WLI

As expected, markets viewed Friday’s Cattle on Feed report as bearish, despite the fact that cattle numbers continue to decline overall and will continue to decline.

Feeder Cattle futures closed an average of 69¢ lower (17¢ lower at the back to $1.65 lower toward the front).

Live Cattle futures closed an average of 31¢ lower, except for 32¢ and 2¢ higher in the front two contracts.

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

Last week, live prices were steady in the Texas Panhandle at $175/cwt., steady to $2 lower in Kansas at $173-$175, $1-$2 lower in Nebraska at $180-$185 and steady to $1 lower in the western Corn Belt at $180-$183.

Dressed prices were steady to $6 lower in Nebraska at $284-$290 and $2 lower in the western Corn Belt at $288.

The weighted average five-area direct fed steer price was $178.57/cwt. on a live basis last week, which was 1.87 lower. The average fed steer price in the beef was $2.35 lower at $287.42.

Choice boxed beef cutout value was 52¢ higher Monday afternoon at $307.12/cwt. Select was 90¢ higher at $288.70/cwt.

Corn futures closed mostly 2¢ to 3¢ higher on Monday, except for fractionally lower to 12¢ lower in the front four contracts.

KC HRW Wheat closed mostly 7¢ to 8¢ lower.

Soybean futures closed 8¢ to 18¢ lower through May ‘24 and then 6¢ to 8¢ lower.

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Major U.S. financial indices closed narrowly mixed Monday, ahead of quarterly corporate earnings reports from bellwether tech companies.

The Dow Jones Industrial Average closed 66 points higher. The S&P 500 closed 3 points higher. The NASDAQ was down 35 points.

West Texas Intermediate Crude Oil futures (CME) closed 89¢ to 94¢ higher through the front six contracts.

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Although futures traders appeared to use Friday’s Cattle on Feed report as a reason to sell, cattle numbers are less year over year and will continue to decline.

Analysts with the Livestock Marketing Information Center (LMIC) point out strong placements of cattle weighing 700-799 pounds and 800-899 pounds likely point to drought forcing cattle from wheat pasture earlier than usual in Kansas, Texas and Oklahoma. In theory, in the latest Livestock Monitor, they say it suggests fewer cattle available to place in April-May. They add that the ratio of heifers on feed remains historically high.

“…Heifers are a strong proportion of the FI slaughter mix and beef cow slaughter continues at a strong pace. The unsaid conclusion is that better cattle prices are yet to come — that should be a question,” says Stephen Koontz, agricultural economist at Colorado State University, in the latest issue of In the Cattle Markets. “I believe the continued rally is unlikely for the remainder or even a portion of the year. Seasonality is favorable in the spring, but the seasonal peak is likely soon.”

Koontz points out cattle markets have been ruled by a unique environment the past couple of years including supply chain shocks and federal economic stimulus. He explains such factors have diminished.

“In the long-term the cattle market is likely to have substantial strength but in the short-term – within the year – we will see the market get back to business of relative protein prices mattering, disposable income not being substantially better than the prior year, and the surprises in trade news being pessimistic,” Koontz says. “Both inflation and the economy are slowing. And that corn crop is not yet planted.” 

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

For the week, live prices were steady in the Southern Plains at $175/cwt., $1-$2 lower in Nebraska at $180-$185 and unevenly steady in the western Corn Belt at $182. Dressed prices were $2 lower at $288.

Choice boxed beef cutout value was 39¢ lower Friday afternoon at $306.60/cwt. Select was 94¢ lower at $287.80/cwt.

However, weaker Corn futures helped Feeder Cattle futures ease an average of 44¢ higher Friday, (5¢ to $1.00 higher), except for $1.25 lower in spot Apr. They closed an average of $3.69 higher week to week on Friday (37¢ higher in spot Apr to $5.92 higher).

Live Cattle futures closed mixed, from an average of 18¢ lower to an average of 11¢ higher. They were an average of 78¢ higher week to week on Friday, except for 77¢ lower in spot Apr.

Corn futures closed mostly 7¢ to 9¢ lower.

KC HRW Wheat closed mixed, mostly 1¢ to 2¢ lower through May ’24 and then mostly 3¢ higher.

Soybean futures closed mostly 12¢ to 21¢ lower.

Cattle futures could face some pressure heading into the new week, based on Friday monthly Cattle on Feed report (see below).

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Major U.S. financial indices closed a touch higher Friday, once again amid mixed quarterly corporate earnings reports.

The Dow Jones Industrial Average closed 22 points higher. The S&P 500 closed 3 points higher. The NASDAQ was up 12 points.

West Texas Intermediate Crude Oil futures (CME) closed 50¢ to 81¢ higher through the front six contracts.

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Markets will likely view Friday’s monthly Cattle on Feed report as bearish, depending on expectations priced into the market ahead of the report. For feedlots with 1,000 head or more capacity, placements and on-feed numbers were more than analyst estimates.

March placements of 1.99 million head were 13,000 head fewer year over year (-0.6%). That was 4.2% more than expectations.

In terms of placement weights, 35% went on feed weighing 699 pounds or less, 53% weighing 700-899 pounds and 12% weighing 900 pounds or more.

Marketings in March of 1.97 million head were 23,000 head less (-1.2%). That was in line with expectations.

Cattle on feed April 1 of 11.61 million head were 533,000 head fewer year over year (-4.4%), which was 0.8% more than analysts expected.

Cattle futures gained ground Thursday, helped along by eroding Corn futures, likely positioning ahead of Friday’s monthly Cattle on Feed report and despite the steady to softer tone of weekly fed cattle prices.

Feeder Cattle futures closed an average of $1.74 higher (35¢ to $2.75 higher).

Live Cattle futures closed an average of 62¢ higher, except for $1.32 lower in spot Apr and 10¢ lower in the back contract.

Traders appeared to pull some weather premium from grain and soybean contracts Thursday, with a more favorable forecast.

Weekly export sales also pressured Corn or Soybeans.

Net 2022-2023 U.S. corn export sales (April 13) were 41% less than the previous week and 79% less than the prior four-week average. Net 2022-2023 U.S. soybean export sales were down 73% from the previous week and 58% from the prior four-week average.

On the other hand, Net U.S. 2023 beef export sales of 19,100 metric tons were up noticeably from the previous week and up 47% from the prior four-week average, according to the latest U.S. Export Sales report. Increases were primarily for South Korea, Japan, Mexico, Taiwan and China.

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

So far this week, live prices are steady in the Southern Plains at $175/cwt., steady to $2 lower in Nebraska at $182 and unevenly steady in the western Corn Belt at $181-$183. Dressed prices are $2 lower at $288.

Choice boxed beef cutout value was $1.07 higher Thursday afternoon at $306.99/cwt. Select was $2.72 lower at $288.74/cwt.

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Major U.S. financial indices closed lower Thursday, led by tech stocks.

The Dow Jones Industrial Average closed 110 points lower. The S&P 500 closed 24 points lower. The NASDAQ was down 97 points.

West Texas Intermediate Crude Oil futures (CME) closed $1.73 to $1.87 lower through the front six contracts.

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Nationwide, drought conditions continued to improve last week. According to the latest U.S. Drought Monitor (April 18), drought existed across 25.8% of the continental United States, compared to 43.9% three months earlier and 55.4% a year earlier.

“The coverage of severe (D2) to exceptional (D4) drought is near to its lowest since July 2020,” according to Drought Monitor analysts.

However, moderate to severe drought continues to persist in the Southern Plains and Central Plains. The worst conditions will likely continue from the tip of Texas and up through Kansas, including eastern New Mexico and eastern Colorado, as well as pockets in the West. That’s according to the U.S. Seasonal Drought Outlook for April 20 through July 31 this year.

Prospects for El Niño developing provide some hope for those in the Central and Southern Plains. The National Weather Service Climate Prediction Center recently issued an El Niño Watch, with a 62% chance of El Niño developing in North America during May-July of this year.

An estimated 41% of the nation’s cattle inventory is in areas currently affected by drought.

Negotiated cash fed cattle was slow on light demand in the Southern Plains through Wednesday afternoon, where a light test brought steady money with last week at $175/cwt. on a live basis.

Elsewhere, trade ranged from limited on light demand to a standstill with too few transactions to trend, according to the Agricultural Marketing Service.

Live prices last week were $182-$184 in Nebraska and $180-$184 in the western Corn Belt. Dressed prices were $290.

Choice boxed beef cutout value was $1.14 lower Wednesday afternoon at $305.92/cwt. Select was 15¢ lower at $291.46/cwt.

Cattle futures mostly softened Wednesday, with consolidation and awaiting weekly cash fed cattle trade.

Feeder Cattle futures closed an average of 41¢ lower (2¢ lower at the back to $1.25 lower at the front), except for 70¢ and 25¢ higher in Aug and Sep, respectively.

Live Cattle futures closed an average of 87¢ lower (25¢ lower at the back to $1.60 lower toward the front).

Grain futures were pressured Wednesday by Poland’s announcement to allow grain to flow through its country from Ukraine, while maintaining its closure to grain purchases from that nation.

Corn futures closed mostly 3¢ to 8¢ lower.

KC HRW Wheat closed 14¢ to 19¢ lower.

Soybean futures closed 8¢ to 12¢ lower through Sep ‘24 and then 4¢ to 6¢ lower.

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Major U.S. financial indices closed flat again Wednesday amid mixed quarterly earnings reports.

The Dow Jones Industrial Average closed 79 points lower. The S&P 500 closed fractionally lower. The NASDAQ was up 3 points.

West Texas Intermediate Crude Oil futures (CME) closed $1.60 to $1.70 lower  through the front six contracts.

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Odds of the world economy achieving a soft landing of lower inflation and steady growth continue to recede, according to the latest quarterly World Economic Outlook (WEO) from the International Monetary Fund.

“The global economy remains on track for a gradual recovery from the pandemic and Russia’s war in Ukraine. China’s reopened economy is rebounding strongly. Supply chain disruptions are unwinding while the dislocations to energy and food markets caused by the war are receding,” says Pierre-Olivier Gourinchas, IMF economic counsellor and director of the research department. “The massive and synchronized tightening of monetary policy by most central banks is starting to bring inflation back towards its targets. At the same time, serious financial stability-related downside risks have emerged.”

The current WEO predicts a bottom in global economic growth this year at 2.8% before inching higher to 3% next year. Expected global inflation declines but slower than originally anticipated, from 8.7% last year to 7% this year and 4.9% next year.

“Inflation is much stickier than anticipated even a few months ago,” Gourinchas says. “While global inflation has declined, this reflects mostly the sharp reversal in energy and food prices, but core inflation, excluding energy and food prices, has still not peaked in many countries. It is expected to decline to 6.2% this year, still well above target.”

“Risks to the outlook are heavily skewed to the downside, with the chances of a hard landing having risen sharply,” according to the WEO Executive Summary. Financial sector stress could amplify and contagion could take hold, weakening the real economy through a sharp deterioration in financing conditions and compelling central banks to reconsider their policy paths.”

Cattle futures eased higher Tuesday, with follow-through support.

Feeder Cattle futures closed an average of 65¢ higher.

Live Cattle futures closed an average of 25¢ higher (10¢ higher at the back to 72¢ higher at the front).

Corn futures closed mostly 1¢ to 4¢ higher.

KC HRW Wheat closed 6¢ to 8¢ lower through May ‘24 and then mostly 1¢ lower.

Soybean futures closed mostly 5¢ to 8¢ 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.

Live prices last week were $175/cwt. in the Southern Plains, $182-$184 in Nebraska and $180-$184 in the western Corn Belt. Dressed prices were $290.

Choice boxed beef cutout value was $1.08 higher Tuesday afternoon at $307.06/cwt. Select was $2.29 higher at $291.61/cwt.

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Major U.S. financial indices closed little changed on Tuesday amid mixed quarterly earnings reports.

The Dow Jones Industrial Average closed 10 points lower. The S&P 500 closed 3 points higher. The NASDAQ was down 4 points.

West Texas Intermediate Crude Oil futures (CME) closed 3¢ to 7¢ higher through the front six contracts.

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USDA’s Economic Research Service (ERS) increased the projected second-quarter feeder steer price (750-800 pounds, Oklahoma City) by $6/cwt. to $199, based on recent price data. In the latest monthly Livestock, Dairy and Poultry Outlook, ERS forecast prices at $214 in the third quarter and $224 in the fourth quarter for an annual average of $205.12, which would be about $37 higher year over year.

As reported recently in Cattle Current, ERS projected the weighted average five-area direct fed steer price $6 higher in the second quarter and $3 higher in the third and fourth quarters: $169/cwt. in the second, $214 in the third and $224 in the fourth quarter. The average annual price was projected to be $164.50, about 14% more year over year.

“Despite an increase in expected fed cattle marketings in 2023 from last month, supplies will remain tighter than last year,” ERS analysts say. “The recent surge in prices may be attributed to stronger demand in the North, where packing capacity is the greatest but market-ready supplies may be relatively tighter.”

The same goes for the current price differential between North and South. For example, ERS analysts explain, based on price data for the week ending April 9, the total all-grades price for Nebraska steers averaged $175.37/cwt., which was $5.42 more than reported prices in Texas.

“The difference in prices likely reflects, in part, the relative availability of fed cattle in the South. Nebraska has a relatively smaller supply of market-ready cattle, despite poor winter weather conditions possibly pushing Nebraska feedlots to keep cattle on feed longer to achieve the desired carcass grades,” ERS analysts explain. “According to the Midwest Regional Climate Center’s Accumulated Winter Season Severity Index, many locations in the Northern Plains experienced extreme winter weather this year, and this likely decreased feedlot performance, lowering cattle out-weights. As a result, packers likely had to increase prices paid for fed cattle in Nebraska relative to southern markets.”