WLI

Cattle futures closed sharply lower Wednesday, apparently driven by fund selling and likely pressure from outside markets.

Live Cattle futures closed an average of $2.53 lower ($1.97 to $2.95 lower).

Feeder Cattle futures closed an average of $4.35 lower.

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

Last week, live prices were $185/cwt. in the Texas Panhandle, $186 in Kansas, $189-$192 in Nebraska and $190 in the western Corn Belt. Dressed prices were $300 in Nebraska and $298-$300 in the western Corn Belt.

Choice boxed beef cutout value was $1.07 higher Wednesday afternoon at $339.06/cwt. Select was 22¢ lower at $309.26/cwt.

Corn futures closed 1¢ to 4¢ lower through Jly ‘24 and then mostly 1¢ higher.

Soybean futures closed mostly fractionally mixed.

KC HRW Wheat closed mostly 10¢ lower.

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Major U.S. financial indices closed mixed Wednesday after dropping sharply lower following the Federal Reserve’s decision to let current interest rates ride at its meeting this week, as expected. However, the nation’s bank also insinuated more hikes were likely to come later.

“Holding the target range steady at this meeting allows the Committee to assess additional information and its implications for monetary policy,” according to an FOMC statement. “Tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation. The extent of these effects remains uncertain.”

The Dow Jones Industrial Average closed 232 points lower. The S&P 500 closed 3 points higher. The NASDAQ was up 53 points.

West Texas Intermediate Crude Oil futures (CME) closed 99¢ to $1.15 lower through the front six contracts.

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Rapid escalation of wholesale beef prices since Memorial Day suggests beef demand remains positive, according to David P. Anderson, Extension livestock economist at Texas A&M University.

“Beef production will continue to be lower than a year ago, supporting higher wholesale beef prices. Normally, beef production increases seasonally in the summer months,” Anderson explains, in the latest issue of In the Cattle Markets. “Even though production may increase from current levels, it will be below last year. Reduced beef production combined with positive beef demand has drawn down beef in cold storage dramatically since the first of the year. Since January cold storage beef stocks have declined 86 million pounds, or 16%.”

As mentioned recently in Cattle Current, estimated year-to-date beef production of 11.8 billion pounds last week was 592.5 million pounds less (-4.8%) than a year earlier.

“It would appear beef demand actually changed post-coronavirus, when compared to the previous time period,” explains Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “…In the short term, beef supply is being impacted by slaughter rates and slaughter weights. Total steer and heifer slaughter continue to run below year-ago levels, but strong boxed beef prices incentivize growing animals to a larger weight. In recent weeks, cattle dressed weights have been catching up to year-ago weights, and it is likely cattle feeders will attempt to push finished weights higher than last year’s weights. This is about the only way to influence beef production in the short term.”

Cattle futures faded pressure early in Tuesday’s session to closer higher.

Live Cattle futures closed an average of 70¢ higher (35¢ to $1.02 higher), except for 10¢ lower in the back contract.

Feeder Cattle futures closed an average of $1.12 higher.

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

Last week, live prices were $185/cwt. in the Texas Panhandle, $186 in Kansas, $189-$192 in Nebraska and $190 in the western Corn Belt. Dressed prices were $300 in Nebraska and $298-$300 in the western Corn Belt.

Choice boxed beef cutout value was 56¢ higher Tuesday afternoon at $337.99/cwt. Select was 76¢ lower at $309.38/cwt.

Deteriorating crop conditions helped boosted Corn and Soybean futures Tuesday. 

Corn futures closed mostly 1¢ to 2¢ higher.

Soybean futures closed mostly 18¢ to 30¢ higher.

KC HRW Wheat closed 2¢ to 4¢ lower through May ‘24, and then 1¢ to 3¢ higher.

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Major U.S. financial indices closed higher again Tuesday with further indications of easing inflation.

The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.1% in May on a seasonally

adjusted basis, after increasing 0.4 percent in April, according to the U.S. Bureau of Labor Statistics. Over the last 12 months, the all items index increased 4.0% before seasonal adjustment.

The Dow Jones Industrial Average closed 145 points higher. The S&P 500 closed 30 points higher. The NASDAQ was up 111 points.

West Texas Intermediate Crude Oil futures (CME) closed $2.26 to $2.30 higher through the front six contracts, supported by easing inflation and China’s cut in short-term interest rates, both bullish for demand.

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Cutter cow prices (90% lean) have been more than $90/cwt. on a live basis the past three weeks, the first time since 2015, according to the Livestock Marketing Information Center (LMIC).

“This year started with a price for cutter cows in the mid-$60s and has steadily climbed into midyear,” say LMIC analysts, in the latest Livestock Monitor.

Price spreads serve as another example of how steady demand relative to declining numbers are impacting value.

“The spread in price between cutter cows and other grades of live-priced cows has shrunken considerably this year,” according to LMIC analysts.  “Last year, the average spread between premium whites and cutter cows was just over $10/cwt. This year, the average is just under $4. The same is true for breakers (75% lean) and boners (85% lean). Breaker volumes are up 8% year to date, and the premium to cutters has averaged $6.77 versus the 2022 average of $10.61 per cwt. Boner graded cow volumes are up almost 400% from last year at this time, and the premium to cutters has averaged $4.84 per cwt this year. In 2022, the average was $7.01 per cwt.”

Negotiated cash fed cattle trade was at a standstill in all major cattle feeding regions through Monday afternoon, according to the Agricultural Marketing Service.

Last week, Live prices were $5-$10 higher in the Texas Panhandle at $185/cwt., $6-$8 higher in Kansas at $186, steady to $9 higher in Nebraska at $189-$192 and $3-$5 higher in the western Corn Belt at $190. Dressed prices were $8-$15 higher in Nebraska at $300 and $8-$10 higher in the western Corn Belt at $298-$300.

The weighted average five-area direct fed steer price last week was $188.75/cwt. on a live basis, which was $6.72 more than the previous week. The average fed steer price in the beef was $9.16 higher at $299.21.

Choice boxed beef cutout value was $4.50 higher Monday afternoon at $337.43/cwt. Select was $4.53 higher at $210.24/cwt.

Last week’s strong gains in cash fed cattle prices and wholesale beef values helped lift Live Cattle futures higher on Monday, dragging Feeder Cattle along.

Live Cattle futures closed an average of $1.24 higher.

Feeder Cattle futures closed an average of 50¢ higher.

Corn futures closed mostly 10¢ to 18¢ higher, apparently driven once again by the latest weather outlook in the Corn Belt — drier this time.

Soybean futures closed mostly 3¢ to 8¢ higher, except for lower in the front two contracts.

KC HRW Wheat closed mostly fractionally mixed through May ‘24, and then 3¢ to 4¢ lower.

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Major U.S. financial indices closed higher Monday with apparent optimism the Fed will skip raising interest rates at this week’s meeting as inflation eases.

The Dow Jones Industrial Average closed 189 points higher. The S&P 500 closed 40 points higher. The NASDAQ was up 202 points.

West Texas Intermediate Crude Oil futures (CME) closed $2.66 to $3.05 lower through the front six contracts.

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Barring residual or redeveloping drought in key beef cow states, currently improving drought conditions and the onset of El Niño suggest beef herd liquidation is ending, according to Derrell Peel, extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. Nevertheless, he explains the beef cow herd will likely contract again this year.

“The first step to stabilizing the beef cow herd is the reduction of beef cow slaughter and a lower rate of cow culling,” Peel says. “Following record beef herd culling in 2022, beef cow slaughter is down 11.5% so far in 2023, a sign that herd liquidation is slowing.  However, I suspect that, until recently, the decrease in total beef cow slaughter was masking some continued liquidation in the drought areas of the plains… Beef cow slaughter is expected to decrease more sharply in the second half of the year.”

Definitive indication of herd expansion will come with increased heifer retention, according to Peel.

“Right now, no such signs exist, though I suspect that some heifer retention is beginning,” Peel says. “In fact, heifer slaughter thus far in 2023 is fractionally higher than last year’s elevated level. Of course, the reduced heifer feedlot placement that follows increased heifer retention will show up as lower heifer slaughter only after several months. The July Cattle inventory report may be the first sign that shows an increased inventory of beef replacement heifers. The report will be released July 21, 2023. Heifer slaughter is expected to start declining in the second half of the year.”

In the meantime, Peel notes the low inventory (Jan. 1) of replacement heifers — bred heifers calving this year and heifer calves to breed for calves in 2024.

“The bred heifer inventory is the lowest since 2011 and the inventory of replacement heifer calves is the lowest in the 23 years of data available,” according to Peel. “The number of replacement heifers is not enough to prevent more herd liquidation this year and likely not enough to do more than stabilize the beef cow herd in 2024. The big push for heifer retention will likely begin with weaning heifers this fall. These heifers will be bred in 2024, calve in 2025 and begin to increase beef production in 2026. It doesn’t seem possible to speed up the timeline.”

As herd expansion takes hold, reduced beef cow slaughter and increased heifer retention will pull beef production lower for a time.

“In the last herd expansion that began in 2014, total cattle slaughter in 2015 dropped to the lowest levels since 1963, resulting in the lowest beef production since 1993,” Peel explains. “We can expect analogous reductions in cattle slaughter and beef production in 2024 and 2025 at least. Increased heifer retention will pull feedlot inventories down sharply and keep them low for the expected three years of heifer retention that will be needed for the next herd expansion. With drought seemingly on its heels, the process of herd rebuilding is poised to begin.”

There was no afternoon negotiated cash fed cattle trade summary from AMS at press time but it sounded like feedlots in the Southern Plains were holding out for more money.

In the North, through Wednesday, dressed sales in Nebraska were $8-$15 higher at $300/cwt. and live sales in the western Corn Belt were $3-$5 higher at $190. Trade in the Southern Plains last week was at $175-$180.

Wholesale beef prices continued higher. Choice boxed beef cutout value was $3.54 higher Thursday afternoon at $328.73/cwt. Select was $2.54 higher at $304.10/cwt.

Both Live Cattle and Feeder Cattle futures closed an average of 90¢ lower, though bullish fundamentals remain.

Corn and Soybean futures closed higher with support from expanded drought coverage in the Corn Belt. Perhaps there was also positioning ahead of Friday’s World Agricultural Supply and Demand Estimates.

Corn futures closed mostly 3¢ to 5¢ higher.

Soybean futures closed mostly 10¢ to 12¢ higher.

KC HRW Wheat closed 14¢ to 18¢ higher, buoyed in part by Russia’s saber rattling over the Black Sea Initiative.

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Major U.S. financial indices closed higher Thursday with no apparent driver behind increased investor optimism.

The Dow Jones Industrial Average closed 168 points higher. The S&P 500 closed 26 points higher. The NASDAQ was up 133 points.

West Texas Intermediate Crude Oil futures (CME) closed $1.07 to $1.24 lower through the front six contracts.

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April beef export value per head of fed slaughter was $441.70, the highest since last July, according to data released by USDA and compiled by the U.S. Meat Export Federation (USMEF).

However, April beef exports were 10% below last year at 111,416 metric tons, while value fell 18% to $859.5 million.

Beef exports continued to gain momentum in Mexico in April, while exports also increased to South Korea, Europe and Africa. Exports to China/Hong Kong were relatively strong in April but shipments to Japan were down significantly.

Through the first four months of 2023, beef exports were down 8% in volume (437,910 mt) and were 21% lower in value ($3.21 billion) compared to last year’s record pace.

“With U.S. beef supplies tightening, it’s difficult to keep pace with the remarkable export totals posted in the first half of 2022, but exports continue to account for a similar share of production as last year’s record,” says Dan Halstrom, USMEF President and CEO. “The rebound in travel and tourism – which is now gaining momentum in Asia – and related foodservice opportunities continue to support beef demand. In some countries we have also seen a recent easing of the inflationary pressure on consumers’ discretionary income.”