WLI

Cattle futures traded mixed Monday, holding their own in the face of higher grain futures.

Feeder Cattle futures closed an average of 36¢ higher, except for an average of 15¢ lower in two contracts.

Live Cattle futures closed mixed, from an average of 38¢ lower (10¢ to 70¢ lower) through Feb and then unchanged to an average of 10¢ higher.

Grain and Soybean futures bounced back some Monday with apparent technical resistance to the downside and perhaps some weather premium with the drier, hotter near-term outlook in parts of the Corn Belt.

Corn futures closed mostly 7¢ to 8¢ higher.

KC HRW Wheat closed fractionally higher to 3¢ higher.

Soybean futures closed mostly 15¢ to 21¢ higher.

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

For the week, live prices were steady in the Southern Plains at $170/cwt., $2 higher in Nebraska at $178 and steady to $3 higher in the western Corn Belt at $177-$178. Dressed prices were steady to $2 higher at $280-$282.

The five-area direct weighted average fed steer price was $1.02 higher last week at $175.15/cwt. The weighted average fed steer price in the beef was $1.36 higher at $280.84.

Choice boxed beef cutout value was $2.80 higher Monday afternoon at $303.90/cwt. Select was 51¢ lower at $283.43/cwt.

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Major U.S. financial indices closed mixed Monday, as investors continued to eye debt ceiling negotiations. 

The Dow Jones Industrial Average closed 140 points lower. The S&P 500 closed fractionally higher. The NASDAQ was up 62 points.

West Texas Intermediate Crude Oil futures (CME) closed 32¢ to 44¢ higher through the front six contracts.

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Beef cow slaughter continues less than last year but the year-to-date decline of 11%, with about five months of the year already gone, suggests the herd will continue to liquidate some more this year, says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments.

“In 2014, beef cow slaughter dropped just over 18% from the previous year to put the brakes on herd liquidation. I suspect that the ongoing drought is masking continued liquidation in some areas up to this point,” Peel explains. “The low bred heifer inventory combined with the relatively slow reduction in beef cow slaughter makes additional beef cow herd liquidation this year probably unavoidable. In other words, if drought conditions continue to improve, 2024 will probably be the low point of the herd similar to 2014, albeit at even lower beef cow inventories.”

Assuming drought continues to fade, Peel explains, “What all of this means is that heifer retention likely will begin in earnest this fall with heifer calves to be bred in 2024. Modest herd expansion is possible next year with faster herd expansion after 2024.”

Negotiated cash fed cattle trade was mostly slow on light to moderate demand through Friday afternoon, according to the Agricultural Marketing Service.

For the week, live prices were steady in the Southern Plains at $170/cwt., $2 higher in Nebraska at $178 and $1-$3 higher in the western Corn Belt at $178. Dressed prices in Nebraska were steady to $2 higher at $280-$282.

Stronger cash fed cattle prices in the North, coupled with erosion in Corn futures helped lift Cattle futures again on Friday.

Feeder Cattle futures closed an average of 64¢ higher (17¢ to 77¢ higher).

Live Cattle futures closed an average of 49¢ higher.

Choice boxed beef cutout value was $2.79 higher Friday afternoon at $301.10/cwt. Select was 33¢ higher at $283.94/cwt.

Estimated total cattle slaughter last week of 642,000 head was 4,000 head fewer than the previous week and 15,000 head fewer than the same week last year. Year-to-date estimated total cattle slaughter of 12.6 million head was 423,000 head fewer (-3.3%) than a year earlier. Estimated year-to-date beef production of 10.3 billion pounds was 513.6 million pounds less (-4.7%).

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As alluded to, market bears continued to pressure the grain complex Friday. Faster than average domestic planting, extension of the Black Sea Grain Initiative and China’s continued cancellation of contracts for U.S. corn all fueled bearishness in grain markets during the week.

Corn futures closed mostly 1¢ lower.

KC HRW Wheat closed 25¢ to 32¢ lower through May ‘24 and then 4¢ to 11¢ lower.

Soybean futures closed mostly 6¢ to 11¢ lower.

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Major U.S. financial indices closed lower Friday, dampened by stalled debt ceiling negotiations.

The Dow Jones Industrial Average closed 109 points lower. The S&P 500 closed 6 points lower. The NASDAQ was down 30 points.

West Texas Intermediate Crude Oil futures (CME) closed 25¢ to 39¢ lower through the front six contracts.

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USDA announced confirmation of an atypical case of Bovine Spongiform Encephalopathy (BSE) at a slaughter plant in South Carolina. According to Friday’s announcement, the cow, approximately 5 years old, never entered slaughter channels and at no time presented a risk to the food supply or to human health in the United States. Given the United States’ negligible risk status for BSE, USDA does not expect any trade impacts as a result of the finding.

USDA Animal and Plant Health Inspection Service’s (APHIS) National Veterinary Services Laboratories (NVSL) confirmed the cow was positive for atypical L-type BSE. The animal was tested as part of APHIS’s routine surveillance of cattle that are deemed unsuitable for slaughter.

Atypical BSE generally occurs in older cattle and seems to arise rarely and spontaneously in all cattle populations.

This is the nation’s 7th detection of BSE. Of the six previous U.S. cases, the first, in 2003, was a case of classical BSE in a cow imported from Canada; the rest have been atypical (H- or L-type) BSE.

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Markets will likely view the monthly Cattle on Feed report — feedlots with 1,000 head or more capacity — as neutral.

Placements in April of 1.7 million head were 76,000 head fewer (-4.2%) than a year earlier. That was 0.6% fewer than average estimates ahead of the report.

In terms of placement weights, 35% went on feed weighing less than 600 pounds, 49% weighing 700-899 pounds and 16% weighing 900 pounds or more.

Marketings in April of 1.7 million head were 192,000 head fewer (-10.1%) year over year. That was 0.3% less than pre-report estimates.

Cattle on feed May 1 of 11.6 million head were 414,000 head fewer (-3.4%) than the same time last year, about dead even with expectations.

Year-over-year on-feed numbers May 1 were 10% less in Colorado, 2% less in Kansas, 5% less in Nebraska, 9% less in Oklahoma and 4% less in Texas. Inventory was 5% more in Idaho, 2% more in Iowa and 9% more in Washington.

Cattle futures stepped higher Thursday, supported by recently lower Corn futures, bullish cash strength for feeder cattle, cattle feeders’ resolve to hold the line on fed cattle prices and perhaps some positioning ahead of Friday’s Cattle on Feed report.

Feeder Cattle futures closed an average of $2.83 higher ($1.55 to $3.35 higher).

Live Cattle futures closed an average of 78¢ higher.

Bearish sentiment continued in the grain complex.

Corn futures closed mostly 1¢ higher.

KC HRW Wheat closed mostly 18¢ to 28¢ lower.

Soybean futures closed mostly 1¢ to 3¢ lower.

Negotiated cash fed cattle trade was slow on light demand in the Texas Panhandle through Thursday afternoon, according to the Agricultural Marketing Service. Prices were steady at $177/cwt.

Elsewhere, trade was limited on light demand. Although too few to trend, there were some live trades in the western Corn Belt at $178.

Last week, live prices were $170/cwt. in Kansas, mostly $176 in Nebraska and $175-$177 in the western Corn Belt. Dressed prices were $280.

Choice boxed beef cutout value was 16¢ higher Thursday afternoon at $298.31/cwt. Select was 16¢ higher at $283.61/cwt.

Net U.S. beef export sales (2023) were 17,400 metric tons for the week ending May 11, according to the U.S. Export Sales report. That was 5% more than the previous week and 7% more than the prior four-week average. Increases primarily were for Japan, South Korea, China, Mexico and Taiwan.

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Major U.S. financial indices closed higher again Thursday, once again supported by apparent optimism about debt ceiling talks.

The Dow Jones Industrial Average closed 115 points higher. The S&P 500 closed 39 points higher. The NASDAQ was up 188 points.

West Texas Intermediate Crude Oil futures (CME) closed 77¢ to 97¢ lower through the front six contracts.

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USDA’s Economic Research Service (ERS) raised the expected second-quarter feeder steer price by $5 to $204/cwt. That’s basis 750-800 lbs. at Oklahoma City. The increase was based on recent data and forecast declines in season-average corn prices, according to ERS analysts, in the May Livestock, Dairy and Poultry Outlook.

Projected feeder steer prices were unchanged for the third quarter at $214, but $4 lower in the fourth quarter at $220. The average annual price was little changed at $205.37. ERS projected next year’s annual average price at $220.75.

As mentioned recently in Cattle Current, ERS increased forecast fed steer prices (five-area direct) higher for the remainder of this year, in the May World Agricultural Supply and Demand Estimates (WASDE). Prices were projected $3 higher in the second quarter at $172/cwt., and $2 higher in the third and fourth quarters at $164 and $169, respectively. The annual average price estimate increased $2 to $166.50.

Lingering drought in the Central and Southern Plains continues to hold market sway.

“Despite recent rains, for some producers, the very low hay supplies may not be sufficient to offset poor pastures to sustain herds this summer and allow producers to retain breeding stock to rebuild their herds,” ERS analysts say. “As a result, the culling of beef cows continues at a relatively high rate. Based on USDA, Agricultural Marketing Service reports for weekly slaughter under federal inspection, the pace of monthly beef cow slaughter remains relatively high despite dropping to below the pace for the last two years in March and April. This has the potential to weaken the outlook for calf crops in late 2023 and 2024, further reducing potential cattle placements year over year in 2024.”

ERS projects new highs for cattle prices in 2024, as cattle numbers decline.

“The relatively strong pace of beef cow slaughter and relatively large placements of heifers in feedlots in 2022 and into early 2023 will likely yield a smaller year-over-year calf crop in 2023, tightening future cattle supplies,” ERS analysts say. “Further, this will likely lead to fewer cows and bulls in the slaughter mix in 2024, both as absolute numbers are lower and—assuming a return to normal pasture conditions—producers hold back animals for herd expansion.”

ERS projects 2024 beef production 8% less than this year at 24.7 billion pounds.

Cattle futures closed mostly lower Wednesday, apparently with spillover pressure from apparent long liquidation in grain futures.

Feeder Cattle futures closed an average of 88¢ lower (32¢ to $1.15 lower).

Live Cattle futures closed an average of 27¢ lower, except for an average of 58¢ higher in the front three contracts.

Negotiated cash fed cattle trade was limited on light to moderate demand in all regions through Wednesday afternoon, with too few transactions to trend, according to the Agricultural Marketing Service.

Last week, live prices were $170/cwt. in the Southern Plains, mostly $176 in Nebraska and $175-$177 in the western Corn Belt. Dressed prices were $280.

Choice boxed beef cutout value was $1.32 lower Wednesday afternoon at $298.15/cwt. Select was $1.46 lower at $282.89/cwt.

Grain and Soybean futures tumbled Wednesday. At least from a psychologic perspective, widespread selling appeared to be tied to the U.N. Secretary General’s announcement that Russia agreed to extend the Black Sea Grain initiative for another 60 days (see below). As well, private exporters reported the cancellation of sales of 272,000 metric tons of corn for delivery to China during the 2022/2023 marketing year.

Corn futures closed mostly 5¢ to 9¢ lower.

KC HRW Wheat closed mostly 12¢ to 20¢ lower.

Soybean futures closed mostly 15¢ to 19¢ lower.

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Major U.S. financial indices closed higher Wednesday, supported by gains in regional bank stocks and apparent optimism about debt ceiling talks. 

The Dow Jones Industrial Average closed 408 points higher. The S&P 500 closed 48 points higher. The NASDAQ was up 157 points.

West Texas Intermediate Crude Oil futures (CME) closed $1.97 to $2.16 higher through the front six contracts.

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You might recall one reason Russia continues to threaten withdrawing from the aforementioned Black Sea Grain Initiative is that it says economic sanctions imposed by the West — in response to the Russian invasion of Ukraine — are limiting its ability to export agricultural goods.

“Russia complains that its exports of food and fertilizers are hampered by sanctions. Let me be clear: Russia is exporting just fine. It is exporting grain and fertilizer at the same levels, if not higher, than before the full-scale invasion,” said Ambassador Linda Thomas-Greenfield, U.S. Representative to the United Nations, during a Foreign Press Center news briefing last week. “Russia’s threats are about money and power. The more Russia obstructs Ukraine’s exports, the higher prices go, and with Russian exports moving well, they’re making more profits.”

Despite Russia’s claims of export challenges, that nation’s grain and oilseed exports have thrived during the current marketing year, according to analysts with USDA’s Foreign Agricultural Service (FAS).

“Throughout 2022/23, Russia has benefited from large supplies, both beginning stocks and record production,” FAS analysts explain, in a report published last week. “Russia has exported significant quantities of both grains and oilseeds, despite its lack of transparent trade data. Additional sources of data validate the strong export volumes amid low prices.”

In fact, Russian wheat exports are forecast to hit a record 45.0 million tons in 2022/23, up 36% from the prior year and 3.5 million tons above its previous record in 2017/18, according to the report.

“While recent Russian government statements have claimed that economic sanctions have hampered Russia’s ability to export, in the case of grains and oilseeds, the Russian government itself has applied export taxes and quotas that affect its prices and export volumes,” FAS analysts say.

Feeder Cattle futures closed an average of 35¢ higher, except for 80¢ and 72¢ lower at either end of the board, supported by continued erosion in Corn futures.

Live Cattle futures closed an average of 25¢ lower, awaiting cash direction.

Wheat futures closed mostly 1¢ to 4¢ lower Tuesday with likely profit taking.

Corn futures closed 9¢ to 11¢ lower through Jly ‘24, and then mostly 7¢ lower.

Soybean futures closed mostly 19¢ to 36¢ lower.

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

Last week, live prices were $170/cwt. in the Southern Plains, mostly $176 in Nebraska and $175-$177 in the western Corn Belt. Dressed prices were $280.

Choice boxed beef cutout value was $2.51 lower Tuesday afternoon at $299.47/cwt. Select was 36¢ lower at $284.35/cwt.

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Major U.S. financial indices closed lower amid heightened recession fears, fueled by weaker retail sales than anticipated and a lower annual financial forecast from bellwether, Home Depot. 

The Dow Jones Industrial Average closed 336 points lower. The S&P 500 closed 26 points lower. The NASDAQ was down 22 points.

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

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Left to their own devices, markets rise and fall, discount and reward and find their way to economic truths, whether or not anyone likes the ride or the destination.

A recent editorial by the Wall Street Journal (WSJ) Editorial Board, and shared by the North American Meat Institute, provides a reminder.

Authors note Tyson Foods last week reported its first quarterly loss since 2009 as meat prices declined.

“Tyson’s stock plunged after it reported anemic sales and downgraded its forecast. The quarterly loss at the largest U.S. meat supplier marks a stunning reversal from 2021 and early last year when it earned record profits amid a run-up in meat prices,” write WSJ authors.

Back then, they also note lawmakers accused beef packers of conspiring to manipulate the market to pad profits.

“Are they now conspiring to lose money?” wonder the authors. “…If markets were ‘distorted,’ the culprit was pandemic transfer payments that were a disincentive to work. As these programs lapsed, hiring became easier. Competition for workers and market share raised supplier costs while pushing down prices and profits. Meat prices fell 0.4% in April and are up only 0.3% over the past 12 months…

“Tyson’s stock has fallen by nearly half over the past year and is trading at the lowest levels since 2015. This doesn’t look like an antitrust conspiracy or market oligopoly…”