WLI

Cattle futures closed lower on Friday amid weaker cash fed cattle prices but ended mostly higher week to week.

Negotiated cash fed cattle trade ranged from slow on light to moderate demand in the Southern Plains through Friday afternoon, according to the Agricultural Marketing Service. Live prices were $173/cwt., which was $2 lower in the Texas Panhandle and steady to $2 lower in Kansas.

Elsewhere, trade ranged from mostly inactive on light demand to limited on light demand.

For the week, live prices were $2-$7 lower in Nebraska at $178 and steady to $3 lower in the western Corn Belt at $180. Dressed prices were $1-$4 lower in Nebraska at $283-$286 and $3 lower in the western Corn Belt at $285.

Choice boxed beef cutout value was 37¢ higher Friday afternoon at $311.44/cwt. Select was 75¢ lower at $288.34/cwt.

Estimated total cattle slaughter last week of 620,000 head was 2,000 head less than the prior week and 25,000 head fewer than the same week last year. Year-to-date estimated cattle slaughter of 10.6 million head was 352,000 head fewer (-3.2%) than the same time last year. Estimated year-to-date beef production of 8.75 billion pounds was 444.8 million pounds (-4.8%) less than a year earlier.

Live Cattle futures closed an average of 11¢ lower, except for 27¢ higher in near Jun and unchanged in Dec. Week to week on Friday, they closed an average of 61¢ higher, except for unchanged to 37¢ lower in three contracts. Funds extended already weighty long positions, according to the weekly CFTC Commitments of Traders report.

Feeder Cattle futures closed an average of 60¢ lower on Friday, except for 20¢ higher in the back contract. Week to week they closed an average of $1.13 higher, except for $1.42 lower in spot May.

Perhaps the main market story last week was price erosion in the grain complex as China cancelled U.S. corn purchases and managed money fled positions as the nation’s price competitiveness declines.

Corn futures closed mostly 2¢ lower in new-crop contracts on Friday. Week to week, they were an average of 22’0¢ lower through the front six contracts, except for 2’8¢ higher in spot May.

KC HRW Wheat closed 8¢ to 11¢ higher, except for 28’4¢ higher in the front month.

Soybean futures closed mostly 7¢ to 8¢ higher, except for 11¢ to 17¢ higher in the front three contracts. Week to week on Friday, they closed from an average of 24’8¢ lower through the front six contracts, except for 5’8¢ lower in spot May.

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Major U.S. financial indices closed higher Friday with follow-through support and positive quarterly corporate earnings reports.

The Dow Jones Industrial Average closed 272 points higher. The S&P 500 closed 34 points higher. The NASDAQ was up 84 points.

West Texas Intermediate Crude Oil futures (CME) closed $1.88 to $2.03 higher through the front six contracts.

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Although the previous Friday’s monthly Cattle on Feed report added pressure in cattle futures early last week, they ended mostly higher week to week with bullish supply fundamentals and price erosion in the grain complex.

As mentioned in Cattle Current last week, March feedlot placements (feedlots with 1,000 head or more capacity) were 4.2% more than analysts expected, although 0.6% less year over year.

Kenny Burdine, Extension livestock Economist at the University of Kentucky expects more placements than anticipated had more to do with timing than a major shift in market fundamentals.

In Cattle Market Notes Weekly, Burdine offers some possible reasons for the higher placement numbers than anticipated.

“First, March is a month when cattle are often moved off of wheat pasture. Continued dry weather in much of the Southern Plains, combined with high wheat prices, likely impacted movement of feeders last month,” Burdine says. “Secondly, live cattle imports from Mexico were higher in March, which would contribute to placement numbers. And finally, there is still a lot of carry on the feeder cattle board, so it is very possible that feedlots are aggressively buying feeders ahead, in anticipation of the rising price levels suggested by deferred feeder cattle futures contracts.”

Cattle futures gained more ground Thursday, helped along by further erosion in the grain complex, as well as stronger wholesale beef values.

Feeder Cattle futures closed an average of $1.38 higher (62¢ to $1.92 higher).

Live Cattle futures closed an average of 33¢ higher (5¢ to 92¢ higher).

Favorable domestic weather and bullish expectations for Brazilian production continued to pressure grain and Soybean futures on Thursday. Another corn sales cancellation by China (233,000 metric tons) added more weight to Corn futures, which closed 11¢ to 19¢ lower through Jly ‘24 and then mostly 6¢ to 8¢ lower.

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

Soybean futures closed 7¢ to 12¢ lower through Aug ‘24 and then mostly 3¢ lower.

There was no afternoon negotiated cash fed cattle summary from USDA at press time.

Based on the morning report, live and dressed sales Wednesday were steady to $3 lower in the western Corn belt at $180/cwt. and $275, respectively.

Last week, live prices were $175/cwt. in the Texas Panhandle, $173-$175 in Kansas and $180-$185 in Nebraska. Dressed prices in Nebraska were $284-$290.

Choice boxed beef cutout value was $1.49 higher Thursday morning at $310.73/cwt. Select was $2.17 higher at $290.11/cwt.

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Major U.S. financial indices bounced sharply higher Thursday, led by big-name tech stocks. Macro-economic news was a mixed bag with the U.S. economy slowing more than analysts expected in the first quarter and inflation stronger than expected.

Real gross domestic product (GDP) increased at an annual rate of 1.1% in the first quarter of 2023, according to the advance estimate released by the Bureau of Economic Analysis.

The Personal Consumption Expenditures (PCE) price index increased 4.2%. Excluding food and energy prices, the PCE price index increased 4.9%. 

The Dow Jones Industrial Average closed 524 points higher. The S&P 500 closed 79 points higher. The NASDAQ was up 287 points.

West Texas Intermediate Crude Oil futures (CME) closed 27¢ to 46¢ higher through the front six contracts.

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Rural economic conditions improved slightly in April, by one measure, but economic growth continues to be slow or negative, according to Ernie Goss, Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business.

The Rural Mainstreet Index (RMI) rose from 45.6 to above growth-neutral in April at 50.01. The index ranges between 0 and 100, with a reading of 50.0 representing growth neutral. It is based on a monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.

“The Rural Mainstreet economy continues to experience slow, to no, to negative economic growth,” Goss says. “Less than 1% of bankers reported improving economic conditions for the month with 92% indicating no change in economic conditions from February’s slow growth.”

The slowing economy, higher borrowing costs and labor shortages continued to constrain the business confidence index to a weak 38.0, down from 39.1 in March. “Over the past 12 months, the regional confidence index has fallen to levels indicating a very negative outlook,” Goss says.

Negotiated cash fed cattle trade ranged from limited on light demand in the western Corn Belt to inactive on very light demand through Wednesday afternoon, according to the Agricultural Marketing Service. Although too few transactions to trend, there were some early sales in the western Corn Belt at $180/cwt. on a live basis and $285 in the beef.

Last week, live prices were $175/cwt. in the Texas Panhandle, $173-$175 in Kansas $180-$185 in Nebraska and $180-$183 in the western Corn Belt. Dressed prices were $284-$290 in Nebraska and $288 in the western Corn Belt.

Choice boxed beef cutout value was $1.61 higher Wednesday afternoon at $309.24/cwt. Select was 32¢ higher at $287.94/cwt.

Weaker Corn futures, and apparently renewed focus on fundamentals, helped Cattle futures gain on Wednesday.

Feeder Cattle futures closed an average of $1.53 higher, (60¢ to $2.15 higher).

Live Cattle futures closed an average of 60¢ higher, (22¢ higher at the front to $1.05 higher at the back).

Corn futures closed 4¢ to 6¢ lower.

KC HRW Wheat closed mostly 12¢ to 24¢ lower.

Soybean futures closed mixed — fractionally mixed through Sep ’24 and then 3¢ to 4¢ higher. The exception was 9¢ and 2¢ lower in the front two contracts.

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Major U.S. financial indices closed lower again Wednesday with follow-through  pressure from renewed concerns about bank health tied to First Republic Bank. 

The Dow Jones Industrial Average closed 228 points lower. The S&P 500 closed 15 points lower. The NASDAQ was down 113 points.

West Texas Intermediate Crude Oil futures (CME) closed $2.30 to $2.77 lower through the front six contracts.

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Although recent weekly cash fed cattle prices eclipsed the previous highs, Elliott Dennis, Extension livestock economist at the University of Nebraska-Lincoln points out real prices for feeder and fed cattle — adjusted for inflation —remain less than the peaks in 2013-2015.

“The significant rise in cattle prices along the supply chain has been encouraging. But, as in every year, higher prices are nice but wide profit margins are better,” Dennis says, in the latest issue of In the Cattle Markets.

“Previous studies have found that interest rates reduce feeder cattle prices. On average, a 1% increase in the interest rates would decrease feeder cattle prices by 1.14% (Marsh 2001),” Dennis explains. “Ultimately, higher interest rates squeeze profit margins and producers will seek to reduce these impacts.”

Reducing the number of days cattle are on feed by placing cattle at heavier weights is one way producers can ease the impact of higher interest rates, according to Dennis. Increasing operational efficiency is another.

“The interest in and use of precision livestock management has increased in the last five years, ranging from animal health detection such as Cattle Sense in feedlots to virtual fencing in the cow-calf sector,” Dennis explains. “Many other technologies have been and will be available to producers. Some technologies will also help in solving long-run concerns about labor.”

Negative outside markets and the lack of cash fed cattle direction helped pressure Cattle futures on Tuesday.

Feeder Cattle futures closed an average of 96¢ lower (47¢ lower at the back to $1.62 lower), except for 17¢ higher in Aug.

Live Cattle futures closed an average of 38¢ lower, except no change in spot Apr.

Grain and Soybean futures were under pressure Tuesday from a variety of geo-political and geo-economic forces including cancellation of recent U.S. corn purchases by China to chatter that the Black Sea Initiative would be extended once again.

Corn futures closed narrowly mixed, mostly 1¢ lower to 1¢ higher.

KC HRW Wheat closed 9¢ to 14¢ lower through May ‘24 and then mostly 1¢ to 5¢ lower.

Soybean futures closed mostly 6¢ to 10¢ lower.

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

Last week, live prices were $175/cwt. in the Texas Panhandle, $173-$175 in Kansas, $180-$185 in Nebraska and $180-$183 in the western Corn Belt. Dressed prices were $284-$290 in Nebraska and $288 in the western Corn Belt.

Choice boxed beef cutout value was 51¢ higher Tuesday afternoon at $307.63/cwt. Select was $1.08 lower at $287.62/cwt.

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Major U.S. financial indices closed sharply lower amid resurgent banking fears fueled by a sell-off in First Republic Bank which issued an alarming quarterly corporate earnings report: deposits of $104.5 billion were 35.5% less year over year; net income was down 32.9% at $269 million.

The Dow Jones Industrial Average closed 344 points lower. The S&P 500 closed 65 points lower. The NASDAQ was down 238 points.

West Texas Intermediate Crude Oil futures (CME) closed $1.69 to $1.88 lower through the front six contracts.

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Total pounds of beef in freezers Mar. 31 were down 4% from the previous month and down 10% from the previous year, according to the latest USDA Cold Storage report.

Frozen pork supplies were 2% more than the previous month and 10% more than last year.

Total red meat supplies in freezers were down 1% from the previous month and down 1% from last year. 

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

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.”