WLI

Cattle futures firmed in cautious trade Tuesday, helped along by more optimistic outside markets.

Feeder Cattle futures closed an average of 38¢ higher, except for an average of 9¢ lower in the back two contracts.

Live Cattle futures closed mixed, from an average of 44¢ higher in the front three contracts to an average of 25¢ lower.

Lower grain and Soybean futures helped.

Corn futures closed mostly 2¢ to 4¢ lower.

KC HRW Wheat closed mostly 5¢ to 8¢ lower.

Soybean futures closed mostly 13¢ to 19¢ lower.

Negotiated cash fed cattle trade was mostly inactive on light demand in all regions through Tuesday afternoon, according to the Agricultural Marketing Service.

Last week, live prices were mainly $1 lower in the Southern Plains and Nebraska at $164/cwt., and steady to $2 lower in the western Corn Belt at $164-$165. Dressed prices were $1 lower at $264.

Choice boxed beef cutout value was $1.10 lower Tuesday afternoon at $279.92/cwt. Select was $2.39 lower at $271.55/cwt.

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Major U.S. financial indices closed higher again Tuesday, supported by comments from U.S. Treasury Secretary, Janet Yellen that the federal government was ready to provide more support to smaller lenders if needed.

In prepared remarks at Tuesday’s American Bankers Association Washington, D.C. Summit, Yellen explained actions taken to protect FDIC-insured deposits at recently failed lenders, Silicon Valley Bank and Signature Bank.

“The situation is stabilizing. And the U.S. banking system remains sound. The Fed facility and discount window lending are working as intended to provide liquidity to the banking system. Aggregate deposit outflows from regional banks have stabilized,” Yellen explained.

Apparently, investors are also speculating the banking fiasco will bring a close to monetary tightening sooner rather than later.

The Dow Jones Industrial Average closed 316 points higher. The S&P 500 closed 51 points higher. The NASDAQ was up 184 points.

West Texas Intermediate Crude Oil futures (CME) closed $1.55 to $1.85 higher through the front six contracts. 

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Despite softer Cattle futures trade and mixed cash prices last week, calf prices at auction remain on an upward trajectory, buoyed by demand for summer-grazing cattle, says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. He explains value of gain on forage should be strong through the spring and summer, given the high cost of feedlot gain.

“Feeder cattle prices are likely to continue increasing as the CME Feeder Cattle Index price has gained $8 to $9/cwt. since the beginning of February. However, the increase in the cash price of feeder cattle has slowed, which may be part of the reason feeder cattle futures experienced weakness,” Griffith says. “Feeder cattle prices will increase further moving through spring, summer, and fall, but their ability to reach current expectations in the futures market is uncertain.”

On the other side of the equation, Griffith says the anticipated hole in cattle supplies will come eventually but likely later than expected as there is little evidence of additional heifer retention currently.

“Cattle on feed numbers will slowly dwindle as heifer retention picks up and as fewer calves are born, which is certain to be the case this year,” Griffith says. “There remains upside potential in the finished cattle market this spring, but there may not be enough to meet my lofty expectations of $170 cattle.”

Cattle futures leaked lower Monday amid recently declining open interest and uncertainty about the health of the banking structure, and despite Friday’s friendly Cattle on Feed report.

Feeder Cattle futures closed an average of 46¢ lower, except for an average of 20¢ higher in the back two contracts.

Live Cattle futures closed an average of 41¢ lower, except for an average of 22¢ higher in the back two contracts.

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

Last week, live prices were mainly $1 lower in the Southern Plains and Nebraska at $164/cwt., and steady to $2 lower in the western Corn Belt at $164-$165. Dressed prices were $1 lower at $264.

The five-area direct weighted average steer price last week was $1.23 lower on a live basis at $164.17. The average steer price in the beef was $1.50 lower at $263.82.

Choice boxed beef cutout value was $2.33 lower Monday afternoon at $281.02/cwt. Select was $1.50 higher at $273.94/cwt.

Corn futures closed mostly 1¢ to 2¢ lower through Jly ‘24 and then mostly 1¢ higher.

KC HRW Wheat closed 6¢ to 8¢ lower.

Soybean futures closed mostly 1¢ to 4¢ lower.

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Major U.S. financial indices closed higher Monday, apparently buoyed by the forced takeover of troubled Credit Suisse over the weekend, though plenty of questions remain for the banking sector.

The Dow Jones Industrial Average closed 382 points higher. The S&P 500 closed 34 points higher. The NASDAQ was up 45 points.

West Texas Intermediate Crude Oil futures (CME) closed 79¢ to 90¢ higher through the front six contracts. 

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Considering declining feedlot supplies before herd rebuilding begins, Derrell Peel, Extension livestock marketing specialist at Oklahoma State University says 2012-17 appear to provide a useful analog to help understand how low feedlot inventories may decline and when they might turn the corner to higher levels.

“The current state of cattle inventories, especially the cow herd size, replacement heifer inventories and expected calf crops are generally analogous to the previous period beginning in late 2012,” Peel explains, in his weekly market comments. “In fact, the current situation reflects a more severe depletion of female inventories compared to the 2012-2017 period. Based on the analog period, feedlot inventories will likely decline from the feedlot inventory (12-month) moving-average peak (MA) in September 2022 to a level similar to the 2014 low in the coming months and remain relatively low for the next four years or longer.”

Peel points out feedlot inventories declined year over year for six consecutive months through March 1. Specifically, he explains the MA peaked in September 2022 at 11.8 million head. It was11.63 million head in Friday’s Cattle on Feed report, the lowest level since October 2020.

“The previous multi-year low in the feedlot inventory MA was in October 2014, after drought-forced herd liquidation in 2011-2013. The current beef cow herd is slightly smaller that the 2014 herd level,” Peel explains. “The beef cow herd is likely to drop a bit more in 2023. It is reasonable to expect that average feedlot inventories will drop close to the 2014 low of 10.375 million head or possibly even lower at some point in the coming months … The smallest calf crop of the next few years will be in 2024 at the earliest.  Feedlot inventories will decline through 2023 with the low in 2024 or beyond.”

Cattle futures closed mixed Friday amid some likely positioning ahead of the ultimately friendly Cattle on Feed report (see below), lower cash fed cattle prices and uncertain outside markets.

Feeder Cattle futures closed mixed, from an average of 49¢ lower in the front three contracts to an average of 16¢ higher. They closed an average of $1.84 lower week to week on Friday, giving back about half of the previous week’s gains.

Live Cattle futures closed narrowly mixed, from an average of 22¢ lower in the front three contracts to an average of 6¢ higher.

Corn futures closed mostly fractionally higher to 2¢ higher.

KC HRW Wheat closed 10¢ to 16¢ higher through May ‘24 and then 6¢ to 7¢ higher.

Soybean futures closed 8¢ to 15¢ lower, pressured by declining Oil futures.

Negotiated cash fed cattle trade was mostly limited on light demand in all regions through Friday afternoon, according to the Agricultural Marketing Service.

For the week, live prices were mainly $1 lower in the Southern Plain and Nebraska at $164/cwt., and steady to $2.50 lower in the western Corn Belt at $164.00-$164.50. Dressed prices were $1 lower in Nebraska at $264 and $1-$2 lower in the western Corn Belt at $263-$264.

Choice boxed beef cutout value was 60¢ lower Friday afternoon at $283.35/cwt. Select was 68¢ lower at $272.44/cwt.

Estimated total cattle slaughter last week of 631,000 head was 3,000 head fewer than the previous week and 5,000 head fewer than the same week last year. Year-to-date estimated total cattle slaughter of 6.1 million head was 169,000 head fewer (-2.4%). Estimated year-to date beef production of 5.7 billion lbs. was 250.6 million pounds less (-4.2%) less than the same time last year.

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So much for market confidence provided by the infusion of uninsured deposits to First Republic Bank last Thursday. Major U.S. financial indices sank lower again on Friday as investors grappled with the recent spate of banking woes, tied in part to devalued bond assets as interest rates continue higher.

The Dow Jones Industrial Average closed 384 points lower. The S&P 500 closed 43 points lower. The NASDAQ was down 86 points.

West Texas Intermediate Crude Oil futures (CME) closed $1.29 to $1.61 lower through the front six contracts. 

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Markets likely will view USDA’s monthly Cattle on Feed Report as neutral to a touch bullish with about 1% fewer placements than analysts expected ahead of the report, but also slightly fewer marketings. The report is for feedlots with 1,000 head or more one-time capacity.

Placements in February of 1.73 million head were 134,000 head less (-7.2%) than last year. In terms of placements weights, 38% went on feed weighing 699 pounds or less, 51% weighing 700-899 pounds and 10% weighing 900 pounds or more.

Marketings in February of 1.74 million head were 90,000 head fewer (-4.9%) than a year earlier.

Cattle on feed March 1 of 11.65 million head were 548,000 head fewer (-4.5%) than the same time last year.

Stronger outside markets helped Cattle futures recover some recent losses Thursday.

Feeder Cattle futures closed an average of $1.63 higher.

Live Cattle futures closed an average of 39¢ higher, except for 2¢ lower in the back contract.

Weekly U.S. beef export sales also provided some support. Net U.S. beef export sales for the week ending March 9 were 17,700 metric tons (mt), according to USDA’s Export Sales report. That was noticeably higher than the previous week and 24% more than the previous four-week average.

Corn futures closed mostly 1¢ to 2¢ higher.

KC HRW Wheat closed mostly 1¢ to 2¢ lower.

Soybean futures closed mostly fractionally lower to 1¢ lower.

Negotiated cash fed cattle trade was limited on light demand in all regions through Thursday afternoon, according to the Agricultural Marketing Service.

So far this week, live prices are mainly $1 lower in the Southern Plains and Nebraska at $164/cwt., and $1-$2 lower in the western Corn Belt at $163-$165. Dressed prices are $1 lower at $264.

Choice boxed beef cutout value was 32¢ lower Thursday afternoon at $283.95/cwt. Select was 87¢ lower at $271.76/cwt.

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Major U.S. financial indices bounced back Thursday. Presumably, much of the support was due to First Republic Bank (FRB) — the fourteenth largest bank in the U.S. and apparently another one on the cash ropes — receiving $30 billion in uninsured deposits from some of the nation’s largest banks.

“Their collective support strengthens our liquidity position, reflects the ongoing quality of our business, and is a vote of confidence for First Republic and the entire U.S. banking system…” according to Jim Herbert, FRB executive chairman and Mike Roffler, FRB president and CEO, in a statement.

The Dow Jones Industrial Average closed 371 points higher. The S&P 500 closed 65 points higher. The NASDAQ was up 283 points.

West Texas Intermediate Crude Oil futures (CME) closed 74¢ to 84¢ higher through the front six contracts. 

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With Choice boxed beef cutout value hovering around $285/cwt. and beef production declining, Andrew P. Griffith, agricultural economist at the University of Tennessee says, the question is how much resistance $300 will pose.

“The $250 price point has proven to be a strong support price, and it is difficult to believe Choice boxed beef will be rangebound between $250 and $300 per hundredweight,” Griffith explains in his weekly market comments. “The immediate thought is that Choice boxed beef has greater potential to exceed $300 than to decline below $250. This will primarily be supply-driven, compared to being demand-driven. The consumer has done about everything possible to demonstrate strong demand for beef. Thus, the declining quantity of beef available will be what pushes prices higher.”

For perspective, Griffith points out the market topped at just less than $350 on two occasions in 2021.

“This likely means it will be difficult to push past that mark in 2023. It is probably safer to assume the market will do well to challenge $325 in the next 12 months,” Griffith says.

Too many black swans in too little time tends to make folks cautious. That seems to be as apt an explanation as any for eroding Cattle futures and then cash fed cattle prices in the face of such positive market fundamentals.

In this case, the next feared black swan appears to be a potential contagion of bank failures. Silcon Valley Bank failed last week. Signal bank followed suit quickly after — the third largest bank failure in U.S. history, according to various sources. Then came speculation/news yesterday that Credit Suisse, across the pond, was on the ropes with its largest investor unwilling to provide more funding.

Major U.S. financial indices fell sharply before regaining some lost ground later yesterday when the Swiss Financial Market Supervisory Authority (FINMA) and Swiss National Bank (SNB) — the nation’s central bank — issued a joint statement, saying in part: “The Swiss Financial Market Supervisory Authority (FINMA) and the Swiss National Bank assert that the problems of certain banks in the USA do not pose a direct risk of contagion for the Swiss financial markets … In addition, the SNB will provide liquidity to the globally active bank if necessary.”

By the time the statement was issued, the die was cast for Cattle futures.

Feeder Cattle futures closed an average of $2.04 lower.

Live Cattle futures closed an average of $1.15 lower.

Corn futures closed mostly 2¢ lower.

KC HRW Wheat closed fractionally higher to 2¢ higher.

Soybean futures closed mostly 12¢ to 13¢ lower.

Negotiated cash fed cattle trade ranged from limited on moderate demand in the Southern Plains to moderate on moderate demand in Nebraska to light on moderate demand through Wednesday afternoon, according to the Agricultural Marketing Service.

So far this week, live prices are mainly $1 lower at $164/cwt. in the Southern Plain and Nebraska, where dressed sales were $1 lower at $264.

Although too few to trend, there have been some sales in the western Corn Belt at $164.00-$164.50 on a live basis and $263-$264 in the beef. Prices there last week were $164-$167 and $265, respectively.

Choice boxed beef cutout value was $1.64 lower Wednesday afternoon at $284.27/cwt. Select was $1.93 lower at $272.63/cwt.

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As mentioned above, worries about failing banks cast a pall over major U.S. financial indies Wednesday.

The Dow Jones Industrial Average closed 280 points lower. The S&P 500 closed 27 points lower. The NASDAQ was up 5 points.

West Texas Intermediate Crude Oil futures (CME) closed $3.63 to $3.75 lower lower through the front six contracts. 

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Americans are buying more fresh meat than before the COVID-19 pandemic and are seeking value in terms of price, convenience and better-for attributes in meat purchases, according to the 18th annual Power of Meat report released by the Meat Institute and FMI—The Food Industry Association.

Self-described “meat eaters” comprise 78% of Americans, compared to just 7% who describe themselves as vegan or vegetarian. Shoppers spend more than $15 in the meat department per trip and average nearly one trip to the meat department per week (up nearly 5% since 2019). While 50% of shoppers get their meat from a supermarket, many turn to supercenters (35%), club stores (4%) and hard discounters (5%) for their meat purchases.

Despite rising food and beverage prices over the past year, consumers did not significantly change the amount of meat they buy (down just 2.5% by volume compared to 2021). Product quality and appearance continue to be the top factors driving meat purchase decisions, followed by price per pound and total package price.

To save money, a large majority of consumers (76%) report they made changes to the amount, type, cut, and/or brand of meat they purchase or changed where they shop. Consumers’ top strategies to save money include: buying only the amount needed (42%), looking for coupons (35%), and stocking up when meat is on sale (35%). Seventeen percent said they buy less meat with organic, grass-fed, or other claims. Only 16% of meat shoppers said they cook more meatless meals to save money. Of the 33% of Americans who said they are looking to eat less meat or chicken, 52% cite cost as the reason (up from 16% in 2020).