WLI

Cattle futures closed lower for the second consecutive day on Friday as Corn futures gained and cash fed cattle prices remained steady to cloudy.

Feeder Cattle futures closed an average of 1.72¢ lower. However, they were $3.66 higher week to week.

Live Cattle futures closed an average of 76¢ lower.

Corn futures closed 4¢ to 6¢ higher.

KC HRW Wheat closed mostly 18¢ to 20¢ higher.

Soybean futures closed mostly 1¢ to 4¢ lower through Sep ‘24 and then mostly 3¢ higher.

Negotiated cash fed cattle trade was slow on moderate demand in Kansas, Nebraska and the western Corn Belt through Friday afternoon, according to the Agricultural Marketing Service. Elsewhere, trade was very limited on light demand.

For the week, live prices were mostly steady at $165/cwt., except for steady to $1 higher in the western Corn Belt at $165-$166. Dressed prices were steady to $3.50 higher in Nebraska at $265.00-$268.50 and steady in the western Corn Belt at $265.

Choice boxed beef cutout value was 31¢ higher Friday afternoon at $284.91/cwt. Select was $4.51 lower at $271.54/cwt.

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Major national financial indices closed lower Friday, pressured by news that Silicon Valley Bank (SVB), in Santa Clara, Calif. was shuttered by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver.

Apparently, as a tech-focused lender, SVB ran into a massive cash crunch between clients, such as venture groups, making more withdrawals than anticipated, while increasing interest rates devalued the bank’s bond assets. Silicon Valley Bank had 17 branches in California and Massachusetts.

According to the FDIC, this was the first closure of an FDIC-insured institution since October of 2020.

The Dow Jones Industrial Average closed 345 points lower. The S&P 500 closed 56 points lower. The NASDAQ was down 199 points.

West Texas Intermediate Crude Oil futures (CME) closed 88¢ to 96¢ higher through the front six contracts.

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The U.S. restaurant industry continues to recover from the impact of Covid restrictions and pandemic-related closures, according to The NPD Group (NPD). Although still less than pre-pandemic counts, the number of restaurants in the U.S. grew by 18,000 locations, according to NPD’s fall 2022 restaurant census, which includes restaurants open as of September 30, 2022. Total foodservice traffic, restaurants and retail foodservice combined, was up 2%, and restaurant visits were up 3% in January over visit losses due to the omicron variant last year. Foodservice consumer spending rose 7% in the month compared to a year ago.  

In January, dine-in visits at restaurants were up 24% over a gain of 41% in January 2022. Even with the increases, dine-in or on-premises traffic is still recovering from the steep pandemic-related declines in 2020.

Off-premises — primarily drive-thru and delivery — was a default beneficiary of pandemic restrictions, and visits for both order modes remain up, 9% and 88%, respectively, versus three years ago. Traffic at morning meal, including breakfast and A.M. snack periods, has fully recovered from pandemic declines. Restaurant visits at breakfast and A.M. snack increased 13% in January compared to a year ago, and are up 3% versus three years ago, according to NPD.

“Although the pandemic is still informing the foodservice industry narrative, there are areas of meaningful growth and recovery,” says David Portalatin, NPD food industry advisor. “Consumers still need and want foodservice experiences and convenience, and we see the light at the end of this long tunnel peek through.”

Cattle futures closed lower Thursday with likely profit taking, the lack of weekly cash fed cattle direction and outside market bearishness.

Feeder Cattle futures closed an average of 90¢ lower.

Live Cattle futures closed an average of 66¢ lower, except for 60¢ higher in the back contract.

Weekly beef export sales offered no support. According to USDA’s weekly U.S. Export Sales report, net U.S. beef export sales for the week ending March 2 were 5,600 metric tons, a marketing-year low. The total was 31% less than the prior week and 67% less than the previous four-week average (see below).

Negotiated cash fed cattle trade got underway in the Texas Panhandle Thursday at steady money of $165/cwt. on slow trade and light demand.

Elsewhere, trade was mostly inactive on light demand with too few transactions to trend, 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 18¢ lower Thursday afternoon at $284.60/cwt. Select was $2.07 lower at $276.05/cwt.

Corn futures closed 12¢ to 16¢ lower through old-crop contracts. and then mostly 3¢ to 4¢ lower.

KC HRW Wheat closed mostly 18¢ to 22¢ lower.

Soybean futures closed mostly 8¢ to 11¢ lower.

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Major U.S. financial indices closed strongly lower Thursday amid likely positioning ahead of Friday’s monthly federal jobs report, as investors fret strong gains would tip the Fed’s hand toward higher interest rates for longer.

However, weekly initial unemployment insurance claims (week ending March 4) were higher than expected at 211,000, according to the U.S. Department of Labor. That was 21,000 more than the previous week’s revised level.

The Dow Jones Industrial Average closed 543 points lower. The S&P 500 closed 73 points lower. The NASDAQ was down 237 points.

West Texas Intermediate Crude Oil futures (CME) closed 94¢ to 97¢ lower through the front six contracts.

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U.S. beef exports are off to a slower start than the last two record-breaking years, according to data released by USDA and compiled by the U.S. Meat Export Federation (USMEF). January volume fell 15% year-over-year to 100,942 metric tons (mt) valued at $702.3 million (down 32%).

Beef inventories swelled in some key markets near the end of last year, contributing to a challenging environment for U.S. beef, according to USMEF.

January beef exports were down substantially in most Asian destinations compared to the large year-ago totals. The decline was especially sharp in South Korea, where volume dipped 36% to 18,896 mt and value fell 52% to $151.5 million.

However, U.S. beef export shipments increased sharply to Mexico, the Dominican Republic, the Philippines and Africa.

“While beef exports are off to a slow start in 2023, we remain optimistic that post-COVID foodservice demand will strengthen in additional markets as the year progresses,” explains Dan Halstrom, USMEF president and CEO.

January beef exports equated to $331.27 per head of fed slaughter, down 34% from a year ago.

Cattle futures gained Wednesday, buoyed by the friendly World Agricultural Supply and Demand Estimates (WASDE), which weighed on Corn and underscored the higher price outlook for cattle (see below).

Feeder Cattle futures closed an average of $1.84 higher.

Live Cattle futures closed an average of 30¢ higher, except for 52¢ lower in spot Apr.

Negotiated cash fed cattle trade ranged from mostly inactive on very light demand to a standstill through Wednesday 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 $3.15 lower Wednesday afternoon at $284.78/cwt. Select was 63¢ higher at $278.12/cwt.

Corn futures closed mostly 8¢ to 9¢ lower.

KC HRW Wheat closed mostly 2¢ to 9¢ lower.

Soybean futures closed mostly 1¢ to 2¢ lower.

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Major U.S. financial indices closed narrowly mixed Wednesday with carry-over pressure from the bearish outlook on tighter monetary policy.

The Dow Jones Industrial Average closed 58 points lower. The S&P 500 closed 5 points higher. The NASDAQ was up 45 points.

West Texas Intermediate Crude Oil futures (CME) closed 83¢ to 92¢ lower through the front six contracts.

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The latest monthly World Agricultural Supply and Demand Estimates favor cattle and beef prices.

USDA projected the annual five-area direct weighted average fed steer price for this year at $162/cwt., which was $3 more than the previous estimate. Prices are forecast to be $161 in the first quarter, $163 in the second quarter, $159 in the third quarter and $164 in the fourth quarter.

USDA estimated beef production for this year at 26.7 billion pounds, which was 170 million pounds more than the previous estimate. It would be 1.62 billion pounds less (-5.7%) than last year.

“Slaughter projections are raised through the first three quarters of the year on higher cow slaughter and increased placements of cattle in feedlots in the first quarter of 2023, which will likely be marketed in the third quarter,” according to analysts with the Economic Research Service.

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.