WLI

Cattle futures closed mixed Tuesday as bullish fundamentals battled with some likely positioning ahead of Wednesday’s monthly World Agricultural Supply and Demand Estimates.

Feeder Cattle futures closed an average of 62¢ higher (5¢ to 95¢ higher).

Live Cattle futures closed narrowly mixed, from an average of 30¢ lower to an average of 12¢ 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.

Last week, live prices were $165/cwt. Dressed prices were $265 in Nebraska and $262-$265 in the western Corn Belt.

Choice boxed beef cutout value was $2.27 lower Tuesday afternoon at 287.93/cwt. Select was $1.02 higher at $277.49/cwt.

Corn futures closed 2¢ to 5¢ lower through Jly ‘24, and then fractionally lower to 1¢ lower.

KC HRW Wheat closed narrowly mixed, mostly 1¢ lower to 1¢ higher.

Soybean futures closed 12¢ to 15¢ lower in the front three contracts, and then mostly 2¢ to 5¢ lower.

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Major U.S. financial indices closed sharply lower Tuesday, pressured by Federal Reserve Chair Jerome Powell’s hawkish comments during his semiannual monetary report to Congress.

“…the latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated,” Powell explained. “If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes. Restoring price stability will likely require that we maintain a restrictive stance of monetary policy for some time.”

The Dow Jones Industrial Average closed 574 points lower. The S&P 500 closed 62 points lower. The NASDAQ was down 145 points.

West Texas Intermediate Crude Oil futures (CME) closed $2.63 to $2.88 lower through the front six contracts, pressured by lower Chinese imports and overall bearish market sentiment.

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U.S. agricultural producer sentiment waned month to month in February, according to the latest Purdue University/CME Group Ag Economy Barometer, which slipped 5 points to a reading of 125.

The Index of Current Conditions fell 2 points to 134 and the Index of Future Expectations declined 6 points to 121.

“Increased concern over the risk of falling output prices, rising interest rates, and uncertainty over the future growth of U.S. agricultural exports is weighing on producers’ minds,” says James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture.

Producers’ expectations for their farms’ financial performance in 2023 compared to 2022 weakened in February. The Farm Financial Performance Index declined 7 points to a reading of 86. Farmers continue to point to concerns about higher input costs (38% of respondents), rising interest rates (24% of respondents), and lower output prices (18% of respondents), as their biggest concern for the year ahead.

The Ag Economy Barometer is calculated each month from 400 U.S. agricultural producers’ responses to a telephone survey. This month’s survey was conducted between February 13-17.

Feeder Cattle futures rallied an average of $2.11 higher Monday, helping Live Cattle futures close an average of 65¢ higher, underpinned by bullish fundamentals and last week’s stronger cash.

Last week, negotiated cash fed cattle prices were $1-$2 higher on a live basis at $165/cwt. Dressed prices were $3 higher in Nebraska at $265 and steady to $3 higher in the western Corn Belt at $262-$265.

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

Choice boxed beef cutout value was 88¢ higher Monday afternoon at 290.20/cwt. However, Select was 39¢ lower at $276.47/cwt.

Corn futures closed mostly fractionally lower to 2¢ lower.

KC HRW Wheat closed mostly 10¢ to 18¢ lower.

Soybean futures closed 5¢ to 7¢ higher., except for 10¢ to 11¢ higher in the front four contracts.

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Major U.S. financial indices closed narrowly mixed Monday.    

The Dow Jones Industrial Average closed 40 points higher. The S&P 500 closed 2 points higher. The NASDAQ was down 13 points.

West Texas Intermediate Crude Oil futures (CME) closed 68¢ to 78¢ higher through the front six contracts.

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Rising cash prices and Cattle futures underscore declining beef production, which will continue for a prolonged period.

“The decrease in cattle numbers since the 2018 peak calf crop has finally worked through the system,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “Cattle slaughter and beef production are expected to decrease for the balance of 2023 and beyond. With continuing drought conditions, it is not clear exactly how cattle and beef market timing will develop going forward, but the question is not one of whether beef production will fall, but rather how fast and how much it will fall in 2023.”

Peel uses Oklahoma auction prices to provide perspective on recent price gains. He explains the average Oklahoma auction price last week for steers weighing 500 pounds was $239.66/cwt., the highest since September 2015. The average price for feeder steers weighing 825 pounds was $181, the highest since October 2015. The five-area direct fed steer price was $165.09, the highest since April 2015.

“Cattle prices are expected to continue trending higher in 2023 and new record cattle prices will happen, if not in 2023, at some point in the next two or three years,” Peel says. “Higher cattle prices will push wholesale and retail beef prices against beef demand, which remains strong but somewhat muted currently. There will be resistance to higher beef prices, but the reality of decreasing beef supplies will ultimately push beef prices higher.”

You can find more of Peel’s insights here.

Negotiated cash fed cattle trade ranged from limited on light demand to a standstill through Friday afternoon, with too few to trend, according to the Agricultural Marketing Service (AMS).

For the week, the only established trade reported by AMS was live prices of $164.50-$165.00/cwt. in the western Corn Belt, which was 50¢ to $1 higher. Dressed prices there the previous week were $260-$262.

Elsewhere the previous week, live prices were mostly at $164/cwt. and dressed prices were $262.

However, various private sources suggested more trade developing in other regions on Friday at $1-$2 higher. For instance, the Texas Cattle Feeders Association reported its members trading steers and heifers about $1 higher at $165.40) and $165.25, respectively.

Through Thursday, the weighted average five-area direct fed steer price was $1.19 higher at $164.84/cwt. The average steer price in the beef was $2.61 higher at $262.54.

Cattle futures gained Friday, supported by stronger cash fed cattle prices.

Feeder Cattle futures closed an average of $1.76 higher ($1.22 to $2.17 higher).

Live Cattle futures closed an average of $1.12 higher.

Choice boxed beef cutout value was 82¢ higher Friday afternoon at 289.32/cwt. Select was 72¢ lower at $276.86/cwt.

Corn futures closed 4¢ to 7¢ higher in old-crop contracts, mostly 1¢ to 3¢ lower.

KC HRW Wheat closed 5¢ to 9¢ lower.

Soybean futures closed mostly 5¢ higher.

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Major U.S. financial indices closed higher Friday as rates eased for the benchmark 10-year treasury note.   

The Dow Jones Industrial Average closed 387 points higher. The S&P 500 closed 64 points higher. The NASDAQ was up 226 points.

West Texas Intermediate Crude Oil futures (CME) closed $1.47 to $1.52 higher through the front six contracts.

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Year-over-year beef production continues to decline, supporting cattle and beef prices.

Total cattle slaughter last week of 629,000 head was 11,000 more than the previous week but 30,000 head fewer than the same week last year. Estimated year to-date total cattle slaughter of 5.7 million was 153,000 fewer (-2.6%) than the same time last year. Estimated year-to-date beef production of 4.7 billion pounds was 219.2 million pounds less (-4.5%) than a year earlier.

“Cattle slaughter the first two months of the year is down relative to the same two months a year ago. Heifer slaughter is up ever so slightly while steer slaughter is down 2.2% and beef cow slaughter is down 5.7% compared to last year,” explains Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “Heifer slaughter rates are sure to begin running lower than year-ago rates as we move through the year due to extremely high rates a year ago and the desire to retain females for breeding. This factor alone will assist cattle feeders in maintaining leverage for the foreseeable future. It means cattle feeders are likely to hold out for higher prices each week until packers are willing to raise bids. The supply is only going to get tighter moving through the next couple of years.”

Widespread moisture is helping improve heifer retention prospects. According to the Feb. 28 U.S. Drought Monitor, 55% of the continental United States was abnormally dry or experiencing drought, versus 73% a year earlier — 38% were experiencing drought versus 59% at the same time last year.

Stable Corn futures and strong cash trends helped Feeder Cattle futures lean mostly higher Thursday. They were up an average of 22¢, except for 17¢ lower and unchanged in two contracts.

Live Cattle futures closed an average of 74¢ lower (40¢ to $1.15 lower) with traders awaiting cash direction.

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

Although too few to trend, there were a few live sales in the western Corn Belt at $165/cwt. — $164.50 to $165.00 on Wednesday. Dressed prices there last week were $260-$262.

Elsewhere, last week, live prices were mostly at $164/cwt. and dressed prices were $262.

Choice boxed beef cutout value was 67¢ higher Thursday afternoon at 288.50/cwt. Select was $1.15 higher at $277.58/cwt.

Weekly beef export sales offered no support to Cattle futures. For the week ending Feb. 23, net U.S. beef export sales were 8,100 metric tons (mt.), according to the latest USDA U.S. Export Sales report. That was 48% less than the previous week and 62% less than the prior four-week average. Increases were primarily for Japan, Taiwan, China and Mexico.

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

KC HRW Wheat closed mostly 6¢ to 7¢ higher.

Soybean futures closed 8¢ to 15¢ higher through Jan ’24 and then mostly 4¢ to 6¢ higher.

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Major U.S. financial indices closed higher Thursday, fueled in part by comments made by one region Federal Reserve president who suggested the Fed could hold future interest rate hikes at 25 basis points.

The Dow Jones Industrial Average closed 341 points higher. The S&P 500 closed 29 points higher. The NASDAQ was up 83 points.

West Texas Intermediate Crude Oil futures (CME) closed 47¢ to 57¢ higher through the front six contracts.

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U.S. agricultural exports in fiscal year (FY) 2023 were projected at $184.5 billion in the latest quarterly Outlook for U.S. Agricultural Trade from USDA’s Economic Research Service (ERS) and Foreign Agriculture Service (FAS). The projection was $5.5 billion less than the previous report’s estimate. The largest year-over year decreases are expected for corn, sorghum, and soybeans.

Beef and veal exports were forecast $300 million less at $10.0 billion on weaker unit values for fresh and frozen beef muscle cuts and softening demand in East Asia.

Total, livestock, poultry, and dairy exports were projected $900 million less at $40.5 billion.

“The global economic outlook for 2023 has moderately improved since the last forecast in November 2022, as downside risks of recession have lessened,” according to ERS/FAS analysts. “Inflation has begun to ease globally, particularly in the United States, but remains elevated. Economic growth is expected to remain steady but at a slower pace than in recent years. World real gross domestic product (GDP) is projected to increase by 2.8% in 2023…”

Projected growth for U.S. real GDP in 2023 was raised 0.4% to 1.4%.

Cattle futures took a breather Wednesday on likely profit taking and awaiting weekly cash direction.

Feeder Cattle futures closed an average of 61¢ lower.

Live Cattle futures closed narrowly mixed, from an average of 42¢ lower to unchanged to an average of 2¢ higher.

Wholesale beef prices declined on Wednesday for the first time in a while. Choice boxed beef cutout value was $1.12 lower in the afternoon at 287.83/cwt. Select was $2.82 lower at $276.43/cwt.

By all accounts, negotiated cash fed cattle trade remained stuck in the gate Wednesday. There was no afternoon USDA summary available at press time.

Last week, live prices were mostly at $164/cwt. in all regions. Dressed prices were $260-$262.

Grain and Soybean futures found some footing Wednesday.

Corn futures closed mostly fractionally lower to 1¢ lower, except for 3¢ to 11¢ higher in old-crop contracts.

KC HRW Wheat closed 1¢ to 5¢ higher through Sep ’24 and then fractionally lower to 2¢ lower.

Soybean futures closed 10¢ to 15¢ higher through May ’24 and then mostly 4¢ to 5¢ higher.

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Major U.S. financial indices closed narrowly mixed Wednesday, pressured once again by rising bond yields. 

The Dow Jones Industrial Average closed 5 points higher. The S&P 500 closed 18 points lower. The NASDAQ was down 76 points.

West Texas Intermediate Crude Oil futures (CME) closed 64¢ to 69¢ higher through the front six contracts.

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Although beef stocks in cold storage Jan. 31 were 2% less than the previous month, they were 1% more year over year and remain historically large, according to David Anderson, Extension livestock economist at Texas A&M University.

“Cold storage stocks of beef tend to peak in December-January and reach a low in June-July,” Anderson explains in the latest In the Cattle Markets from the Livestock Marketing Information Center. “The seasonal decline in stocks has been, on average, about 82 million pounds over the last five years. In 2022, there was very little seasonal decline and supplies grew to 544 million pounds by the end of the year.”

Beef in cold storage at the end of last month was 533 million pounds, according to Anderson

“Putting this level of stocks in context is that 533 million pounds is about 1.6 pounds per person, which is not a lot different than per capita stocks over the last several decades,” Anderson explains. “Per capita cold storage stocks were over 2 pounds back in the early to mid-1970s when the U.S hit peak cattle numbers and beef demand began to decline.”

Keep in mind domestic beef production was record large last year,

Total red meat supplies in freezers Jan. 31 were up 5% from the previous month and up 9% from last year, according to USDA’s Cold Storage report. Frozen pork supplies were 13% higher month to month and 19% more year over year. Total frozen poultry supplies on the same date were 3% more than the previous month and 13% more than the same time last year.