WLI

Cattle futures strengthened during much of Thursday’s session but closed lower, perhaps with some defensiveness ahead of Friday’s Cattle on Feed report, as well as the Semiannual Cattle report. So far, these reversals have represented a breather rather than a top.

Live Cattle futures closed an average of 74¢ lower (35¢ to $1.05 lower).

Feeder Cattle futures closed an average of 71¢ lower (15¢ to $1.70 lower).

Negotiated cash fed cattle trade was slow to moderate in the western Corn Belt through Thursday afternoon, according to the Agricultural Marketing Service. Live prices were $3-$4 higher than last week at $188/cwt.

There were a few live sales in Nebraska at $188 on limited trade and light demand, but too few to trend.

Last week, live prices were $186/cwt. in Nebraska and $175-$184 in Kansas on a light test. Dressed prices were $290-$292 in Nebraska and $290-$295 in the western Corn Belt. Live prices in the Texas Panhandle the previous week were $178.

Choice boxed beef cutout value was $1.03 lower Thursday afternoon at $302.56/cwt. Select was $1.25 lower at $274.71/cwt.

Corn futures closed mostly 4¢ to 5¢ lower on likely profit taking.

KC HRW Wheat closed mixed, from 8¢ lower to 8¢ higher.

Soybean futures closed mixed, mostly 5¢ to 6¢ lower through Mar ’24 and then mostly 2¢ to 4¢ higher.

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Major U.S. financial indices closed mixed Thursday, amid mixed but mainly positive quarterly earnings reports.

The Dow Jones Industrial Average closed 163 points higher. The S&P 500 closed 30 points lower. The NASDAQ was down 294 points.

West Texas Intermediate Crude Oil futures (CME) closed 25¢ to 36¢ higher through the front six contracts.

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Friday’s semiannual USDA Cattle report should provide some insight to the degree of continued beef cow liquidation.

“Since January, slaughter data has indicated a 12% decline in beef cow slaughter,” say USDA Economic Research Service analysts, in the latest Livestock, Dairy and Poultry Outlook. “This is likely a combination of improving pasture conditions, sufficient reductions in animal units per acre on poorer pastures, and the prospect of improved profitability from selling calves. At the same time, dairy cow slaughter is up almost 6% year over year, but not by enough to offset the effect of declining beef cow slaughter on total cow slaughter. However, beef cow retention will likely cap cow slaughter for the foreseeable future.”

While beef cow slaughter is likely to decline more significantly in the second half of the year, it is unlikely to decline enough to come close to stabilizing the beef cow herd this year, according to Derrell Peel, Extension Livestock Marketing Specialist at Oklahoma State University, in his weekly market comments.

“There is no data currently to support the idea that heifer retention is under way, but it may have started with recent improvements in range and pasture conditions,” Peel says. The beef replacement heifer number in the upcoming report will be of keen interest and is likely to show a still smaller number compared to last year but could show a slight increase year over year if heifer retention has begun.”

Traders continued to add risk premium to grain and Soybean futures Wednesday.

Corn futures closed mostly 9¢ to 18¢ higher.

KC HRW Wheat closed 31¢ to 41¢ higher.

Soybean futures closed mostly 12¢ to 14¢ higher.

Higher Corn futures weighed on Feeder Cattle, which closed an average of 61¢ lower (27¢ to $1.20 lower), except for an average of 10¢ higher in the back two contracts.

However, recent cash strength and cattle feeders’ continued resolve to hold cattle helped push Live Cattle future an average of 43¢ higher (5¢ to 75¢ higher).

Negotiated cash fed cattle trade ranged from inactive on very light demand to a standstill through Wednesday afternoon, according to the Agricultural Marketing Service.

Last week, live prices were $186/cwt. in Nebraska, $184-$185 in the western Corn Belt and $175-$184 in Kansas on a light test. Dressed prices were $290-$292 in Nebraska and $290-$295 in the western Corn Belt. Live prices in the Texas Panhandle the previous week were $178.

Choice boxed beef cutout value was $1.09 lower Wednesday afternoon at $303.59/cwt. Select was 65¢ lower at $275.96/cwt.

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Major U.S. financial indices continued to gain Wednesday, as quarterly earnings continue to surpass expectations.

The Dow Jones Industrial Average closed 109 points higher. The S&P 500 closed 10 points higher. The NASDAQ was up 4 points.

West Texas Intermediate Crude Oil futures (CME) closed 22¢ to 40¢ lower through the front six contracts.

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The all-fresh aggregate retail beef price set a record in June at $7.57 per pound, which was 3¢ more than the previous monthly record established in October 2021, according to the Livestock Marketing Information Center (LMIC).

“Retail fresh beef prices are 3.1% higher than last year at this time,” LMIC analysts say in the latest Livestock Monitor. “Retail pork prices continued to decline, coming in at $4.68 per pound, about 5% lower than last June. Broiler retail prices ticked higher … Retail meat prices appear strong for beef and chicken, but domestic pork demand still seems to be struggling. Adding to pork complications is the new Prop 12 law, which will likely increase the amount of pork on the domestic market outside of California.”

Although the Consumer Price Index (CPI) continues to grow at a slowing pace, LMIC analysts note prices for food continued more than 5% higher year over year. They add that the meat index was only 0.6% higher.

Cash strength and weaker Corn futures helped lift Feeder Cattle futures Monday.

Feeder Cattle futures closed an average of $1.80 higher.

Live Cattle futures closed narrowly mixed, from an average of 18¢ lower in three contracts to an average of 34¢ higher (7¢ to 75¢ higher).

Apparently, the trade wasn’t buying reports of Russia pulling out of the Black Sea Grain initiative, set to expire on Tuesday without renewal. Grain futures were stronger right after the reports but lost ground throughout the session.

Corn futures closed mostly 6¢ to 8¢ lower.

KC HRW Wheat closed mostly 7¢ to 13¢ lower.

Soybean futures closed mostly 2¢ to 7¢ higher.

Negotiated cash fed cattle trade was inactive on very light demand in all major cattle feeding regions through Monday afternoon, according to the Agricultural Marketing Service.

Last week, live prices were generally $3 higher in Nebraska at $186/cwt., $1-$2 higher in the western Corn belt at $184-$185 and from $3 lower to $6 higher in Kansas at $175-$184. Dressed prices were steady to $2 higher in Nebraska at $290-$292 and steady to $5 higher in the western Corn Belt at $290-$295.

Live prices in the Texas Panhandle the previous week were $178.

The five-area direct weighted average fed steer price last week was $2.21 higher on a live basis at $184.27/cwt. The average fed steer price in the beef was $1.35 higher at $291.34.

Choice boxed beef cutout value was 84¢ higher Monday afternoon at $306.78/cwt. Select was 87¢ lower at $275.74/cwt.

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Major U.S. financial indices closed higher Monday ahead of this week’s bellwether quarterly corporate earnings reports.

The Dow Jones Industrial Average closed 76 points higher. The S&P 500 closed 17 points higher. The NASDAQ was up 131 points.

West Texas Intermediate Crude Oil futures (CME) closed 95¢ to $1.27 lower through the front six contracts.

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USDA will release the semiannual Cattle report Friday, which could provide some clues about the pace of further beef cow liquidation this year.

“The report is expected to show that herd liquidation continued in the first six months of the year but may slow in the remainder of the year,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “There is no data currently to support the idea that heifer retention is under way, but it may have started with recent improvements in range and pasture conditions. The beef replacement heifer number in the upcoming report will be of keen interest and is likely to show a still smaller number compared to last year but could show a slight increase year over year if heifer retention has begun.”

Likewise, analysts with USDA’s Agricultural Marketing Service explain preliminary numbers for the first half of the year indicate yearling heifer slaughter was the most in 15 years, while year-to-date beef clow slaughter is the second most in 10 years,

“With that number of females going to market in the first half of the year, it will take a considerable amount of time to turn the tide and have more heifer retention,” AMA analysts say.

Moreover, AMS analysts point out significant drought persists broadly across key the cow-calf states of Kansas and Missouri and Nebraska, as well as parts of Texas.

“The cattle inventory report will show that the beef cow herd continued to decline in the first half of the year. While beef cow slaughter is down thus far — 12.0% less year over year in the first six months of the year — the current pace suggests a herd culling rate over 12% for the year. Beef herd expansion requires a herd culling rate below 10% and likely below 9% for a year or more,” Peel says.

While beef cow slaughter is likely to decline more significantly in the second half of the year, Peel explains, “It is unlikely to drop enough to come close to stabilizing the beef cow herd this year.”

Negotiated cash fed cattle trade was slow on light to moderate demand in Nebraska and the western Corn Belt through Friday afternoon, according to the Agricultural Marketing Service.

Live prices in the western Corn Belt were $183-$186/cwt., which was $1-$2 higher than the previous week when dressed prices were $290.

Although too few to trend, there were a few live sales in Nebraska at $186 and a few in the beef at $291. Prices the previous week were $183.00-$186.50 and $290, respectively.

Trade in the Southern Plains remained inactive on very light demand. Prices the previous week were $178.

Live Cattle futures closed higher Friday, buoyed by stronger cash prices in the North, dragging Feeder Cattle along.

Live Cattle futures closed an average of $2.02 higher ($1.15 at the back to $3.27 higher in spot Aug).

Feeder Cattle futures closed an average of $1.97 higher.

Choice boxed beef cutout value was 97¢ lower Friday afternoon at 305.94/cwt. Select was $3.57 lower at $276.61.

Estimated total cattle slaughter last week was 633,000, which was 94,000 head more than the previous holiday-shortened week. Estimated year-to-date total cattle slaughter was 17.5 million head, which was 662,000 head fewer (-3.6%). Estimated year-to-date beef production of 15 billion pounds was 709.6 million pounds less (-4.7%).

Turning to the grain complex, Grain and Soybean futures closed higher Friday, supported by the lower U.S. dollar and the looming deadline to extend the Black Sea Grain initiative.

Corn futures closed mostly 7¢ to 13¢ higher.

Soybean futures closed mostly 4¢ to 9¢ higher.

KC HRW Wheat closed mostly 22¢ to 23¢ higher.

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Major U.S. financial indices closed higher to sideways Friday with follow-through support from recent inflation news, as well as a strong start to quarterly corporate earnings reports.

The Dow Jones Industrial Average closed 113 points higher. The S&P 500 closed 4 points lower. The NASDAQ was down 24 points.

West Texas Intermediate Crude Oil futures (CME) closed $1.28 to $1.47 lower through the front six contracts.

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Forecast cattle feeding returns continue to be extremely positive, according to the most recent Historical and Projected Kansas Feedlot Net Returns from Kansas State University.

Net returns for steers in Kansas (July-December) range from a low of $158.96 per head in December to a high of $261.37 in November. Net returns in July were projected to be $172.78. Over the same period, estimated feedlot cost of gain ranges from $139.65/cwt. in July to $110.60 in December.

Keep mind the returns reflect no price risk management.

Returns for heifers follow a similar pattern, ranging from a low of $68.66 per head in December to a high of $203.74 in October. July returns were estimated to be $156.98. During the same period, estimated feedlot cost of gain ranges from $153.59/cwt. in July to $118.45 in December.