The macroeconomic news this week was mixed, ending with a worse than anticipated jobs report on Friday that showed the number of jobs added in August totaled 142,000 (compared to an expected 230,000). Unemployment is now 6.1% versus 6.2% in July.

Corn futures moved lower compared with the previous Friday’s close. The nearby September contract fell the most as harvest continues and favorable yields are being reported.

Beef:

Wholesale Choice boxed beef prices dropped again this week. Choice boxes averaged $247.62, down $0.13. Select boxes ended the week at an average of $234.68, down $2.28.

Note: all cattle and beef prices are quoted in dollars per hundredweight and corn prices are quoted in dollars per bushel, unless stated otherwise.

Whither global warming?

I recently read an academic article with the word “whither” in the title and thought it sounded a bit hifalutin (but wait, the word hifalutin sounds hifalutin…) so let me know if you do to. Anyway…

There’s an interesting Wall Street Journal article about how global warming doesn’t really seem to be a thing anymore.

On Sept. 23 the United Nations will host a party for world leaders in New York to pledge urgent action against climate change. Yet leaders from China, India and Germany have already announced that they won’t attend the summit and others are likely to follow, leaving President Obama looking a bit lonely. Could it be that they no longer regard it as an urgent threat that some time later in this century the air may get a bit warmer?

In effect, this is all that’s left of the global-warming emergency the U.N. declared in its first report on the subject in 1990. The U.N. no longer claims that there will be dangerous or rapid climate change in the next two decades. Last September, between the second and final draft of its fifth assessment report, the U.N.’s Intergovernmental Panel on Climate Change quietly downgraded the warming it expected in the 30 years following 1995, to about 0.5 degrees Celsius from 0.7 (or, in Fahrenheit, to about 0.9 degrees, from 1.3).

Climate change has been a major area of research in agricultural and environmental research lately, so it will be interesting to see – if climate science continues to downgrade the threat of global warming – how quickly economic research will change.

Of course, this isn’t to say the matter is settled. The article mentions that it’s mainly the effects over the next two decades which have been adjusted, not necessarily beyond that. So stay tuned to this blog for climate change updates for the next 20 years.