WLI

Cattle futures rose Monday, buoyed by strong cash prices across the board.

Last week, the weekly weighted average five-area direct fed steer price was $7.34 higher on a live basis at $180.44/cwt. The average fed steer price in the beef was $11.12 higher at $289.77.

Regionally, negotiated cash fed cattle prices last week were $5 higher in the Southern Plains at $175/cwt. on a live basis, $7-$8 higher in Nebraska at $182-$184 and $6-$7 higher in the western Corn Belt at $180-$184. Dressed prices were $5-$10 higher at $290.

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

Those prices were helped along by the recent seasonal bump higher in wholesale beef values.

Choice boxed beef cutout value was $3.36 higher Monday afternoon at $305.98/cwt. Select was $5.45 higher at $289.32/cwt. Week to week on Monday, Choice was up $13.07 and Select was up $10.92.

Cash calf and feeder cattle prices followed a similar trajectory last week, with steers and heifers selling $5-$9/cwt. higher nationwide, except for $9-$15 higher in the North Central region, according to AMS.

Feeder Cattle futures closed an average of $1.31 higher on Monday (55¢ higher at the back to $2.85 higher toward the front).

Live Cattle futures closed an average of 93¢ higher.

That was with Grain and soybean futures closing higher Monday, with Support including cool-to-cold, wet weather on the cusp of planting season, as well as Poland’s decision to prohibit grain exports from Ukraine, which slows global grain flow.

Corn futures closed mostly 4¢ to 6¢ higher.

KC HRW Wheat closed mostly 9¢ to 13¢ higher.

Soybean futures closed mostly 10¢ to 18¢ higher in the front six contracts, and then 7¢ to 9¢ higher.

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Major U.S. financial indices closed higher Monday, with investors apparently betting on recent readings of cooling inflation and spending leading to less restrictive monetary policy, at least for the day.

The Dow Jones Industrial Average closed 100 points higher. The S&P 500 closed 13 points higher. The NASDAQ was up 34 points.

West Texas Intermediate Crude Oil futures (CME) closed $1.30 to $1.69 lower through the front six contracts.

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Domestic consumer beef demand resilience continues.

“It does not appear that consumer beef buying behavior has changed significantly thus far with higher retail beef prices,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “There is little indication of consumers trading down…i.e. switching to lower value products and away from more expensive beef cuts.”

For price perspective, Peel explains all fresh retail beef prices were $7.23 per pound in February, down 1.8% year over year.

“Retail beef prices have been mostly steady since late 2021.  The 12-month moving average of monthly retail beef prices has been above $7.25/lb. since April 2022,” Peel says. “This indicates strong beef demand given record beef production in 2022 and the highest beef consumption per capita at 58.9 pounds (unchanged from 2021) since 2010.  Retail all-fresh beef prices averaged $7.30/lb. in 2022, the highest on record and up 5.1% over 2021 average retail prices. The highest monthly price ever was in October 2021 at $7.55/lb.” 

Peel notes middle meats continue to lead wholesale beef prices higher with tenderloins and ribeyes 12-15% higher year over year. He explains Chuck and Round wholesale values vary across a wide range of products, while Brisket values are weaker compared to last year.

“Both 90% and 50% lean beef trimmings have advanced significantly thus far in 2023, pushing ground beef prices higher. Higher ground beef prices are probably partly due to stronger demand but are mostly due to decreasing supplies of processing beef,” Peel says.

Higher beef prices stem from strong consumer demand, as well as declining beef production. As noted in Cattle Current, estimated year-to-date cattle slaughter of 9.4 million head last week was 284,000 head fewer (-2.9%) than the same period a year earlier. Estimated year-to-date beef production of 7.7 billion pounds was 373.2 million pounds less (-4.6%).

“Carcass weights for all classes of cattle are lower year over year with average cattle carcass weights down 15.2 pounds year over year,” Peel says. “Steer carcass weights have averaged 14.7 pounds lighter this year with heifers averaging 19.2 pounds lighter and cow carcass weights smaller by 11.6 pounds compared to one year ago.”

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

Live prices last week were $5 higher in the Southern Plains at $175/cwt., $8-$9 higher in Nebraska at $182-$186 and $6-$7 higher in the western Corn Belt at $180-$184. Dressed prices were $5-$10 higher at $290.

Choice boxed beef cutout value was $2.20 higher Friday afternoon at $302.62/cwt. Select was 49¢ higher at $283.87/cwt. Week to week on Friday, Choice was $11.64 higher and Select was $8.09 higher.

Estimated total cattle slaughter last week of 613,000 head was 10,000 head more than the previous week but 25,000 head fewer than the same week last year. Estimated year-to-date cattle slaughter of 9.4 million head was 284,000 head fewer (-2.9%) than the same period a year earlier. Estimated year-to-date beef production of 7.7 billion pounds was 373.2 million pounds less (-4.6%).

Cattle futures finished mostly lower on Friday, weighed down by surging Corn futures.

Feeder Cattle futures closed an average of 88¢ lower (42¢ to $1.12 lower), except for 72¢ and 10¢ higher in the front two contracts.

Live Cattle futures closed an average of 43¢ lower, except for 12¢ higher in away Jun.

Week to week on Thursday, though, Feeder Cattle futures closed an average of $3.52 higher and Live Cattle futures closed an average of $1.41 higher.

Corn futures closed mostly 5¢ to 6¢ higher as traders appeared to apply some weather risk premium.

KC HRW Wheat closed mostly 29¢ to 33¢ higher powered by lingering drought, as well as resurgent rhetoric from Russia that it will withdraw from the Black Sea Initiative if the West fails to meet specific conditions.

Soybean futures closed mostly 10¢ to 12¢ lower, pressured by bullish Brazilian production expectations.

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Major U.S. financial indices softened Friday with pressure including weaker retail sales than expected.

Advance estimates of U.S. retail and food services sales for March 2023, were 1% less than the previous month but 2.9% higher year over year, according to the U.S. Census Bureau.

The Dow Jones Industrial Average closed 143 points lower. The S&P 500 closed 8 points lower. The NASDAQ was down 42 points.

West Texas Intermediate Crude Oil futures (CME) closed 36¢ to 39¢ lower through the front six contracts.

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“It was not that long ago that many cattle market analysts debated and held fast to the notion that live cattle prices would not reach and exceed $170 this spring. The market is now trading at $180, and most of those same analysts are smart enough to now be asking the question of just how high is this market going to go,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “There is no reason to put a limit on price expectations at this point because finished cattle prices have already surpassed what most people thought they would do this spring. The continued price run is hard to fathom as prices dance around $180. One would think that upside potential is waning at this point, but it is doubtful there will be much weakness through the summer and fall months, either.”

Griffith notes the expected seasonal increase in wholesale beef prices should provide underpinning.

“Wholesale beef prices should be supported the next six weeks as many retailers are purchasing for the summer grilling season and the unofficial kickoff to summer that is the Memorial Day weekend,” Griffith says. “Not only is the market being supported by the upcoming grilling season, but the start of baseball season tends to support beef movement as lots of hamburgers and hotdogs are consumed at baseball fields, regardless of whether it is 5-year-old children playing or it is the Atlanta Braves. There is likely room in the wholesale beef market for prices to continue escalating.

Tighter fed cattle supplies, compounded by weather-reduced tonnage kept the hammer down on negotiated cash fed cattle prices Thursday. Trade ranged from moderate with good demand in Nebraska to mostly inactive on light demand through Thursday afternoon, according to the Agricultural Marketing Service.

So far this week, live prices are $5 higher in the Southern Plains at $175/cwt., $7-$8 higher in Nebraska at $182-$184 and $7 higher in the western Corn Belt at $181-$184. Dressed prices are $5-$10 higher at $290.

Choice boxed beef cutout value was $1.94 higher Thursday afternoon at $300.42/cwt. Select was $1.57 higher at $283.38/cwt.

Cattle futures mostly edged lower Thursday with likely repositioning amid the strong rally.

Feeder Cattle futures closed an average of 50¢ lower, except for 5¢ and 45¢ higher in two contracts.

Live Cattle futures closed an average of 58¢ lower, except for $1.22 higher in spot Apr.

Corn futures closed fractionally lower to 3¢ lower.

KC HRW Wheat closed mostly 12¢ to 18¢ lower.

Soybean futures closed mostly 3¢ to 5¢ higher.

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Major U.S. financial indices closed higher Thursday with a another closely watched inflation gauge lower than expected.

The Producer Price Index for final demand declined 0.5% in March, seasonally adjusted, according to the U.S. Bureau of Labor Statistics. Final demand prices were unchanged in

February and increased 0.4% in January. On an unadjusted basis, the index for final demand advanced 2.7% for the 12 months ended in March.

The Dow Jones Industrial Average closed 383 points higher. The S&P 500 closed 54 points higher. The NASDAQ was up 236 points.

West Texas Intermediate Crude Oil futures (CME) closed 74¢ to $1.10 lower through the front six contracts.

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All things being equal, analysts with the Food and Agricultural Policy Research Institute at the University of Missouri (FAPRI-MU) see commodity prices mostly moderating and returning to a more historical semblance of normalcy.

“What goes up, generally comes back down in agricultural markets,” says Pat Westhoff, FAPRI-MU director Pat Westhoff. “Projected prices for most crops, poultry and dairy products all retreat in 2023 from recent peaks, and so do some production expenses…Net farm income is likely to fall back from the record levels of 2022 and consumer food price inflation is also likely to slow in 2023.” 

The projections Westhoff refers to come from the recently released FAPRI-MU annual U.S. Baseline Outlook report. The report includes projections for agricultural and biofuel markets and serves as a point of reference for evaluating alternative scenarios for agricultural policy.

Among some of the highlights…

In 2023, most projected livestock sector prices fall as supplies rebound and demand growth slows. The one major exception is cattle, where drought-reduced inventories reduce the number of animals available for slaughter.

If weather conditions allow crop yields to return to trend-line levels in 2023, prices for corn, soybeans, wheat, cotton and many other crops are likely to fall. Over the next 10 years, average nominal crop prices are much lower than they have been in 2022/23, but they remain above the average of 2017/18 to 2021/22.

Consumer food price inflation jumped to 9.9% in 2022 as farm commodity prices rose, labor and other costs increased, supply chain problems continued, and consumer demand was strong. Price increases have slowed in recent months, and the projected annual increase in consumer food prices is 4.4% in 2023 and under 2% in 2024.

Cattle futures continued to gain Wednesday with prospects for record-high cash fed cattle prices increasing again this week.

Feeder Cattle futures closed an average of $1.26 higher (12¢ to $1.80 higher).

Live Cattle futures closed an average of 78¢ higher (37¢ to $1.97 higher).

Choice boxed beef cutout value was $3.38 higher Wednesday afternoon at $298.48/cwt. Select was 23¢ lower at $281.81/cwt.

Negotiated cash fed cattle trade ranged from limited on light demand to mostly a standstill through Wednesday afternoon. Although too few to trend, there were some early live sales in the western Corn Belt at $181/cwt.

Last week, live prices were $170/cwt. in the Southern Plains and $174-$177 in Nebraska and the western Corn Belt. Dressed prices were $275-$280.

Corn futures closed mostly 1¢ to 3¢ lower.

KC HRW Wheat closed mostly 2¢ to 3¢ lower.

Soybean futures closed mostly 3¢ to 9¢ lower, except for nearby contracts.

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Major U.S. financial indices softened Wednesday with recessionary concerns, although inflation was lower last month than the trade expected.

The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.1% in March on a seasonally adjusted basis, after increasing 0.4% in February, according to the U.S. Bureau of Labor Statistics. Over the last 12 months, the all items index increased 5.0% before seasonal adjustment.

However, investors appeared to focus more on cautionary comments from the Federal Open Market Committee (FOMC).

“Given their assessment of the potential economic effects of the recent banking sector developments, the staff’s projection at the time of the March meeting included a mild recession starting later this year, with a recovery over the subsequent two years,” according to FOMC minutes released Wednesday.

The Dow Jones Industrial Average closed 38 points lower. The S&P 500 closed 16 points lower. The NASDAQ was down 102 points.

West Texas Intermediate Crude Oil futures (CME) closed $1.26 to $1.73 higher through the front six contracts.

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“From a seasonal standpoint, lightweight calf prices tend to soften after April, but it is highly unlikely lightweight calf prices will soften this summer and may even be higher during the fall of 2023 than the current time period,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments.

Likewise, Griffith notes feeder-weight cattle prices continue to gain amid narrowing supplies.

“The CME feeder cattle index has gained about $10/cwt. since the last day of February and the futures market is predicting further gains,” Griffith says. “The futures market may be a bigger story than the strength in local cash markets. The April Feeder cattle contract has traded between $193 and $200 since the beginning of March. It appears to have a direction towards higher prices, but recent volatility in the futures market makes it tough to say prices are definitely going to increase to predicted levels. It seems certain cattle prices are destined to continue increasing given supply and demand fundamentals, but meeting the current expectations of the futures market is not as certain. This is especially true looking into the summer and fall months that are trading between $222 and $228/cwt.” 

On the other side of the demand equation, Choice boxed beef cutout value is knocking at $300/cwt.

“There remain questions as to the consumer’s willingness to continue paying high prices for beef, and if those consumers are willing to pay more than they are currently paying,” Griffith says. “As has been mentioned before, there is no reason to doubt the consumer’s willingness to continue purchasing beef until the consumer demonstrates some sort of pushback on the market.”

Feeder Cattle futures closed an average of $1.86 higher ($1.17 to $2.62 higher), helped along by weaker Corn futures and cash strength.

Live Cattle futures closed an average of 57¢ higher, supported by cash strength and rising wholesale beef values.

Choice boxed beef cutout value was $2.19 higher Tuesday afternoon at $295.10/cwt. Select was $3.64 higher at $282.04/cwt.

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

Last week, live prices were $170/cwt. in the Southern Plains and $174-$177 in Nebraska and the western Corn Belt. Dressed prices were $275-$280.

Grain and Soybean futures seemed to bow to weather and outside markets more than the monthly World Agricultural Supply and Demand Estimates (see below).

Corn futures closed mostly 1¢ to 3¢ lower.

KC HRW Wheat closed mostly 8¢ to 10¢ lower.

Soybean futures closed mostly 2¢ to 4¢ higher.

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Major U.S. financial indices closed little changed Tuesday as investors awaited key inflation data Wednesday.

The Dow Jones Industrial Average closed 98 points higher. The S&P 500 closed fractionally lower. The NASDAQ was down 52 points.

West Texas Intermediate Crude Oil futures (CME) closed $1.56 to $1.79 higher through the front six contracts.

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USDA’s Economic Research Service (ERS) increased the expected annual five-area direct fed steer price for this year by $2.50 to $164.50/cwt. In the latest World Agricultural Supply and Demand Estimates (WASDE), ERS projected the second-quarter price $6 higher than the previous month at $169. Expected prices for the third and fourth quarters were raised by $3 to $162 and $167, respectively.

That was with beef production forecast 110 million pounds more than the previous month (+0.4%) at 26.77 billion pounds. The total would be 1.5 billion pounds less (-5.3%) than last year.

Corn — This month’s 2022/23 U.S. corn outlook was for reduced imports and food, seed, and industrial (FSI) use, with unchanged ending stocks. With supply and use falling by the same amount, ending stocks were unchanged at 1.34 billion bushels.

The season-average farm price was unchanged at $6.60 per bushel.

Soybeans — U.S. soybean supply and use forecasts for 2022/23 were unchanged relative to last month. Soybean and soybean meal prices also were unchanged at $14.30 per bushel and $465 per short ton, respectively. The soybean oil price was projected 2¢ lower at 64¢ cents per pound.

Wheat — The outlook for 2022/23 U.S. wheat was for slightly higher supplies, reduced domestic use, unchanged exports, and increased ending stocks. Projected 2022/23 ending stocks were raised 30 million bushels to 598 million, still 14% below last year.

The 2022/23 season-average farm price was forecast 10¢ per bushel lower at $8.90, based on NASS prices reported to date and expectations for cash prices for the remainder of 2022/23.