WLI

Despite sharply lower outside markets, a bounce higher in grain prices and the ongoing slower beef packing pace, cash cattle and futures prices held their own last week.

Negotiated cash fed cattle trade was mostly inactive on light demand through Friday afternoon, with too few transactions to trend, according to the Agricultural Marketing Service.

For the week, live prices were steady to $1 higher in the Texas Panhandle at $137, $1-$2 higher in Kansas at $137. Prices were steady to $1 higher in Nebraska at $137-$138 and $1 lower in the western Corn Belt at $137. Dressed prices were steady at $218.

Cattle futures leaked lower Friday amid stagnant cash prices and bearish outside markets.

Live Cattle futures closed an average of 63¢ lower (25¢ to $1.07 lower), except for unchanged and 5¢ higher in the back two contracts. Week to week, they closed mixed, from an average of 19¢ lower in the front four contracts to an average of 52¢ higher.

Choice Boxed beef cutout value was 57¢ lower Friday afternoon at $292.41/cwt. Select was 15¢ higher at $282.33. Week to week, though, Choice was $8.10 higher and Select was $8.36 higher.

Estimated total cattle slaughter last week was 636,000 head, which was 18,000 head more than the previous week, but 26,000 head fewer than the same week last year. Estimated year-to-date total cattle slaughter of 1.87 million head is 161,000 head fewer (-7.9%) than last year. Estimated year-to-date beef production is 147.5 million lbs. less (-8.6%) at 1.57 billion lbs.

Net U.S. beef export sales were 12,800 metric tons for the week ending Jan. 13, according to the weekly U.S. Export Sales report. Sales were primarily for China, Japan, South Korea, Mexico, and Taiwan.

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Based on weekly auctions monitored by Cattle Current, calf and feeder cattle prices trended widely mixed last week. Impaired travel conditions due to winter weather and wobbly futures prices applied pressure, while the optimistic outlook ahead provided lift, especially for grass-suited cattle.

Feeder Cattle futures closed an average of 90¢ lower (52¢ to $1.65 lower). Week to week, they closed an average of $1.82 lower through the front five contracts and then unchanged to $1 higher.

Although soybean futures closed lower Friday, on likely profit taking, South American weather and geopolitical tensions continue to provide lift.

Soybean futures closed mostly 6¢ to 11¢ lower except for fractionally higher in a few contracts. Week to week on Friday, however, they closed an average of 35.4¢ higher.

Corn futures closed 2¢ to 5¢ higher through Jly ’23 and then fractionally higher. They closed an average of 12.5¢ higher through the front six contracts week to week on Friday.

Exports continued to add lift to grain prices, according to the weekly U.S. Export Sales report. For the week ending Jan. 13.

Net U.S. wheat export sales 44% more than the previous week and 62% more than the prior four-week average. Net U.S. corn export sales were up noticeably from the previous week and up 48% from the prior four-week average. And, Net U.S. export soybean sales were 9% less than the previous week, but 12% more than the prior four-week average.

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Major U.S. financial indices closed sharply lower Friday, led by tech stocks, with continued pressure from treasury bond yields, inflation and pending monetary tightening.

The Dow Jones Industrial Average closed 450 points lower. The S&P 500 closed 84 points lower. The NASDAQ was down 385 points.

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Markets will likely view the latest monthly Cattle on Feed report negatively, with placements significantly higher than average expectations.

Feedlots with 1,000 head or more capacity placed 1.96 million head in December, which was 110,000 head more (+6.0%) than a year earlier. Average expectations were for an increase of 2.5%. Placements were the highest for the month since the series began in 1996.

In terms of placement weights, 50% went on feed weighing less than 700 lbs. (26% less than 600 lbs.), 40% weighing 700-899 lbs. and 10% weighing 900 lbs. or more.

Marketings in December of 1.86 million head were 4,000 head more (+0.21%) than the previous year, which was in line with pre-report expectations.

Cattle on feed Jan. 1 of 12.04 million head were 70,000 head more (+0.58%) more than a year earlier and the second highest for the date since the series began in 1996. Heifers and heifer calves on feed (4.68 million head) were 2% more year over year.

Negotiated cash fed cattle trade ranged from limited on light demand to a standstill through Thursday afternoon, with too few transactions to trend, according to the Agricultural Marketing Service.

So far this week, live prices are steady to $1 higher in the Texas Panhandle at $137and $1-$2 higher in Kansas at $137. Prices are steady to $1 higher in Nebraska at $137-$138. Although too few to trend, there were a few live trades in the western Corn Belt at $137, which was $1 lower. Dressed prices are steady at $218.

Cattle futures softened Thursday after follow-through support early in the session.

Live Cattle futures closed narrowly mixed, from an average of 17¢ lower in the front five contracts; unchanged to an average of 14¢ higher the rest of the way.

Feeder Cattle futures closed an average of 37¢ lower, except for unchanged to 75¢ higher in the back three contracts.

Choice Boxed beef cutout value was $1.38 higher Thursday afternoon at $292.98/cwt. Select was $1.75 higher at $282.18.

The average dressed steer weight the week ending Jan. 8 was 928 lbs., according to USDA’s Actual Slaughter Under Federal Inspection Report. That was the same as a week earlier but 5 lbs. heavier than the previous year. The average dressed heifer weight was 851 lbs., which was 4 lbs. lighter than the previous week and the same as a year earlier.

Weather in South America and tension between Russia and Ukraine continued to dominate grain market commentary Thursday.

Soybean futures closed 27¢ to 34¢ higher through the front four contracts and then mostly 9¢ to 15¢ higher.

Corn futures closed mostly 2¢ to 4¢ lower.

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Major U.S. financial indices rallied early in Thursday’s session but gave up the gains and more by the end of the day as investors come to grips with inflation and monetary tightening.

Seasonally adjusted initial unemployment insurance claims were 286,000 for the week ending January 15, according to the U.S. Department of Labor. That was 55,000 more than the previous week’s revised level. The four-week moving average was 231,000, an increase of 20,000 from the previous week’s revised average.

The Dow Jones Industrial Average closed 313 points lower. The S&P 500 closed 50 points lower. The NASDAQ was down 186 points.

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Retail beef prices moderated the last couple of months but continue at inflationary levels.

“December beef prices, all fresh and Choice, both declined for the second month in a row from record levels set in October. In December, the all fresh beef price was $7.35/lb., down 2.7% from the record price but 18.0% higher than a year ago,” say analysts with the Livestock Marketing Information Center (LMIC). “The December Choice beef price was $7.66/lb., down 3.0% from the October record price but 21.8% above a year ago. The round and sirloin in December were $7.34 and $11.05/lb., respectively, which was the third highest price for both cuts. Ground beef prices moved slightly lower from the prior month to $4.60/lb., which was the fourth highest on record and 16.5% above the prior year.”

In the latest Livestock Monitor, LMIC analysts explain the Food Consumer Price Index (CPI) in December was 6.3% higher year over year, the steepest annual increase since October 2008. The overall CPI was 7.0% higher, the most in about four decades.

“The Meat CPI rose 14.8% from a year ago, which slowed slightly from the prior month’s rate but is still at levels only seen during the pandemic and the late 1970’s,” LMIC analysts say.

The LMIC folks add that December pork prices were $4.74/lb., which was 15.0% more than a year earlier. The broiler composite retail price was record high at $2.22/lb., which was 10.4% more than the prior year.

Improving packer production — 117,000 head Tuesday — helped boost Live Cattle futures an average of $1.11 higher on Wednesday.

The uptick in Live Cattle, helped boost Feeder Cattle futures an average of 73¢ higher, except for 50¢ lower in spot Jan, despite surging Corn futures prices.

Grain futures surged on Wednesday, led by soybeans on weather concerns in South American and wheat based on mounting tension between Russia and Ukraine.

Soybean futures closed mostly 18¢ to 30¢ higher. 

Corn futures closed mostly 7¢ to 11¢ higher. 

Negotiated cash fed cattle trade was slow on light to moderate demand in the Southern Plains and Nebraska through Wednesday afternoon, according to the Agricultural Marketing Service.

So far this week, live prices are steady to $1 higher in the Texas Panhandle at $137, $1-$2 higher in Kansas at $137. Prices are steady in Nebraska at $137 and in the western Corn Belt at $138. Dressed prices are steady at $218.

Choice Boxed beef cutout value was $2.11 higher Wednesday afternoon at $291.60/cwt. Select was $2.04 higher at $280.43.

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Major U.S. financial indices continued to step lower Wednesday amid worries about inflation, higher input costs and higher interest rates.

The Dow Jones Industrial Average closed 339 points lower. The S&P 500 closed 44 points lower. The NASDAQ was down 166 points.

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USDA’s Economic Research Service (ERS) increased the projected annual feeder steer price (750-800 lbs., Oklahoma City) for this year to $160/cwt., in the latest monthly Livestock, Dairy and Poultry Outlook. That’s $1 higher than the previous month’s estimate and would be $13.05 more than last year’s annual estimate. ERS analysts note the feeder steer price for the week ending Jan. 10 was $156.65/cwt., up 14.2%, or $19.13.

Feeder steer prices are projected at $159 in the first quarter, $156 in the second quarter, $160 in the third quarter and $165 in the fourth quarter.

On the other end of the scale, the five-area direct average fed steer price in December was $30.31 more (+27.8%) than a year earlier at $139.36/cwt. From August through December the average price was $14.91 (+12.0%) more than the same period a year earlier, according to ERS. The trend continued into the new year with the average price the week ending Jan. 9 up $27.14 (+24.4%) from a year earlier at $138.41.

As mentioned in Cattle Current recently, based on expected continued packer demand strength, ERS increased the forecast annual five-area direct average fed steer price for this year to $136.75/cwt.

The average fed steer price was forecast at $139 in the first quarter, $136 in the second quarter, $134 in the third quarter and $138 in the fourth quarter.

Keep in mind the more optimistic price projections come with slightly higher expectations of beef production.

“Given the anticipated rise in fourth-quarter net placements, fed cattle marketings and fed cattle slaughter expectations are raised in the second quarter, and coupled with a stronger expected pace of marketings in the second half of the year, the beef production forecast is raised for 2022. The forecast for 2022 beef production was raised to 27.165 billion lbs., up 165 million lbs. from last month,” say ERS analysts.

Uncertainty about the pace of packer production continued to weigh on Live Cattle futures Tuesday, as wholesale beef prices continue to climb for the same reason. Sharply lower outside markets added to bearish sentiment.

Live Cattle futures closed an average 37¢ lower.

Choice Boxed beef cutout value was $1.63 higher Tuesday afternoon at $289.49/cwt. Select was $1.34 higher at $278.39.

Feeder Cattle futures drifted lower with the lack of support from the Live side. They closed an average 62¢ lower (20¢ lower at the back to $1.25 lower at the front).

Negotiated cash fed cattle trade was slow on light to moderate demand in Nebraska through Tuesday afternoon, according to the Agricultural Marketing Service. Although too few transactions to trend, early trade was steady at $137/cwt. on a live basis and $128 in the beef.

Elsewhere, trade ranged from mostly inactive on light demand to a standstill.

Last week, live prices were at $136-$137 in the Texas Panhandle, $135-$136 in Kansas and $138 in the western Corn Belt, where dressed trade was at $218.

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Major U.S. financial indices closed sharply lower Tuesday as investors fretted over anemic bank earnings and higher treasury bond yield rates.

The Dow Jones Industrial Average closed 543 points lower. The S&P 500 closed 85 points lower. The NASDAQ was down 386 points.

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Hay production and stocks continue lower, according to the most recent USDA Crop Production  report.

All hay stocks Dec. 1 of 79.0 million tons was 5.0 million tons less (-6.0%) than the same time a year earlier.

“Drought stricken Western states saw the most notable declines in hay stocks,” say analysts with the Livestock Marketing Information Center, in the latest Livestock Monitor (LMIC). “Oregon, Montana, North Dakota, South Dakota, and Arizona all posted declines in hay stocks over 40% from the prior year. Minnesota was down 35% while Wyoming, Utah, and California reported declines between 20%-27%. Nevada, Colorado, New Mexico, Texas, Oklahoma, and Nebraska all posted 4%-28% increases from a year ago.”

In terms of production, LMIC analysts explain, all hay acres in 2021 declined 2.9% to nearly 50.7 million acres, which was the lowest since 1974.

“Alfalfa hay prices have been over $200 per ton for the last five months while other hay prices have averaged in the upper $140-per-ton range for the last several months,” say LMIC analysts. “Although recent alfalfa and other hay prices are not at record levels, they are still near some of the highest on record. Hay supplies will continue to be lower, especially in the Western U.S., and hay prices are expected to remain elevated which will likely limit livestock producer profitability in the near term.”

Negotiated cash fed cattle trade ranged from mostly inactive on very light demand to a standstill through Monday afternoon, according to the Agricultural Marketing Service. There were too few transactions to trend.

Last week, live prices were at $136-$137/cwt. in the Texas Panhandle, $135-$136 in Kansas, $137 in Nebraska and $138 in the western Corn Belt. Dressed trade was at $218.

Choice Boxed beef cutout value was $3.55 higher Monday afternoon at $287.86/cwt. Select was $3.08 higher at $277.05.

Futures and equity markets were closed Monday in observance of Martin Luther King Day.

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When Jan. 1 cattle inventory numbers are released by USDA at the end of this month, odds are they will show continued contraction of the U.S. beef cow herd; the degree is up in the air, though.

“The general feeling among analysts seems to be that the herd likely decreased 1.5-2.0% in 2021, with some possibility that the decrease was over 2%,” said Derrell Peel, Extension livestock marketing specialist at Oklahoma State University in his mid-January market comments, “The level of beef cow slaughter in 2021 was up 9.1% year over year, leading to a culling rate of 11.44% for the year, the highest since 2011. In 2011, the beef cow herd decreased 2.04%. However, the net change in the beef cow herd in 2021 also depends on what happened with beef replacement heifers.”

At the beginning of last year, beef replacement heifers represented 18.7% of the beef cow herd, according to Peel. 

“This level of replacement heifers indicates neither significant herd liquidation nor does it suggest aggressive expansion,” Peel says. “In the last two decades, the beef replacement heifer percentage has varied from a low of 16.6% in 2011 (liquidation) to a high of 21.0% in 2016 (expansion) and has averaged 18.2%.”

Last year, Peel explains the inventory of replacement heifers was higher than in 2011, as was the inventory of heifers calving.

“This likely means that some of the additional cow culling in 2021 was offset by more bred heifers entering the herd,” Peel explains. “The heifer calves portion of the replacement heifers from one year ago may well have been diverted to feeder markets but many of the sizable inventory of bred heifers likely entered the herd somewhere. All of this discussion is complicated by the drought conditions in 2021, which impacted what producers had to do as opposed to what they would like to do.”

Most likely, Peel says the inventory of beef replacement heifers will be significantly lower.