WLI

Firmer late-week cash prices and the bounce higher in wholesale beef prices helped push Cattle futures mostly higher on Friday.

Choice Boxed beef cutout value was $8.53 higher Friday afternoon at $262.83/cwt. Select was $6.94 higher at $235.45/cwt.

Feeder Cattle futures closed an average of 26¢ higher (2¢ to 72¢ higher), except for 12¢ lower in Apr. They closed an average of 24¢ lower week to week, except for an average of 30¢ higher in two away contracts.

Live Cattle futures closed an average of 48¢ higher (5¢ higher at the back to $1.00 higher in spot Dec, except for unchanged in away Feb. Week to week, they closed from unchanged to an average of 65¢ higher through the front four contracts week to week on Friday (22¢ to $1.37 higher), and then an average of 26¢ lower.

Negotiated cash fed cattle trade ranged from light on moderate demand to mostly inactive on light to moderate demand through Friday afternoon, with too few transactions to trend, according to the Agricultural Marketing Service.

For the week, live prices were steady to $2 higher in the Texas Panhandle at $155/cwt., steady to $1 lower in Kansas at $155 and $1 lower to $1 higher in Nebraska and the western Corn Belt at $155-$157. Dressed prices were $1-$2 higher at $248.

Estimated total weekly cattle slaughter last week was 629,000 head, which was 23,000 head fewer than the previous week and 29,000 head fewer than the same week a year earlier. Year-do-date estimated total cattle slaughter of 32.58 million head was 412,000 head more (+1.3%) than the same time last year. Year-to-date estimated beef production of 26.93 billion lbs. was 307.7 million lbs. more (+1.1%) than a year earlier.

Corn futures closed mostly fractionally lower to 1¢ lower, but the front six contracts closed an average of 6’5¢ higher week to week on Friday.  

On Friday, Soybean futures closed 3¢ to 7¢ higher through Sep ’23 and then mostly 1¢ to 2¢ lower.

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Major U.S. financial indices closed lower again Friday with extended pressure from investor fears that the Fed’s hawkish stance on interest rates will lead to a recession.

The Dow Jones Industrial Average closed 281 points lower. The S&P 500 closed 43 points lower. The NASDAQ was down 105 points.

West Texas Intermediate Crude Oil futures (CME) closed $1.34 to $1.82 lower through the front six contracts.

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Cow-calf producers’ sensitivity to feeder cattle prices has declined over time (1987-2022), according to a recent factsheet authored by Amber Oerly, a graduate research assistant in agricultural economics at Kansas State University (K-State) and Glynn Tonsor, K-State agricultural economist.

“While price is still an important factor for cow-calf producers when they are making their herd adjustment decisions, other factors may be influencing their decisions more than they did in the past,” say the authors. “For industry analysts, these findings are relevant because when analysts attempt to project future inventory changes, a larger percentage change in price is needed to change inventory than in the past.”

The report — Cow-Calf Level Supply Response: How Has the Industry Responded to Elevated Uncertainty? — points to the declining distance between cattle inventory highs and lows during recent cattle cycles.

“This could occur if cow-calf producers are less sensitive to changes in expected feeder cattle prices (output prices), when making herd adjustment decisions, than they were in the past,” say the authors. “Further, producers may be less likely to invest in herd expansion during times of decreased return on investment and/or increased volatility or uncertainty. Other factors that may reduce the price sensitivity of cow-calf producers are evolving producer and operation demographics; technology and efficiency gains; unexpected weather events; and barriers to entry.”

As well, authors explain increased volatility and uncertainty due to the pandemic and other unexpected events, “…may contribute to reduced price sensitivity of producers when making their herd adjustment decisions.”

Cattle feeder patience paid off Thursday as packers paid mostly steady to higher money.

Negotiated cash fed cattle trade was slow on moderate demand in the Southern Plains through Thursday afternoon at $155/cwt. That was steady to $2 higher in the Texas Panhandle but steady to $1 lower in Kansas.

Trade was slow to moderate on moderate demand in Nebraska and the western Corn Belt. Dressed prices were $248, which was $1 higher in Nebraska and $1-$2 higher in the western Corn Belt, where live prices were unevenly steady at $155-$157. Live prices in Nebraska last week were $156-$158.

In Colorado, trade was mostly inactive on very light demand, with too few transactions to trend, according to the Agricultural Marketing Service. Live prices there last week were $157.

Choice Boxed beef cutout value was $4.23 higher Thursday afternoon at $254.30/cwt. Select was $1.82 higher at $228.51/cwt.

Bearish outside markets, firmer Corn futures and light trade helped pressure Cattle futures Thursday.

Feeder Cattle futures closed an average of 50¢ lower.

Live Cattle futures closed an average of 45¢ lower (7¢ to 85¢ lower).

Corn futures closed mostly 1¢ to 2¢ higher.

Soybean futures closed mostly 3¢ to 8¢ lower.

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Major U.S. financial indices closed sharply lower Thursday with follow-through pressure from the previous session tied to investor fears that the Fed’s hawkish stance on interest rates will lead to a recession. Weaker monthly retails sales added pressure. Advance estimates of U.S. retail and food services sales for November were 0.6% less than the previous month, according to the U.S. Commerce Department.

The Dow Jones Industrial Average closed 764 points lower. The S&P 500 closed 99 points lower. The NASDAQ was down 360 points.

West Texas Intermediate Crude Oil futures (CME) closed $1.17 to $1.43 lower through the front six contracts.

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USDA’s Economic Research Service (ERS) left projected feeder steer prices for next year unchanged, in December’s monthly Livestock, Dairy and Poultry Outlook (LDPO).

ERS projects the average feeder steer price (750-800 lbs., Oklahoma City) to be $177/cwt. in the first quarter of 2023, $190 in the second quarter and $214.00 in the third quarter for an annual average price of $201.25. The annual average this year was projected to be $165.68.

“After nearly three months of feeder cattle prices averaging around $174/cwt., tighter supplies of feeder steers likely helped support higher prices in November and early December,” say ERS analysts. “For November, prices for feeder steers 750–800 lbs. at the Oklahoma City National Stockyards recorded a weighted average of $177.35/cwt.  The average price of feeder steers from the December 5 report sales was $177.18. Lower projected corn prices for the fourth quarter also likely supported firm feedlot demand.”

As mentioned recently in Cattle Current, ERS projected the five-area direct weighted average fed steer price at $153.00 in the first quarter, $154 in the second and $155 in the third quarter for an annual average of $155.50. This year’s annual average price was estimated to be $144.15.

ERS analysts explain the negotiated cash fed steer price the first week of December (five-area) averaged $156.42/cwt., the highest weekly price for any December since 2014.

“Saturday slaughter volumes in early December are lighter than last year at this time and may portend a slight pullback from relatively high fed cattle prices through the end of the year,” ERS analysts say. “Estimated slaughter in early December suggests a slowing year-over-year pace of fed cattle slaughter. The slower expected pace is carried over into early 2023, as a portion of expected fed cattle marketings were shifted from the first to the second quarter. Heavier expected carcass weights in fourth-quarter 2022 are also carried over into early 2023. The temporal shift in expected marketings and heavier anticipated weights are offsetting, keeping the 2023 beef production forecast unchanged at 26.3 billion pounds.”

Cattle futures ran out of steam Wednesday as traders were apparently waiting for more cash direction.

Feeder Cattle futures closed an average of 24¢ lower.

Live Cattle futures closed an average of 34¢ lower.

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

Last week, live prices were at $153-$155/cwt. in the Texas Panhandle, $155-$156 in Kansas, $156-$158 in Nebraska and $156 in the western Corn Belt. Dressed prices were $246-$247.

Choice Boxed beef cutout value was $4.88 lower Wednesday afternoon at $250.07/cwt. Select was $1.23 higher at $226.69/cwt.

Corn futures closed 2¢ to 4¢ lower through Jly ‘23 and then mostly fractionally mixed.

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

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Major U.S. financial indices closed lower Wednesday, pressured by hawkish comments from Federal Reserve Chair, Jerome Powell, taking wind from the sails of those who had hoped the central bank would begin taking a softer monetary stance.

“The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time,” according to an FOMC statement. Although less than recent increases, the Fed raised the target range for the federal funds rate another half-point to 4.25% to 4.50%.

The Dow Jones Industrial Average closed 142 points lower. The S&P 500 closed 24 points lower. The NASDAQ was down 85 points.

West Texas Intermediate Crude Oil futures (CME) closed $1.37 to $1.89 higher through the front six contracts.

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Last year, 26% of U.S. beef production came from small family operations and 57% came from mid-size and large-scale family operations, according to the 2022 edition of America’s Farms and Ranches at a Glance.

Most U.S. operations are small family farms (89%) that operate on nearly 50% of U.S. agricultural land and account for 18% of the total value of production. Large-scale family farms accounted for 46% of the total value of production and 27% of agricultural land in 2021. Mid-size family farms accounted for 18% of agricultural land and 18% of the total value of production.

Small family farms had gross cash farm income of less than $350,000 for the year. For mid-size operations, the range of gross cash farm income was $350,000 to $999,999. It was $1 million or more for large-scale family operations.

Higher outside markets and recently surging wholesale beef prices helped Cattle futures mostly extend gains Tuesday.

Feeder Cattle futures closed an average of 36¢ higher.

Live Cattle futures closed narrowly mixed, from an average of 24¢ higher in the front four contracts to an average of 17¢ lower through the back, except for unchanged in Aug.

Choice Boxed beef cutout value was $2.07 lower Tuesday afternoon at $254.95/cwt. Select was 22¢ lower at $225.46/cwt. But, Choice was $3.31 higher in the morning report and the previous day’s CME Boxed Beef Index was $1.52 higher.

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

Last week, live prices were at $153-$155/cwt. in the Texas Panhandle, $155-$156 in Kansas, $156-$158 in Nebraska, $157 in Colorado and $156 in the western Corn Belt. Dressed prices were $246-$247.

Corn futures closed mostly 1¢ lower.

Soybean futures closed 15¢ to 19¢ higher through Aug ‘23, and then 4¢ to 8¢ higher.

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Major U.S. financial indices rose again Tuesday with another hopeful sign that inflation is easing. The Consumer Price Index for All Urban Consumers rose 0.1% in November on a seasonally adjusted basis, after increasing 0.4% in October, according to the U.S. Bureau of Labor Statistics. The index was 7.1% higher over the last 12 months, less than the trade expected.

The Dow Jones Industrial Average closed 103 points higher. The S&P 500 closed 29 points higher. The NASDAQ was up 113 points.

West Texas Intermediate Crude Oil futures (CME) closed $1.83 to $2.22 higher through the front six contracts.

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Global beef production is forecast to decrease slightly in 2023, as declining beef production in the U.S. and European Union will more than offset increasing beef production in Australia, Mexico and India, says Derrell Peel, Extension livestock Marketing specialist at Oklahoma State University, in his weekly market comments. He adds that changing beef production and consumption will impact global beef exports and imports.

Brazil is expected to remain the largest beef exporter with beef production increasing slightly next year, according to Peel. He explains Brazilian exports are limited by decreased beef imports to China.

“Australia, after drought in recent years decreased cattle numbers and beef production, is now in rebuilding mode,” Peel explains. “Cattle prices are falling from historically high levels in Australia and beef exports are forecast to increase, helping Australia regain the number two spot.” 

Declining beef production, higher beef prices and a continued strong dollar will likely make the U.S. the fourth largest beef exporter in 2023, according to Peel.

Cattle futures mostly edged higher Monday with carryover support from last week’s strong close and the bounce higher in wholesale beef prices.

Choice Boxed beef cutout value was $8.09 higher Monday afternoon at $257.02/cwt. Select was $4.42 higher at $225.68/cwt.

Live Cattle futures closed an average of 39¢ higher.

Feeder Cattle futures closed an average of 14¢ higher, except for unchanged to 27¢ lower in three contracts.

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

Last week, live prices were at $153-$155/cwt. in the Texas Panhandle, $155-$156 in Kansas, $156-$158 in Nebraska and $156 in the western Corn Belt. Dressed prices were $246-$247.

The five-area direct weighted average fed steer price last week was 63¢ lower at $155.79/cwt. The average steer price in the beef was $1.73 lower at $246.82.

Corn futures closed 3¢ to 10¢ higher. Reportedly, bargain hunting was a primary driver.

Soybean futures closed 18¢ to 23¢ lower through Sep ‘23, and then mostly 10¢ to 14¢ lower., pressured by positive rains in South America.

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Major U.S. financial indices closed higher Friday, recovering some recent losses. The main driver appeared to be bets on the next CPI indicating a touch lower inflation.

The Dow Jones Industrial Average closed 528 points higher. The S&P 500 closed 56 points higher. The NASDAQ was up 139 points.

West Texas Intermediate Crude Oil futures (CME) closed $1.82 to $2.15 higher through the front six contracts.

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Volatility continues in wholesale beef prices as buyers dust up holiday shopping and prepare for the calendar to turn, with a stronger floor than many would have expected.

For perspective, the precipitous drop in Choice boxed beef cutout values early last week spooked the market. Week to week on Monday, though, it was $13.71 higher at $257.02/cwt., following a decline of $11.22 for the same period a week earlier. Select was $4.57 higher week to week on Monday at $225.68.

Along the way, Andrew P. Griffith, agricultural economist at the University of Tennessee says the Choice-Select spread underscores consumer demand for higher quality beef.

“The Choice-Select spread typically narrows during the winter months when consumers begin using the slow cooker more frequently. The retail to consumer market is not quite to that point, but the wholesale to retail market should be trading for retailers needs during the winter months,” Griffith explains, in his weekly market comments. “Retailers are demonstrating the demand consumers will have for beef grading higher than Select during the winter months. Consumers have determined that a chuck roast that grades Choice is better than one that grades Select. The Choice-Select spread will narrow in January and February, but it is unlikely those spreads will narrow as much as has been seasonally typical the past decade.”