WLI

Another day of weaker Corn futures and the outlook for steady to stronger cash fed cattle prices this week helped Cattle futures extend gains Wednesday.

Feeder Cattle futures closed an average of $1.46 higher.

Live Cattle futures closed an average of 63¢ higher (25¢ higher in the spot month to $1.10 higher).

Expectations of record production in Brazil helped pressure Corn futures Wednesday.

Corn futures closed mostly 1¢ to 3¢ lower.

KC HRW Wheat closed 2¢ to 6¢ higher in the front three contracts and then mostly 1¢ to 2¢ lower.

Soybean futures closed mostly 6¢ to 16¢ lower.

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

Last week, live prices were $170-$171/cwt. in the Texas Panhandle, $171 in Kansas, $180-$182 in Nebraska and $182 in the western Corn Belt. Dressed prices were $280-$286 in Nebraska and $285 in the western Corn Belt.

Choice boxed beef cutout value was 88¢ higher Wednesday afternoon at $305.84/cwt. Select was 62¢ lower at $287.77/cwt.

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Major U.S. financial indices closed lower Wednesday with investors focused on continued debt ceiling talks.

The Dow Jones Industrial Average closed 134 points lower. The S&P 500 closed 25 points lower. The NASDAQ was down 82 points.

West Texas Intermediate Crude Oil futures (CME) closed $1.29 to $1.37 lower through the front six contracts.

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USDA forecast beef exports for fiscal year (FY) 2023 at $9.3 billion, in the quarterly Outlook for U.S. Agricultural Trade from the Economic Research Service (ERS) and Foreign Agricultural Service (FAS). The total would be $700 million less than February’s projection on weaker unit values for beef muscle cuts more than offsetting firm shipments to Mexico and East Asia.

Total livestock, poultry, and dairy exports were lowered $1.2 billion to $39.3 billion with lower beef and poultry estimates outweighing gains in dairy.

U.S. agricultural exports were forecast at $181.0 billion, down $3.5 billion from the February forecast. This revision was driven by decreases in corn, wheat, beef, and poultry exports.

“Corn exports are forecast $2.1 billion lower to $14.5 billion on lower unit values and volumes as Brazil is poised to harvest a record second crop of corn,” say ERS and FAS analysts.

For overall perspective, the global economic outlook remained mostly unchanged.

“Inflation remains on a slowing trend, but economic growth challenges are materializing as monetary conditions tighten,” explains ERS and FAS analysts. “North America is still projected to grow moderately, with growth in the Eurozone projected to remain at lower levels. World real gross domestic product (GDP) is projected to increase by 2.8% in 2023, unchanged from the previous forecast.”

The quarterly outlook pegs projected growth for the United States’ real GDP in 2023 0.2% higher at 1.6%. 

Last week’s strong cash fed cattle prices, recent higher wholesale beef prices and Tuesday’s break in Corn futures helped propel Cattle futures higher.

Feeder Cattle futures closed an average of $3.24 higher.

Live Cattle futures closed an average of $1.53 higher.

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 were $170-$171/cwt. in the Texas Panhandle, $171 in Kansas, $180-$182 in Nebraska and $182 the western Corn Belt Dressed. prices were $280-$286 in Nebraska and $285 in the western Corn Belt.

The weighted average five-area direct fed steer price last week was $2.79 higher at $177.94/cwt. The average fed steer price in the beef was $4.02 higher at $284.36.

Choice boxed beef cutout value was $1.03 higher Tuesday afternoon at $304.96/cwt. Select was $2.85 higher at $287.77/cwt.

Grain and Soybean futures closed sharply lower Tuesday as traders appeared to take back weather premium, as well as profits from last week’s rally. 

Corn futures closed mostly 6¢ to 10¢ lower.

KC HRW Wheat closed 22¢ to 35¢ lower in the front five contracts and then 8¢ to 12¢ lower.

Soybean futures closed 30¢ to 41¢ lower through Aug ’24 and then 21¢ to 26¢ lower.

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Major U.S. financial indices closed little changed Tuesday with investors focusing on continued debt ceiling talks.

The Dow Jones Industrial Average closed 50 points lower. The S&P 500 closed fractionally higher. The NASDAQ was up 41 points.

West Texas Intermediate Crude Oil futures (CME) closed $2.81 to $3.21 lower through the front six contracts, pressured by concerns about global demand.

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“Increasingly tight cattle supplies suggest that margins at all levels above the cow-calf sector will be squeezed in the coming months.  The severity of the squeeze and the timing will vary across beef industry segments,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments.

Stating with the cow-calf sector, Peel explains calf prices are currently about 50% higher year over year. 

“With calf prices increasing faster than feeder cattle prices, stocker margins or value of gain is eroding. However, similar to feedlots, the time lags in stocker production will allow the uptrend in feeder prices to offset part of the high calf purchase prices,” Peel explains. “Calf prices are likely to continue increasing faster than feeder cattle prices in the coming months.”

So far, feedlot returns remain positive, due to long time lags associated with the sector and the recent rise of fed cattle prices to record levels, according to Peel.

“The increase in fed cattle prices is balanced against the price of feeder cattle placed in feedlots roughly six months ago,” Peel says.  “However, it’s just a matter of time before feedlot margins feel the squeeze of rising cattle prices. The prices of feeder cattle currently being placed in feedlots are up about 39% year over year.  Feedlot breakevens for fed cattle will increase sharply by the end of the year.”

As for the packing sector, Peel points out margins are already being squeezed as the 25% year-over increase in fed cattle prices runs ahead of boxed beef prices, which are about 14% higher.

“Additionally, packers will face increased overhead costs as declining cattle numbers will reduce packing plant utilization rates in the coming months,” Peel says.

Finally, comes the retail sector, where Peel says prices have remained mostly static during the last 16 months.

“It appears that retail margins are decreasing as wholesale values are increasing faster than retail prices,” Peel explains.  “The reported retail beef prices reflect only grocery sales and less is known about beef price adjustments in food service and export markets.  The ability of retail beef prices to move higher as limited supplies and rising wholesale prices squeeze retail margins is perhaps the biggest concern in beef markets currently.”

Live Cattle futures continued to grind higher, closing an average of 49¢ higher (5¢ higher at the front to 92¢ higher at the back), supported by stronger cash prices and wholesale beef values.

Feeder Cattle futures closed an average of 75¢ lower in light trade, pressured by the bounce higher in Corn futures.

Grain and Soybean futures closed higher Friday as traders appeared to add weather premium with the dry, hot outlook in the Corn Belt for the next couple of weeks.

Corn futures closed mostly 10¢ to 18¢ higher.

KC HRW Wheat closed 1¢ to 5¢ higher in the front five contracts and then 13¢ to 15¢ higher.

Soybean futures closed 10¢ to 17¢ higher.

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

For the week, live prices were $1 higher in the Southern Plains at $171/cwt., $2-$4 higher in Nebraska at $180-$182 and $4-$5 higher in the western Corn Belt at $182. Dressed prices were $4-$5 higher in Nebraska at $285-$286 and $3-$5 higher in the western Corn Belt at $285.

Choice boxed beef cutout value was $3.99 higher Friday afternoon at $303.93/cwt. Select was 38¢ higher at $284.92/cwt.

Estimated total cattle slaughter last week of 625,000 head was 17,000 head fewer than the prior week and 16,000 head fewer than the same week last year. Estimated year-to-date cattle slaughter of 13.2 million head was 441,000 head less (-3.2%). Estimated year-to-date beef production of 10.8 billion pounds was 523.7 million pounds less (-4.6%).

U.S. beef exports appear to regaining some momentum. Net U.S. beef sales (2023) for the week ending May 18 totaled 18,300 metric tons. That was 5% more than the previous week and 15% more than the prior four-week average. Increases were primarily for Japan, South Korea, China, Mexico and Taiwan.

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Major U.S. financial indices closed higher Friday with renewed optimism surrounding debt ceiling talks. Tech stocks continued to add support.

The Dow Jones Industrial Average closed 328 points higher. The S&P 500 closed 54 points higher. The NASDAQ was up 277 points.

West Texas Intermediate Crude Oil futures (CME) closed 81¢ to 84¢ higher through the front six contracts.

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Fuel and fertilizer prices remain historically high but are lower year over year, according to analysts with the Livestock Marketing Information Center (LMIC), in the latest Livestock Monitor.

“Prices have been elevated for the better part of two years, and although they have been trending lower, they are still well above historic levels,” LMIC analysts say. “Anhydrous Ammonia prices started the year at $1,308.33 per ton, which was 12% below prices at the start of 2022. Through mid-May, Anhydrous Ammonia prices have fallen almost 17% to the most recent price reported of $1,089.58 per ton. Typically, Anhydrous Ammonia prices range from about $520 to $575 per ton during the first five months of the year.”

Likewise, based on USDA’s Illinois Production Cost Report, LMIC analysts offer other examples, compared to a year earlier (May 26): Diesel prices are 29% less at $3.27 per gallon; Liquid Nitrogen prices are 17% less at $535.75 per ton; Urea prices are 31% less at $653 per ton.

“Urea prices still need to move lower to get closer to more typical prices, which are usually around $400 per ton for this time of year,” according to LMIC analysts.

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

So far this week, live prices are $1 higher in the Southern Plains at $171/cwt., $2-$4 higher in Nebraska at $180-$182 and $4-$5 higher in the western Corn Belt at $182. Dressed prices are $4-$5 higher in Nebraska at $285-$286 and $3-$5 higher in the western Corn Belt at $285.

Choice boxed beef cutout value was $1.64 higher Thursday afternoon at $299.94/cwt. Select was 75¢ higher at $284.54/cwt.

Cattle futures continued to edge higher Thursday, supported by the week’s stronger cash prices.

Feeder Cattle futures closed an average of 25¢ higher, except for unchanged at either end of the board.

Live Cattle futures closed an average of 51¢ higher (25¢ to $1.20 higher in spot Jun).

Corn futures closed mostly 2¢ to 4¢ lower Thursday with likely profit taking and positioning ahead of the long weekend.

KC HRW Wheat closed mostly unchanged to 5¢ higher.

Soybean futures closed mostly 9¢ to 12¢ lower.

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Major U.S. financial indices closed mixed Thursday with gains in tech stocks but overall uncertainty tied to the debt ceiling talks.

The Dow Jones Industrial Average closed 35 points lower. The S&P 500 closed 36 points higher. The NASDAQ was up 213 points.

West Texas Intermediate Crude Oil futures (CME) closed $2.08 to $2.51 lower through the front six contracts.

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Rural economic growth improved last month, according to the Rural Mainstreet Index, which increased from 50.1 in April to 55.8 in May. The index ranges between 0 and 100, with a reading of 50.0 representing growth neutral. 

“The Rural Mainstreet economy continues to experience slow economic growth,” says Ernie Goss, the Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business. “Only 11.5% of bankers reported improving economic conditions for the month, with 88.5% indicating no change in economic conditions from April’s slow growth.”

After declining below growth neutral for March, the overall Rural Mainstreet Index expanded above the threshold for a second straight month, according to the May monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.

The region’s farmland price index dropped to 56.3 from April’s 64.6. This was the 32nd straight month that the index has advanced above 50.0. 

Bankers reported that non-pasture farmland prices in their area grew by an average of 4.3% over the past 12 months. Respondents expected no price growth over the next 12 months.

The May loan volume index expanded to a strong 75.0 from 62.5 in April. The checking-deposit index plummeted to a second consecutive low of 22.0 from April’s 25.0, while the index for certificates of deposit and other savings instruments declined to 70.0 from April’s 74.0.

“Two consecutive record low checking deposit indices point to higher deposit outflows, even for community banks,” Goss says. 

Negotiated cash fed cattle trade was slow to moderate on moderate demand in the Southern Plains through Wednesday afternoon, according to the Agricultural Marketing Service. Prices were $1 higher at $171/cwt.

In Nebraska, trade was slow to moderate with moderate to good demand. Live prices were $2-$4 higher at $180-$182 and dressed prices were $4-$5 higher at $285-$286.

Although too few to trend, there were some live sales in the western Corn Belt at $180-$182 on slow trade with light to moderate demand. Live prices there last week were $177-$178 on a live basis; $280-$282 in the beef.

Cattle futures blossomed with the higher cash fed cattle prices.

Feeder Cattle futures closed an average of $1.33 higher, (87¢ to $2.17 higher).

Live Cattle futures closed an average of $1.04 higher (60¢ to $1.82 higher).

Choice boxed beef cutout value was $2.44 lower Wednesday afternoon at $298.30/cwt. Select was $2.51 higher at $283.79/cwt.

Corn futures closed mostly fractionally higher to 3¢ higher.

KC HRW Wheat closed mostly 15¢ to 29¢ lower.

Soybean futures closed mostly 2¢ to 4¢ lower.

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Major U.S. financial indices closed lower Wednesday with a negative rating watch for the U.S. AAA rating.

The Dow Jones Industrial Average closed 255 points lower. The S&P 500 closed 30 points lower. The NASDAQ was down 76 points.

West Texas Intermediate Crude Oil futures (CME) closed $1.37 to $1.44 higher through the front six contracts.

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Total pounds of beef in freezers April 30 were down 6% from the previous month and down 16% from last year, according to USDA’s Cold Storage report.

Frozen pork supplies were 6% more than the previous month 6% more than the previous year.

Total red meat supplies in freezers were up slightly from the previous month but down 5% from last year.

Total frozen poultry supplies were up 1% from the previous month and up 9% from a year ago.