WLI

Cattle futures stepped higher Thursday, supported by recently lower Corn futures, bullish cash strength for feeder cattle, cattle feeders’ resolve to hold the line on fed cattle prices and perhaps some positioning ahead of Friday’s Cattle on Feed report.

Feeder Cattle futures closed an average of $2.83 higher ($1.55 to $3.35 higher).

Live Cattle futures closed an average of 78¢ higher.

Bearish sentiment continued in the grain complex.

Corn futures closed mostly 1¢ higher.

KC HRW Wheat closed mostly 18¢ to 28¢ lower.

Soybean futures closed mostly 1¢ to 3¢ lower.

Negotiated cash fed cattle trade was slow on light demand in the Texas Panhandle through Thursday afternoon, according to the Agricultural Marketing Service. Prices were steady at $177/cwt.

Elsewhere, trade was limited on light demand. Although too few to trend, there were some live trades in the western Corn Belt at $178.

Last week, live prices were $170/cwt. in Kansas, mostly $176 in Nebraska and $175-$177 in the western Corn Belt. Dressed prices were $280.

Choice boxed beef cutout value was 16¢ higher Thursday afternoon at $298.31/cwt. Select was 16¢ higher at $283.61/cwt.

Net U.S. beef export sales (2023) were 17,400 metric tons for the week ending May 11, according to the U.S. Export Sales report. That was 5% more than the previous week and 7% more than the prior four-week average. Increases primarily were for Japan, South Korea, China, Mexico and Taiwan.

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Major U.S. financial indices closed higher again Thursday, once again supported by apparent optimism about debt ceiling talks.

The Dow Jones Industrial Average closed 115 points higher. The S&P 500 closed 39 points higher. The NASDAQ was up 188 points.

West Texas Intermediate Crude Oil futures (CME) closed 77¢ to 97¢ lower through the front six contracts.

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USDA’s Economic Research Service (ERS) raised the expected second-quarter feeder steer price by $5 to $204/cwt. That’s basis 750-800 lbs. at Oklahoma City. The increase was based on recent data and forecast declines in season-average corn prices, according to ERS analysts, in the May Livestock, Dairy and Poultry Outlook.

Projected feeder steer prices were unchanged for the third quarter at $214, but $4 lower in the fourth quarter at $220. The average annual price was little changed at $205.37. ERS projected next year’s annual average price at $220.75.

As mentioned recently in Cattle Current, ERS increased forecast fed steer prices (five-area direct) higher for the remainder of this year, in the May World Agricultural Supply and Demand Estimates (WASDE). Prices were projected $3 higher in the second quarter at $172/cwt., and $2 higher in the third and fourth quarters at $164 and $169, respectively. The annual average price estimate increased $2 to $166.50.

Lingering drought in the Central and Southern Plains continues to hold market sway.

“Despite recent rains, for some producers, the very low hay supplies may not be sufficient to offset poor pastures to sustain herds this summer and allow producers to retain breeding stock to rebuild their herds,” ERS analysts say. “As a result, the culling of beef cows continues at a relatively high rate. Based on USDA, Agricultural Marketing Service reports for weekly slaughter under federal inspection, the pace of monthly beef cow slaughter remains relatively high despite dropping to below the pace for the last two years in March and April. This has the potential to weaken the outlook for calf crops in late 2023 and 2024, further reducing potential cattle placements year over year in 2024.”

ERS projects new highs for cattle prices in 2024, as cattle numbers decline.

“The relatively strong pace of beef cow slaughter and relatively large placements of heifers in feedlots in 2022 and into early 2023 will likely yield a smaller year-over-year calf crop in 2023, tightening future cattle supplies,” ERS analysts say. “Further, this will likely lead to fewer cows and bulls in the slaughter mix in 2024, both as absolute numbers are lower and—assuming a return to normal pasture conditions—producers hold back animals for herd expansion.”

ERS projects 2024 beef production 8% less than this year at 24.7 billion pounds.

Cattle futures closed mostly lower Wednesday, apparently with spillover pressure from apparent long liquidation in grain futures.

Feeder Cattle futures closed an average of 88¢ lower (32¢ to $1.15 lower).

Live Cattle futures closed an average of 27¢ lower, except for an average of 58¢ higher in the front three contracts.

Negotiated cash fed cattle trade was limited on light to moderate demand in all regions through Wednesday afternoon, with too few transactions to trend, according to the Agricultural Marketing Service.

Last week, live prices were $170/cwt. in the Southern Plains, mostly $176 in Nebraska and $175-$177 in the western Corn Belt. Dressed prices were $280.

Choice boxed beef cutout value was $1.32 lower Wednesday afternoon at $298.15/cwt. Select was $1.46 lower at $282.89/cwt.

Grain and Soybean futures tumbled Wednesday. At least from a psychologic perspective, widespread selling appeared to be tied to the U.N. Secretary General’s announcement that Russia agreed to extend the Black Sea Grain initiative for another 60 days (see below). As well, private exporters reported the cancellation of sales of 272,000 metric tons of corn for delivery to China during the 2022/2023 marketing year.

Corn futures closed mostly 5¢ to 9¢ lower.

KC HRW Wheat closed mostly 12¢ to 20¢ lower.

Soybean futures closed mostly 15¢ to 19¢ lower.

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Major U.S. financial indices closed higher Wednesday, supported by gains in regional bank stocks and apparent optimism about debt ceiling talks. 

The Dow Jones Industrial Average closed 408 points higher. The S&P 500 closed 48 points higher. The NASDAQ was up 157 points.

West Texas Intermediate Crude Oil futures (CME) closed $1.97 to $2.16 higher through the front six contracts.

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You might recall one reason Russia continues to threaten withdrawing from the aforementioned Black Sea Grain Initiative is that it says economic sanctions imposed by the West — in response to the Russian invasion of Ukraine — are limiting its ability to export agricultural goods.

“Russia complains that its exports of food and fertilizers are hampered by sanctions. Let me be clear: Russia is exporting just fine. It is exporting grain and fertilizer at the same levels, if not higher, than before the full-scale invasion,” said Ambassador Linda Thomas-Greenfield, U.S. Representative to the United Nations, during a Foreign Press Center news briefing last week. “Russia’s threats are about money and power. The more Russia obstructs Ukraine’s exports, the higher prices go, and with Russian exports moving well, they’re making more profits.”

Despite Russia’s claims of export challenges, that nation’s grain and oilseed exports have thrived during the current marketing year, according to analysts with USDA’s Foreign Agricultural Service (FAS).

“Throughout 2022/23, Russia has benefited from large supplies, both beginning stocks and record production,” FAS analysts explain, in a report published last week. “Russia has exported significant quantities of both grains and oilseeds, despite its lack of transparent trade data. Additional sources of data validate the strong export volumes amid low prices.”

In fact, Russian wheat exports are forecast to hit a record 45.0 million tons in 2022/23, up 36% from the prior year and 3.5 million tons above its previous record in 2017/18, according to the report.

“While recent Russian government statements have claimed that economic sanctions have hampered Russia’s ability to export, in the case of grains and oilseeds, the Russian government itself has applied export taxes and quotas that affect its prices and export volumes,” FAS analysts say.

Feeder Cattle futures closed an average of 35¢ higher, except for 80¢ and 72¢ lower at either end of the board, supported by continued erosion in Corn futures.

Live Cattle futures closed an average of 25¢ lower, awaiting cash direction.

Wheat futures closed mostly 1¢ to 4¢ lower Tuesday with likely profit taking.

Corn futures closed 9¢ to 11¢ lower through Jly ‘24, and then mostly 7¢ lower.

Soybean futures closed mostly 19¢ to 36¢ lower.

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

Last week, live prices were $170/cwt. in the Southern Plains, mostly $176 in Nebraska and $175-$177 in the western Corn Belt. Dressed prices were $280.

Choice boxed beef cutout value was $2.51 lower Tuesday afternoon at $299.47/cwt. Select was 36¢ lower at $284.35/cwt.

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Major U.S. financial indices closed lower amid heightened recession fears, fueled by weaker retail sales than anticipated and a lower annual financial forecast from bellwether, Home Depot. 

The Dow Jones Industrial Average closed 336 points lower. The S&P 500 closed 26 points lower. The NASDAQ was down 22 points.

West Texas Intermediate Crude Oil futures (CME) closed 25¢ lower through the front six contracts.

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Left to their own devices, markets rise and fall, discount and reward and find their way to economic truths, whether or not anyone likes the ride or the destination.

A recent editorial by the Wall Street Journal (WSJ) Editorial Board, and shared by the North American Meat Institute, provides a reminder.

Authors note Tyson Foods last week reported its first quarterly loss since 2009 as meat prices declined.

“Tyson’s stock plunged after it reported anemic sales and downgraded its forecast. The quarterly loss at the largest U.S. meat supplier marks a stunning reversal from 2021 and early last year when it earned record profits amid a run-up in meat prices,” write WSJ authors.

Back then, they also note lawmakers accused beef packers of conspiring to manipulate the market to pad profits.

“Are they now conspiring to lose money?” wonder the authors. “…If markets were ‘distorted,’ the culprit was pandemic transfer payments that were a disincentive to work. As these programs lapsed, hiring became easier. Competition for workers and market share raised supplier costs while pushing down prices and profits. Meat prices fell 0.4% in April and are up only 0.3% over the past 12 months…

“Tyson’s stock has fallen by nearly half over the past year and is trading at the lowest levels since 2015. This doesn’t look like an antitrust conspiracy or market oligopoly…”

Cattle futures, especially Feeder Cattle, extended gains Monday, closing an average of $1.34 higher (67¢ to $2.07 higher).

Live Cattle futures closed an average of 66¢ higher, except 7¢ lower in spot Jun.

That was with Corn futures closing 5¢ to 7¢ higher through Jly ‘24, on the coattails of Wheat futures (KC HRW), which closed 21¢ to 27¢ higher through May ‘24, fueled by follow-through support from the World Agricultural Supply and Demand Estimates, along with concerns about the Black Sea Initiative.

Soybean futures closed 5¢ to 10¢ higher through Jly ‘24.

Negotiated cash fed cattle trade was inactive on light demand in all regions through Monday afternoon, with too few transactions to trend, according to the Agricultural Marketing Service.

Last week, live prices were $2 lower in the Southern Plains at $170/cwt., mostly steady to $2 lower in Nebraska at mainly $176 and $1 lower to $3 higher in the western Corn belt at $175-$177. Dressed prices were $1 lower in Nebraska at $280 and steady to $5 lower in the western Corn Belt at $280.

The weighted average five-area direct fed steer price was 20¢ higher on a live basis last week at $174.13/cwt. but $1.46 lower in the beef at $279.48.

Choice boxed beef cutout value was $2.63 lower Monday afternoon at $301.98/cwt. Select was 3¢ higher at $284.71/cwt.

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Major U.S. financial indices closed little changed but higher Monday, with apparent optimism about the debt ceiling talks. 

The Dow Jones Industrial Average closed 47 points higher. The S&P 500 closed 12 points higher. The NASDAQ was up 80 points.

West Texas Intermediate Crude Oil futures (CME) closed $1.07 to $1.08 higher through the front six contracts.

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Despite improving moisture conditions in many parts of the country, persistent drought in key cattle states continues to impact the overall industry, says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University.

In his weekly market comments, Peel notes two recent USDA reports underscore forage challenges in the Southern Plains and Central Plains.

One is the weekly Crop Progress report for the week ending May 7.

Peel points out year-over-year pasture and range conditions were significantly worse in Kansas and Oklahoma.

As well, Peel says the recent crop production report paints a dour picture of hay inventory in those same areas.

“For the beginning of the hay crop year, May 1, U.S. hay stocks were down 13.4% year over year and were down 26.4% from the 10-year 2012-2021 average,” Peel says. “Compared to the 10-year average, in Kansas, May 1 hay stocks were down 25.5%; Nebraska was down 51.6%; Oklahoma was down 62.3%; and Texas was down 41.3%.” He adds dry conditions are challenging new hay production in four off the top 10 hay-producing states, which account for about 21% of total U.S. hay production on average: Texas, Nebraska, Kansas and Oklahoma.

“These four states accounted for 9.3 million beef cows on Jan. 1, 2023, just over 32% of the total U.S. beef cow herd and include four of the top 10 beef cow states, Texas (1), Oklahoma (2), Nebraska (4) and Kansas (6),” Peel says. “Delayed, slow and limited pasture and hay growth in these areas is likely still provoking some cattle liquidation. Total beef cow slaughter through April this year is down 11.2% from last year’s elevated level.  However, it is likely that reduced beef cow slaughter in drought-free areas is masking some additional herd liquidation in these worst drought areas … The much-anticipated herd rebuilding and corresponding market conditions in the beef cattle industry cannot begin in earnest until drought conditions ease significantly in these major beef cattle states.”

You can hear more of Peel’s market insights here.

Cattle futures closed higher Friday, supported by lower corn prices suggested by the monthly World Agricultural Supply Demand Estimates (see below).

Feeder Cattle futures closed an average of $2.20 higher on Friday and an average of $6.53 higher week to week ($2.95 to $8.20 higher).

Live Cattle futures closed an average of $1.02 higher ($1.65 higher toward the front to 12¢ higher at the back). They were an average of $2.27 higher week to week on Friday ($1.82 higher at the back to $2.95 higher toward the front).

Negotiated cash fed cattle trade was limited on light to moderate demand in all regions through Friday afternoon, with too few transactions to trend, according to the Agricultural Marketing Service.

For the week, live prices were $2 lower in the Southern Plains at $170/cwt., mostly steady to $2 lower in Nebraska at mainly $176 and $1 lower to $3 higher in the western Corn belt at $175-$177. Dressed prices were $1 lower in Nebraska at $280 and steady to $5 lower in the western Corn Belt at $280.

Estimated cattle slaughter last week of 646,000 head was 23,000 head more than the previous week but 15,000 head fewer than the same week last year. Year-to-date estimated cattle slaughter of 11.9 million head was 386,000 head fewer (-3.1%). Estimated year-to-date beef production of 9.8 billion pounds was 483.8 million pounds less (-4.7%).

Choice boxed beef cutout value was $1.11 lower Friday afternoon at $304.61/cwt. Select was 10¢ higher at $284.68/cwt.

USDA’s Economic Research Service increased forecast fed steer prices (five-area direct) higher for the remainder of this year, in the latest monthly World Agricultural Supply and Demand Estimates (WASDE). Prices were projected $3 higher in the second quarter at $172/cwt., and $2 higher in the third and fourth quarters at $164 and $169, respectively. The annual average price estimate increased $2 to $166.50.

“The 2023 cattle price forecast is raised on recent data and tighter supplies expected later in the year,” ERS analysts say. “For 2024, cattle prices are forecast above 2023 on tighter supplies.”

Estimated beef production this year would be 1.4 million pounds less than last year (-4.8%).

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As mentioned, Corn and Soybean futures closed lower Friday with the World Agricultural Supply and Demand Estimates forecasting record or near record production and increased ending stocks for both.

Corn futures closed mostly 2¢ to 4¢ lower, except for fractionally higher to 4¢ higher in remaining old-crop contracts. Week to week, they closed an average of 21’7¢ lower through the front six contracts.

The WASDE 2023/24 U.S. corn outlook was for larger production, greater domestic use and exports, and higher ending stocks. ERS projected the corn crop at a record 15.3 billion bushels, up more than 10% from last year on increases to both area and yield. The yield projection of 181.5 bushels per acre was based on a weather-adjusted trend assuming normal planting progress and summer growing season weather. With beginning stocks up slightly, total corn supplies were forecast at 16.7 billion bushels, the highest since 2017/18.

The season-average farm price was projected at $4.80 per bushel, down $1.80 from 2022/23.

Soybean futures closed mostly 17¢ to 24¢ lower on Friday. They were an average of 50’4¢ lower through the front six contracts lower week to week.

The 2023/24 outlook for U.S. soybeans was for higher supplies, crush, and ending stocks, and lower exports compared with 2022/23. The soybean crop was projected at 4.51 billion bushels, up 5% from last year’s crop mainly on higher yields. With lower beginning stocks partly offsetting increased production, soybean supplies were forecast at 4.75 billion bushels, up 4% from 2022/23.

The 2023/24 U.S. season-average soybean price was forecast at $12.10 per bushel, which would be $2.10 less than 2022/23. Soybean meal prices were forecast $90 less than last year at $365 per short ton. Soybean oil prices were forecast 6¢ less at 58¢ per pound.

KC HRW Wheat closed 20¢ to 35¢ higher through May ‘24, and then 4¢ to 7¢ higher, supported by the WASDE.

U.S. wheat supplies were forecast lower than last year with smaller beginning stocks and only slightly larger production. All wheat production was projected at 1,659 million bushels, up modestly from last year on increased harvested area. All wheat yield was projected at 44.7 bushels per acre, which would be 1.8 bushels lower than last year.

Ending stocks were projected 11% lower than last year and the lowest in 16 years. The projected 2023/24 season-average farm price was $8.00 per bushel, down 85¢ from last year’s record.

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Major U.S. financial indices closed little changed but lower Friday, with continued concerns about regional bank health and overall economic growth.

The Dow Jones Industrial Average closed 8 points lower. The S&P 500 closed 6 points lower. The NASDAQ was down 43 points.

West Texas Intermediate Crude Oil futures (CME) closed 83¢ to 88¢ lower through the front six contracts.