Cattle futures drifted lower this week, holding just above the contract lows posted the previous week. Beef prices continued to decline and cash cattle traded $1 to $2 lower, trading from $117 to $118/cwt in the southern Plains. Beef prices are also trending lower. The Choice cutout has slipped below $200/cwt to a two-year low and Select is down to the lowest level since October 2013 at $185/cwt.

In addition to softening global economies and the rising value of the dollar, beef exports were under further threat from the WTO ruling allowing Mexico and Canada to initiate retaliatory tariffs against the U.S. exports, including meat, for mandatory country-of-origin labeling (COOL). A resolution may be at hand. Legislation repealing the labeling law is included in the larger omnibus bill now being considered in Congress. If passed and signed by the President, retaliatory trade action against U.S. exports could be avoided. The threat has added to the negative sentiment in the beef market. Canada and Mexico are the second and third largest destinations for U.S. beef behind Japan with imports totaling nearly 800 million pounds in 2014, equivalent to 3.3% of U.S. production. Overall, U.S. beef exports through October are down 13.4% from 2014 and have softened even further in recent weeks. 

USDA will release the Cattle on Feed report on Friday. The average pre-release trade estimate for November placements is down 4.2% and cattle marketed up 3%, resulting in Dec. 1 cattle on feed 1% higher than a year ago at 10.9 million head.