WLI

Feeder Cattle futures closed an average of 88¢ higher Wednesday, supported by lower Corn futures.

Live Cattle futures closed narrowly mixed, from an average of 16¢ lower to an average of 33¢ higher.

Sharp volatility continued in grain futures, Wednesday, with traders apparently retrieving a chunk of recent risk premiums.

Corn futures closed 13¢ to 17¢ lower through Jly ‘24 and then 4¢ to 9¢ lower.

KC HRW Wheat closed 18¢ to 47¢ lower.

Soybean futures closed 1¢ to 2¢ lower, except for 30¢ and 18¢ higher in the front two contracts.

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 (FOB) live prices were $180/cwt in the Southern Plains and $188 in Nebraska and the western Corn Belt, where dressed prices (FOB) were $295.

Choice boxed beef cutout value was 88¢ lower Wednesday afternoon at $303.34/cwt. Select was $2.26 higher at $279.81/cwt.

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Major U.S. financial indices were mixed and little changed Wednesday, as the Fed interest rate hike (0.25%) was widely expected.

The Dow Jones Industrial Average closed 82 points higher. The S&P 500 closed fractionally lower. The NASDAQ was down 17 points.

West Texas Intermediate Crude Oil futures (CME) closed 57¢ to 85¢ lower through the front six contracts.

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Frozen beef supplies continue to decline year over year, according to the latest USDA Cold Storage report.

Total pounds of beef in freezers June 30 were 3% less than the previous month and 20% less than last year.

Frozen pork supplies were down 8% from the previous month and down 9% from the previous year.

Total red meat supplies in freezers were down 6% from the previous month and down 14% from last year.

Total frozen poultry supplies were 5% more than the previous month and 10% more than a year earlier.

Lower Corn futures helped Feeder Cattle futures firm Tuesday and close narrowly mixed, from an average of 15¢ lower to an average of 34¢ higher.

Live Cattle futures closed an average of 75¢ lower, except for 37¢ higher in in the back contract, with pressure tied, in part, to eroding open interest.

Corn futures softened Tuesday with likely profit taking, closing mostly 2¢ to 3¢ lower.

Soybean futures closed mostly 4¢ to 5¢ lower.

KC HRW Wheat closed mostly 4¢ to 6¢ higher through Mar ‘25.

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

Last week, live prices (FOB) live prices were $180/cwt in the Southern Plains and $188 in Nebraska and the western Corn Belt, where dressed prices (FOB) were $295.

Choice boxed beef cutout value was 6¢ higher Tuesday afternoon at $304.22/cwt. Select was 56¢ higher at $277.55/cwt.

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Major U.S. financial indices edged higher Tuesday, amid mixed quarterly corporate earnings.

The Dow Jones Industrial Average closed 26 points higher. The S&P 500 closed 12 point higher. The NASDAQ was up 85 points.

West Texas Intermediate Crude Oil futures (CME) closed 60¢ to 89¢ higher through the front six contracts.

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Rural economic growth continues, at least in one region, according to Creighton University’s Rural Mainstreet Index (RMI). Although it remained above growth-neutral for the fourth consecutive month, the RMI declined from 56.9 in June to 55.6 in July. The index ranges between 0 and 100, with a reading of 50.0 representing growth neutral. It is based on a survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.

“After negative growth during the first quarter of this year, the Rural Mainstreet economy experienced positive but slow economic growth for the second quarter and has now started the third quarter on a healthy note,” says Ernie Goss, Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business.

The region’s farmland price index rose to 64.6 from 59.3 in June and 56.3 in May. This was the 34th straight month that the index has advanced above 50.0. 

Bankers reported that, on average, non-farm investors secured approximately 17.1% of farmland sales in their area over the past six months. This is almost double the 9.1% reported by bankers in April 2022 when the same question was asked. 

Bank CEOs were asked to comment on the Federal Reserve’s current short-term interest rate policy. More than nine of 10 (92.5%) indicated that the Fed should cease raising rates. Only 7.5% indicated that the Fed should continue to raise short-term interest rates.

“Higher short-term interest rates produced by Federal Reserve’s rate hikes over the past year have posed a significant threat to community banks by expanding the costs of customer deposits while the rates on bank loans have risen little over the same time period,” Goss says.

Feeder Cattle futures took stepped lower Monday, pressured by sharply higher Corn futures and Friday’s bearish Cattle on Feed report which indicated June feedlot placements were 2.7% more than the previous year and 4.6% more that the average of analyst expectations ahead of the report.

Headlines of Russia bombing Ukrainian ports fueled grain and Soybean futures Monday.

Corn futures closed 27¢ to 33¢ higher through the front five contracts and then 9¢ to 19¢ higher.

KC HRW Wheat closed 46¢ to 58¢ higher through Jly ‘24 and then 32¢ to 40¢ higher.

Soybean futures closed mostly 19¢ to 22¢ higher.

Live Cattle futures faded most of the heat, supported by last week’s stronger cash trade.

Live Cattle futures closed an average of $1.08 higher (32¢ to $1.82 higher), except for an average of $1.24 lower in the front three contracts.

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 (FOB) were $2 higher in the Southern Plains at $180/cwt., $2 higher in Nebraska at $188 and $3-$4 higher in the western Corn Belt at $188. Dressed prices (FOB) were $3-$5 higher in Nebraska at $295 and steady to $5 higher in the western Corn Belt at $295.

The weighted average five-area fed steer price last week was $1.92 higher at $186.19/cwt. on alive basis. The weighted average dressed fed steer price was $3.38 higher at $294.72.

Choice boxed beef cutout value was $1.42 higher Monday afternoon at $304.16/cwt. Select was 26¢ higher at $276.99/cwt.

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Major U.S. financial indices closed higher Monday, buoyed by energy stocks.

The Dow Jones Industrial Average closed 183 points higher. The S&P 500 closed 18 point higher. The NASDAQ was up 26 points.

West Texas Intermediate Crude Oil futures (CME) closed $1.41 to $1.67 higher through the front six contracts.

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Reflecting on Friday’s semiannual USDA Cattle report, Derrell Peel, Extension Livestock Marketing Specialist at Oklahoma State University notes this is the fifth year of smaller beef cow inventories since the 2018 cyclical peak, with the beef cow herd down 3.0 million head, a five-year decrease of 9.3%.

“Not only did the report show continued cattle liquidation thus far in 2023, but there are also no clear indications that numbers will stabilize and grow anytime soon,” Peel says.  “The current inventory of beef replacement heifers is 4.05 million head, lower than the previous cyclical low of 4.2 million head in 2011 and 2012 and is the lowest in 50 years of available July 1 inventory data.”

Moreover, Peel points out the inventory of heifers in feedlots in the July Cattle on Feed report — unchanged from last year —indicates relatively large numbers of heifers continue to be fed for slaughter rather than retained for breeding. He adds that heifers currently represent 39.9% of total feedlot inventories, the highest proportion of heifers in feedlots since 2001.

“The sharp increase in feeder cattle prices this year represents a growing market incentive for the beef cattle industry to transition from liquidation to herd expansion, but it does not appear that the industry is responding yet,” Peel says. “Feeder cattle prices will continue to increase to jumpstart heifer retention, which will lead to even higher prices as feeder supplies are further squeezed with fewer heifers in the feeder cattle supply.”

Negotiated cash fed cattle trade was slow to moderate with moderate demand in all major cattle feeding regions through Friday afternoon, according to the Agricultural Marketing Service.

For the week, live prices in the Texas Panhandle were $2 higher (compared to two weeks earlier) at $180/cwt. Live prices in Kansas were unevenly steady at $180 (a few up to $187) with live delivered prices at $184-$185. Prices in Nebraska were mostly $2 higher at $188 with a few up to $190. In the western Corn Belt, live prices were mostly $3-$4 higher at $188.

Dressed prices (FOB) in Nebraska were $8-$10 higher at $300.

Choice boxed beef cutout value was 18¢ higher Friday afternoon at $302.74/cwt. Select was $2.02 higher at $276.73/cwt.

Estimated total cattle slaughter last week of 628,000 head was 5,000 head fewer than the previous week and 35,000 head fewer (-5.3%) than the previous year. Year-to-date estimated total cattle slaughter of 18.1 million head was 700,000 head fewer (-3.7%) than the same time last year. Estimated year-to-date beef production of 14.8 billion pounds was 735.5 million pounds less (-4.7%).

As for futures, Live Cattle futures closed an average of 40¢ lower Friday, except for an average of 6¢ higher in two contracts.

Conversely, stronger cash prices and softer Corn futures helped Feeder Cattle futures gain an average of $1.11. They could be challenged Monday, however, with what will likely be considered a bearish Cattle on Feed report (see below).

Corn futures softened again with likely profit taking. They closed 7¢ to 10¢ lower through Dec ‘24 and then 5¢ to 6¢ lower.

KC HRW Wheat closed mostly 14¢ to 15¢ lower.

Soybean futures closed mostly 1¢ to 2¢ lower, except for 6¢ and 2¢ higher in old-crop contracts.

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Major U.S. financial indices closed mixed and little changed Friday.

The Dow Jones Industrial Average closed 2 points higher. The S&P 500 closed 1 point higher. The NASDAQ was down 30 points.

West Texas Intermediate Crude Oil futures (CME) closed $1.10 to $1.42 higher through the front six contracts.

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Markets will likely view Friday’s Cattle on Feed report as bearish with more June placements than expected.

Placements in feedlots with 1,000 head or more capacity were 1.68 million head in June, which was 44,000 head more (+2.7%) than the previous year. That was 4.6% more that the average of analyst expectations ahead of the report.

In terms of placement weights, 39% went on feed weighing 699 pounds or less, 45% weighing 700-899 pounds and 16% weighing 900 pounds or more.

Marketings in June of 1.96 million head were 104,000 head fewer (-5.0%) year over year, which was in line with pre-report estimates.

Cattle on feed July 1 of 11.20 million head were 201,000 head fewer (-1.8%) than the previous year, which was also in line with pre-report estimates.

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National beef cow liquidation continues, and heifer retention has yet to begin, according to Friday’s semiannual USDA Cattle report.

There were 29.4 million beef cows in the U.S. July 1, which was 800,000 head fewer (-2.6%) year over year. The number of beef replacement heifers was 100,000 head fewer (-2.4%) at 4.0 million head. This year’s calf crop was estimated to be 33.8 million head, which would be 664,500 head fewer (-1.9%) than the previous year.

The calculated number of cattle outside feedlots July 1 — calves under 500 pounds, other heifers and steers weighing more than 500 pounds — was 34.4 million, which was 1.3 million head fewer (-3.6%) than the same time last year.

Total cattle and calves in the U.S. July 1 of 95.9 million was 2.7 million fewer (-2.7%) than a year earlier.

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.”