Cattle Quick Thoughts
The European Union (EU) and Japan agreed in principle to the Economic Partnership Agreement (EPA) this week. This is a large scale trade agreement of which beef is just one piece. This agreement will lower the import tariff for EU beef entering Japan in the coming years. Currently, EU beef imported by Japan is subject to a 38.5% tariff, the same as the tariff for U.S. beef. However, under the EPA, the import tariff for EU beef is proposed to gradually decrease to 9% over 15 years. This is significant for U.S. beef producers because it gives beef producers in the EU a trade advantage. The EPA will lower the cost of EU beef for Japanese buyers when compared to U.S. beef. The EU is not a major competitor to the U.S. for Japan sales currently, but lower tariffs are likely to increase imports from the EU. This could erode the U.S. market share of beef in Japan. Lowering tariffs through this type of agreement is what the Trans-Pacific Partnership (TPP) would have done for U.S. beef. Australia already has a similar deal in place with Japan that provides lower import tariffs. Japan is one of the largest buyers of U.S. beef with a total value of over $1.5 billion in 2016. The EPA is anticipated to be implemented in early 2019.
Cash traded fed cattle prices were down slightly on average this week. Fed steers were down $1.13 to an average of $117.52 for live sales through Thursday. Dressed steers were down $2.08 to an average of $187.87.
Mississippi and Oklahoma auctions were closed this week for Independence Day. I hope you enjoyed beef while celebrating our great nation.
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Cattle futures prices were lower again at the end of the week. August live cattle were down $1.03 to $115.25 while October live cattle were down $1 to $114.15. August feeder cattle were down $2.70 to $145.50 while September feeder futures were down $2.85 on the week to $145.50. Corn futures prices were up this week with July and September each up 11 cents to $3.81 and $3.91, respectively.
Boxed beef values continued to slide this week. Choice boxes averaged $221.09, down $9.95 from a week ago. Select boxes averaged $204.76, down $8.07 from last week. The choice-select spread was $16.33, down $1.48 from last week.
Note: all cattle and beef prices are quoted in dollars per hundredweight and corn prices are quoted in dollars per bushel unless stated otherwise.