WLI

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.

******************************

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. 

******************************

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.

******************************

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. 

******************************

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.

******************************

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. 

******************************

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).

Cattle futures closed mainly lower Tuesday, pressured in part by the lack of cash direction for fed cattle and firmer nearby Corn futures.

Feeder Cattle futures closed an average of 71¢ lower (32¢ to $1.32 lower).

Live Cattle futures closed an average of 40¢ lower, except for an average of 24¢ higher in the back two contracts.

Corn futures gained Tuesday, with support from further erosion in Argentina’s crop.

Corn futures closed mostly 1¢ to 2¢ higher.

KC HRW Wheat closed mostly 9¢ to 17¢ 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 $164-$167/cwt. but mostly $165. Dressed prices were $265.

Choice boxed beef cutout value was $1.05 higher Tuesday afternoon at $285.91/cwt. Select was 94¢ higher at $274.56/cwt.

******************************

Major U.S. financial indices closed higher Tuesday, finding some footing after the recent selloff due to the closure of Silcon Valley Bank. Support included the monthly Consumer Price Index meeting trader expectations.

The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.4% in February on a seasonally adjusted basis, after increasing 0.5% in January, according to the U.S. Bureau of Labor Statistics. Over the last 12 months, the all items index increased 6.0% before seasonal adjustment, which was the smallest 12-month increase since the period ending September 2021.

The Dow Jones Industrial Average closed 336 points higher. The S&P 500 closed 63 points higher. The NASDAQ was up 239 points.

West Texas Intermediate Crude Oil futures (CME) closed $3.16 to $3.47 lower through the front six contracts, with continued pressure from worries that banking woes will further slow economic growth.  

******************************

USDA’s Economic Research Service (ERS) increased expected average feeder steer prices (basis 750-800 lbs., Oklahoma City) by $1 in the first quarter to $183/cwt. and by $1 in the second quarter to $193, in the March Livestock, Dairy and Poultry Outlook. Prices are forecast at $214 in the third quarter and $224 in the fourth quarter for an annual average of $204, which would eclipse the record-high average of 2014.

“The outlook for feeder calf prices is improved, given existing tight supplies of cattle, a projection for lower market-year average corn prices, and higher expected fed cattle prices, as well as recent price data,” according to ERS analysts.

As mentioned recently in Cattle Current, ERS forecast the annual average weighted average five-area direct fed steer price at $162/cwt. Support includes historically high seasonal composite boxed beef cutout values, underpinned by declining cattle numbers and lighter winter carcass weights.

“For the week ending February 18, steer and heifer carcass weights were lower by 15 and 21 pounds, respectively, from the same period last year,” ERS analysts say. “Further, cow and bull carcass weights are down 10 and 30 pounds, respectively. The anticipated share of cows in the slaughter mix is raised in 2023, which will contribute to lighter expected average carcass weights. The results have lowered the outlook for cattle weights the rest of year.”

Cattle futures softened further Monday. Aside from taking a pause and potentially profits from last week’s up-move in Feeder Cattle, and steady money for fed cattle, perhaps traders also were wondering about the floor for recently lower wholesale beef prices. As much as anything, though, bearish outside markets, tied to the failure of Silcon Valley Bank and worries about wider repercussions cast a pall over equity and commodity markets.

Feeder Cattle futures closed an average of 53¢ lower (32¢ to $1.17 lower).

Live Cattle futures closed an average of 41¢ lower.

Corn futures closed mostly fractionally lower to 3¢ lower through Jly ‘24 and then 3¢ higher.

KC HRW Wheat closed 1¢ to 3¢ higher.

Soybean futures closed 13¢ to 18¢ lower through Aug ‘24 and then mostly 7¢ lower.

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

Last week, live prices were steady at $165/cwt., except for $1 lower to $2 higher in the western Corn Belt at $164-$167. Dressed prices were steady to $3 higher in the western Corn Belt at $265 and steady in Nebraska at $265.

The five-area direct weighted average steer price last week was 38¢ higher at $165.40/cwt. The weighted average steer price in the beef was 89¢ higher at $265.32.

Choice boxed beef cutout value was 5¢ lower Monday afternoon at $284.86/cwt. Select was $2.08 higher at $273.62/cwt.

******************************

Major U.S. financial indices closed mixed after a volatile session Monday as investors continued to assess fallout from the failure of Silicon Valley Bank (SVP).

The Dow Jones Industrial Average closed 90 points lower. The S&P 500 closed 5 points lower. The NASDAQ was up 49 points.

West Texas Intermediate Crude Oil futures (CME) closed $1.76 to $1.88 lower through the front six contracts. 

******************************

Nationwide, steers sold $2-$6/cwt. higher, according to the Agricultural Marketing Service. Heifers traded $1-$4 higher in the North Central and South Central regions, except for $1 lower in the South Central region for heifers at 800 lbs. Heifers in the Southeast sold $7-$10 higher.

First-quarter cattle prices are higher than originally forecast by the Livestock Marketing Information Center (LMIC), but those analysts caution there could be some correction depending on how weather and forage develop heading into spring.

In the latest Livestock Monitor, LMIC analysts note steers weighing 500-600 lbs. last week sold for $250/cwt. in Montana, $242 in South Dakota and at a combined auction average of $226 in Texas, the highest price of the year.

“These auction prices, by our estimation, are very high, given the spring forage situation is very much unknown, and hay is expensive,” LMIC analysts say. “The big concern in the short term is how spring shapes up. Will all of the country have great early grass growth? Are these buyers able to source and feed reasonably priced feedstuffs until grass shows up? The outlook for the spring contains the probability that La Niña may not withdraw until summer, which may point to a cool wet spring in the Northern Plains and continued dryness in the Southern Plains.”

At the same time, LMIC analysts point out Dec corn futures prices are significantly lower than current cash prices.