Cattle Called Firm on US/China Trade Truce; South American Weather Favorable into Late December

Dec 3, 6:54 am | AM Weather | Share this:

** AgResource Daily Cattle Analysis: Cattle futures finished last week slightly lower, but a steady/higher outlook is offered for early trade this morning. The generally bullish enthusiasm from G20 Summit is expected to carry over into the livestock trade at the start of this week.

  China news aside, late week cash trade that held until late Friday afternoon is viewed as supportive for the CME trade at the start of the week. Cash trade got under way late Friday afternoon when packers raised their bids to $118, or $1-2 higher from the previous week.

  Beef cutout values were $1.24 lower for the week on choice and a dime weaker on select. Estimated slaughter margins slipped to a 5-month low of $164/head but are also at a record for early December.

  The chart shows that China consumes very little beef, with domestic beef consumption in recent years at just 15% of pork. However, we expect that the bullishness in other markets will carry over into the cattle trade. But without confirmation of Chinese demand for US beef, hedgers should consider sales through the 1st half of 2019 on strong rallies.

** South American Weather Pattern Discussion: The EU and GFS forecast models are solid agreement and consistent with prior day solutions. Our confidence in the forecast remains high. The current pattern is favorable to South American crops into late December. The return of rains for Argentina is welcomed.  

  The forecast features above normal rainfall which will occur across N Brazil with below normal rainfall totals for S Brazil and Argentina. A strengthening El Nino will maintain a wet flow across the northern half of Brazil into late December. The overnight forecast offers showers returning for Argentina with rain totals of .5-1.50”. Spring planting will have scored considerable progress and the timing of the rain is ideal.  

  The EU model’s 10-day rainfall forecast is attached. Notice that cumulative totals of 4-9” are offered for NC Brazil. Mato Grosso and Goias will be the wettest and producers there are starting to complain about the need for more sunshine. Asian rust could flourish without more sunshine

  Brazilian high temps range from the 80’s to the lower 90’s. Argentine high temps will range from the 70’s to the upper 80’s. No extreme heat is foreseen. The outlook remains generally favorable and the rains now favor Argentine crops.