WLI

Cattle futures took a breather Tuesday amid light trade as traders await weekly cash direction.

Feeder Cattle futures closed an average of 69¢ lower.

Live Cattle futures closed an average of 67¢ lower.

Negotiated cash fed cattle trade was limited on light demand in Kansas through Tuesday afternoon, according to the Agricultural Marketing Service. Although too few to trend, there were some early live sales at $159/cwt. Elsewhere, trade ranged from mostly inactive on very light demand to a standstill.

Last week, live prices were $158/cwt. in the Texas Panhandle, $158-$159 in Kansas, $155-$159 in Nebraska and $154-$160 in the western Corn Belt. Dressed prices were $250.

Choice boxed beef cutout value was 15¢ higher Tuesday afternoon at $266.72/cwt. Select was $3.61 higher at $257.33/cwt.

Grain and Soybean futures Tuesday likely reflected some positioning ahead of Wednesday monthly World Agricultural Supply and Demand Estimates.

Corn futures closed 2¢ to 5¢ lower.

KC HRW Wheat closed 3¢ to 9¢ higher through May ‘24, and then mostly fractionally higher.

Soybean futures closed 1¢ to 6¢ lower through Aug ‘23 and then mostly 1¢ to 3¢ higher.

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Major U.S. financial indices rebounded Tuesday, apparently fueled by dovish comments from Federal Reserve Chair Jerome Powell at The Economics Club of Washington, D.C. His comments underscored the notion that inflation is easing and that it could be a year or more before inflation meets the target of federal monetary policy.

The Dow Jones Industrial Average closed 265 points higher. The S&P 500 closed 52 points higher. The NASDAQ was up 226 points.

West Texas Intermediate Crude Oil futures (CME) closed $2.52 to $3.03 higher through the front six contracts.

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Agricultural producer sentiment improved for the second consecutive month in January, as measured by the Purdue University/CME Group Ag Economy Barometer.

The Ag Economy Barometer increased 4 points from December to January, rising to 130. The increase was primarily due to better expectations for the future as the Future Expectations Index improved by 5 points to 127. The Index of Current Conditions rose 1 point to a reading of 136.

“Although producers were a bit more optimistic about the future this month, they again reported expectations for tighter margins in 2023 than in 2022,” says James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture.

Each January, starting in 2020, the survey asks respondents if they expect to have a larger operating loan compared to the previous year and if so, the reason for the larger loan. In January, 22% of respondents said they expect to have a larger 2023 farm operating loan compared to 2022, down from 27% last year. Among respondents who expect to have a larger operating loan, 80% indicated it was due to increased input costs. Only 5% said it was due to carrying over unpaid operating debt, significantly fewer than 13% a year earlier and 20% in January 2021.

“The sharp decline in the percentage of producers expecting to carry over unpaid operating debt is important,” Mintert says. “It supports the idea that the vast majority of producers are entering 2023 in a strong financial position despite the rise in production costs.”

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 from January 16-20.

Cattle futures extended gains again Monday, supported by last week’s stronger cash prices and notions they can move higher again this week.

Feeder Cattle futures closed an average of $1.28 higher.

Live Cattle futures closed an average of 45¢ higher.

When all the counting was in last week, negotiated cash fed cattle prices were $2 higher on a live basis in the Texas Panhandle at $158/cwt. and then $2-$3 higher at $158-$159 in Kansas, $155-$159 in Nebraska and $154-$160 in the western Corn Belt. Dressed prices were $2 higher at $250.

The five-area direct weighted average fed steer price last week was $2.92 higher at $158.17/cwt. The weighted average steer price in the beef was $2.16 higher at $249.88.

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

Choice boxed beef cutout value was $1.83 higher Monday afternoon at $266.57/cwt. Select was $2.11 higher at $253.72/cwt.

Corn futures closed 1¢ to 3¢ higher through Jly ‘24, buoyed by exports, and then fractionally lower to 2¢ lower.

Soybean futures closed 8¢ to 11¢ lower through the front four contracts and then unchanged to 2¢ lower.

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Major U.S. financial indices extended losses Monday, pressured by rising bond yields.

The Dow Jones Industrial Average closed 34 points lower. The S&P 500 closed 25 points lower. The NASDAQ was down 119 points.

West Texas Intermediate Crude Oil futures (CME) closed 72¢ to 84¢ higher through the front six contracts.

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Reflecting on last week’s Cattle inventory report, analysts with the Livestock Marketing Information Center (LMIC) note the year-over-year decline of 2.8 million head across all classes was the most since 1989.

“One key difference is that in 1989 the largest drop occurred in animals under 500 pounds — down 1.5 million head of the drop in total cattle inventory,” LMIC analysts explain in the latest Livestock Monitor. “This year, over 1 million cows were lost, predominantly in the beef breeding herd.”

The nation’s beef cow inventory of 28.92 million head was 1.06 million fewer (-3.6%). Total beef cow inventory is the smallest since 1962, according to the Agricultural Marketing Service (AMS).

Beef replacement heifers of 5.16 million head were 317,800 head fewer, down 5.8%.

“Low retention and a much smaller ‘other’ heifer number represent the significant undercutting that has happened to the beef cattle herd,” LMIC analysts explain. “It will take a significant amount of time to rebuild to normal cull rates and gain back the time lost in genetic improvement by culling heifers.  There is very likely to be significant opportunities in the bred heifer markets, but 2023 might be a touch early to see the most benefits of that game plan.”

“With the liquidation in full swing, as well as a greater number of heifers being harvested in 2022, the question will be how long it takes for rebuilding to take place,” say AMS analysts. “The last time this happened a decade ago, the beef cow number grew by 2.2 million cows from 2014 to 2017.”

However, among other challenges, AMS analysts point out there’s more competition today for shifting forage acres into crop production.

Cattle futures extended gains and edged higher Friday, buoyed by expectations of higher cash prices.

Feeder Cattle futures closed an average of 46¢ higher.

Live Cattle futures closed an average of 26¢ higher, except for 15¢ lower in the back contract.

Negotiated cash fed cattle trade was slow on light demand in Nebraska and the western Corn Belt through Friday afternoon, according to the Agricultural Marketing Service. Although too few to trend, there were a few dressed sales in both regions at $250/cwt., and some live sales in the western Corn Belt at $160.

Elsewhere, trade ranged from inactive on very light demand to a standstill.The previous week, live prices were $156/cwt. in the Southern Plains, $153-$156 in Nebraska and $152-$157 in the western Corn Belt. Dressed prices were $248.

Choice boxed beef cutout value was 36¢ lower Friday afternoon at $264.74/cwt. Select was $2.05 lower at $251.61/cwt.

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

KC HRW Wheat closed 6¢ to 8¢ lower through Jly ‘24 and then 3¢ lower.

Soybean futures closed mostly 1¢ to 2¢ lower.

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Major U.S. financial indices closed lower Friday with investors apparently fretting that the strong jobs report might tip the Fed back to more aggressive rate hikes.

Total non-farm payroll employment rose by 517,000 in January, according to the U.S. Bureau of Labor Statistics. That was more than the trade expected with an unemployment rate of 3.4%.

Average hourly earnings for all employees on private non-farm payrolls rose by 10¢ in January to $33.03. Average hourly earnings increased by 4.4% over the past 12 months.

The Dow Jones Industrial Average closed 127 points lower. The S&P 500 closed 43 points lower. The NASDAQ was down 193 points.

West Texas Intermediate Crude Oil futures (CME) closed $2.36 to $2.49 lower through the front six contracts.

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Even when mother nature allows, expanding the U.S. beef cow herd will likely be a slow process.

“Recent herd contraction and eventual transition to heifer retention mean it is plausible that U.S. cattle slaughter will decline between 1.0 and 1.5 million head per year for the next four to five years before increasing again,” says Lance Zimmerman, senior analyst of animal protein at Rabobank’s RaboResearch.

In a new report, examining ultimate beef cow herd expansion, Zimmerman explains the annual cow culling rate last year was a record-high 13.4%. He says a culling rate of near 10% is required to stabilize herd size. Zimmerman expects the culling rate this year to be close to 12%.

“That means the best-case scenario is some level of stabilization arriving in 2024, and the timeline from the previous herd expansion suggests it will take until 2025 or later for meaningful rebuilding,” according to Zimmerman.

Among challenges to herd expansion from the production side, Zimmerman cites increasing competition for protein consumers and feed resources, record-high feed and forage prices and rising interest rates.

On the other side of the equation, packers and processors face cost pressure as cattle supplies decline.

“Processors will face a situation that has been relatively foreign to them over the last seven years,” Zimmerman explains. “All classes of cattle supplies will shrink, and the financial viability of packing plants, value-added processors and distributors will be stressed as each participant fights to maintain capacity utilization. Declining cattle and beef production should not lead to additional facility closures. However, battles for market share will intensify and the recent additions in the sector will face additional margin compression, while construction and fundraising for new facilities will face more scrutiny and skepticism.

Despite the headwinds, Zimmerman believes U.S. cattle numbers can recover during the next cattle cycle and challenge the recent beef cow inventory highs near 32 million head.

“But the supply chain should proceed with caution as it looks to the future,” Zimmerman says. “It is going to take time and cooperation to turn recent trends.”

Cattle futures rebounded Thursday after the previous day’s breather, buoyed by the bullish Cattle report, positive weekly exports and notions this week’s cash fed cattle prices will be higher.

Feeder Cattle futures closed an average of $2.03 higher ($1.80 to $2.68 higher).

Live Cattle futures closed an average of $1.12 higher (80¢ to $1.325 higher).

Negotiated cash fed cattle trade was limited on light demand in the Western Corn Belt through Thursday afternoon, with a few live sales at $154/cwt., according to the Agricultural Marketing Service. Elsewhere, trade ranged from standstill to mostly inactive.

Last week, live prices were $156/cwt. in the Southern Plains, $153-$156 in Nebraska and $152-$157 in the western Corn Belt. Dressed prices were $248.

Choice boxed beef cutout value was 3¢ higher Thursday afternoon at $265.10/cwt. Select was 88¢ higher at $253.66/cwt.

Corn futures closed 1¢ to 5¢ lower through Jly ’24.

KC HRW Wheat closed mostly fractionally lower to 3¢ lower.

Soybean futures closed 3¢ to 17¢ higher.

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Major U.S. financial indices closed mixed on mixed economic news.

The Dow Jones Industrial Average closed 39 points lower. The S&P 500 closed 61 points higher. The NASDAQ was up 385 points.

West Texas Intermediate Crude Oil futures (CME) closed 39¢-53¢ lower through the front six contracts.

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Prices and profitability will favor cattle producers this year, according to CattleFax Analysts at Thursday’s Outlook Seminar, during the 2023 Cattle Industry Convention and NCBA Trade Show in New Orleans.

Kevin Good, vice president of industry relations and analysis at CattleFax forecast the average 2023 fed steer price at $158/cwt., up $13 from 2022, with a range of $150 to $172/cwt. CattleFax projects feeder steers (800 lbs.) to average $195/cwt. with a range of $175 to $215/cwt. Steer calves (550 lbs.) are forecast to  average $225/cwt., with a range of $200 to $245/cwt.

“Drought affected nearly half of the beef cow herd over the last year, exacerbating the liquidation in 2022,” Good says. “Drought improvement and higher cattle prices should drastically slow beef cow culling through 2023.”

Good forecast utility cows at an average of $100/cwt. with a range of $75 to $115/cwt. CattleFax projects bred cow prices an average of $2,100 per head for load lots of quality, running age cows; a range of $1,900 to $2,300.

Cattle futures paused and retraced Tuesday following the previous day’s gains and awaiting cash direction.

Feeder Cattle futures closed an average of $1.72 lower ($1.35 to $2.90 lower).

Live Cattle futures closed an average of 45¢ lower (35¢ to 80¢ lower).

Negotiated cash fed cattle trade was at a standstill through Wednesday afternoon in the Southern Plains and Nebraska, according to the Agricultural Marketing Service. In the Western Corn Belt, trading was inactive on very light demand with too few trades for a trend.

Last week, live prices were $156/cwt. in the Southern Plains, $153-$156 in Nebraska and $152-$157 in the western Corn Belt. Dressed prices were $248.

Choice boxed beef cutout value was $1.02 lower Wednesday afternoon at $265.07/cwt. Select was 14¢ lower at $252.78/cwt.

Corn futures closed mostly 1¢ to 5¢ higher.

KC HRW Wheat closed mostly 3¢ to 5¢ higher through May ’24 and then mostly 2¢ lower

Soybean futures closed fractionally lower to 17¢ lower through Jan’24, then mixed.

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Major U.S. financial indices rallied Wednesday as Fed Chairman Jerome Powell announced a quarter percentage point interest rate increase, notching another slowdown in the Fed’s rate hikes. In a press conference, Powell said, “We can now say for the first time that the disinflationary process has started.” 

Inflation numbers have been easing for the past three months but are still higher than the 2% target the Fed would like to see.

The Dow Jones Industrial Average closed 6 points higher. The S&P 500 closed 42 points higher. The NASDAQ was up 231 points.

West Texas Intermediate Crude Oil futures (CME) closed $2.38 to $2.46 lower through the front six contracts.

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Consumer demand for beef remains strong overall with more than two-thirds of consumers reportedly eat beef on a weekly basis, or more, according to the Today’s Beef Consumer report from the National Cattlemen’s Beef Association (NCBA), a contractor to the Beef Checkoff.

“During the pandemic consumers were forced to cook at home and many have continued to do so as it has become a popular way to make a dollar stretch and combat inflation,” according to the report, which was released Wednesday. The report found 76% of meals are now cooked at home and 94% of consumers who are cooking more at home say they will continue to do so.

“In 2022 fresh ground beef accounted for 50% of volume of beef sales, likely due to the lower price point as well as a renewed consumer interest in comfort foods and nostalgic recipes, like meatloaf,” according to the report.

Report analysts explain inflation is top of mind with 78% of consumers noticing an increase in the price of food whether at retail or foodservice. However, beef has experienced far lower levels of inflation when compared to other proteins in the “food at home” category.

As for food service, beef sales in both dollars and volume rebounded to surpass the pre-pandemic level of 2019.