WLI

Cattle futures surged higher Wednesday, led by Live Cattle, supported by recent wholesale boxed beef strength, performance-depressing winter weather forecast across the Northern Plains, as well as bullish expectations for Friday’s Cattle on Feed report. Evidence of tightening cattle numbers also continues to grow (see below).

Live Cattle futures closed an average of 98¢ higher (25¢ higher at the back to $2.12 higher toward the front).

Feeder Cattle futures closed an average of 56¢ higher.

That was with Corn futures closing mostly 6¢ to 10¢ higher through Jly ‘24, supported by the drier outlook in South America. Soybean futures closed 1¢ to 4¢ higher through Nov ‘23 and then mostly 2¢ to 5¢ lower.

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

Last week, live prices were $155/cwt. in the Southern Plains and $155-$157 in Nebraska and the western Corn Belt. Dressed prices were $248.

Choice Boxed beef cutout value was 19¢ lower Wednesday afternoon at $264.86/cwt. Select was $2.39 higher at $236.29/cwt.

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Major U.S. financial indices climbed Wednesday amid positive economic news that included strong earnings reports from bellwethers Nike and FedEx, as well as stronger consumer confidence.

The Conference Board Consumer Confidence Index^® increased 6.9 points in December to 108.3, following back-to-back monthly declines.

“Consumer confidence bounced back in December, reversing consecutive declines in October and November to reach its highest level since April 2022,” says Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “The Present Situation and Expectations Indexes improved due to consumers’ more favorable view regarding the economy and jobs. Inflation expectations retreated in December to their lowest level since September 2021, with recent declines in gas prices a major impetus. Vacation intentions improved but plans to purchase homes and big-ticket appliances cooled further. This shift in consumers’ preference from big-ticket items to services will continue in 2023, as will headwinds from inflation and interest rate hikes.”

The Dow Jones Industrial Average closed 526 points higher. The S&P 500 closed 56 points higher. The NASDAQ was up 162 points.

West Texas Intermediate Crude Oil futures (CME) closed $1.63 to $2.06 higher through the front six contracts.

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Auction market volume in Oklahoma during the past few months suggest declining cattle numbers are adding lift to feeder cattle prices.

“Weekly volumes were larger year over year from July through mid-October and have been mostly smaller since,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in is weekly market comments.  “From July to mid-October, the cumulative additional weekly feeder volume was up an average of 18%, totaling over 71,000 additional head of feeder cattle marketed in auctions during this period. The year-over-year decreases since mid-October have reduced the cumulative total by about half, meaning that the total feeder cattle auction volume in the second half of 2022 is up over 35,000 head at the end of the year, with all of that increase occurring prior to mid-October. Smaller auction volumes since mid-October are no doubt contributing to the strong feeder prices at the end of the year.”

Peel also points to the fact that average prices for Medium and Large #1 steers reached their annual high in mid-December at weights less than 550 lbs. and weights heavier than 850 lbs.

“Prices for steers from 550-850 lbs. were at the maximum in August/September but are above the annual average at the end of the year,” Peel says.  “In general, feeder cattle markets are finishing 2022 strong with momentum going into the new year.”

Looking ahead, Peel notes the number of stocker cattle on wheat pasture are significantly fewer than typical, well below normal suggesting a muted run of wheat-pasture feeder cattle into March and for graze-out into May. 

You can watch Peel sharing some of his market outlook here.

Feeder Cattle futures retraced the previous session’s losses, perhaps with support from early positioning ahead of Friday’s monthly Cattle on Feed report (see below). They closed an average of 96¢ higher (60¢ to $1.52 higher).

Live Cattle futures softened an average of 21¢ lower, except for an average of 17¢ higher in the back three contracts. Pressure included reduced packer production last week and likely again this week, diluting some opportunity for cash prices to advance.

Corn futures closed 1¢ to 4¢ higher through May ‘24 and then mostly 1¢ to 2¢ lower.

Soybean futures closed 11¢ to 17¢ higher through Sep ‘23 and then mostly 7¢ to 8¢ higher.

Choice wholesale beef prices continued their recent surge higher, due in part to the aforementioned reduction in packer production. Choice Boxed beef cutout value was $1.22 higher Tuesday afternoon at $265.05/cwt. However, Select was $4.67 lower at $233.90/cwt.

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 $155/cwt. in the Southern Plains and $155-$157 in Nebraska and the western Corn Belt. Dressed prices were $248.

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Major U.S. financial indices firmed Tuesday, ending the recent losing streak. Perhaps bargain hunting was part of the support, given the Bank of Japan’s surprise decision to let its 10-year government bond interest rate to rise — fueling the yen higher.

The Dow Jones Industrial Average closed 92 points higher. The S&P 500 closed 3 points higher. The NASDAQ was up 1 point.

West Texas Intermediate Crude Oil futures (CME) closed 72¢ to 90¢ higher through the front six contracts.

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Many analysts expect this Friday’s monthly Cattle on Feed report to be decidedly bullish.

“Early pre-report estimates have placements ranging from 94% to 98% of a year ago,” says David Anderson, Extension livestock economist with Texas A&M AgriLife Extension Service. “Lower placements are driven by fewer feeder cattle available than last year and seasonal declines. The feeder cattle index, calf and feeder cattle sales data, and cattle imports from Mexico all indicate smaller placements than last year.”

With November marketings pegged to be 1% more year over, year, Anderson says the Dec. 1 on-feed inventory is estimated at about 97.5% of last year.

“That would be the fewest December on-feed numbers since 2017,” Anderson says, in the latest issue of In the Cattle Markets. “Supplies for next year and beyond are tightening.”

Recently stronger wholesale beef prices and last week’s mostly steady-to-firmer cash fed cattle trade helped Live Cattle futures edge an average of 15¢ higher Monday.

Despite lower Corn futures, Feeder Cattle futures meandered to a mostly lower close Monday, presumably pressured in part by the lack of cash direction with many auction barns closed for the holidays. Feeder Cattle futures closed an average of 84¢ lower (15¢ to $1.67 lower), except for an average of 35¢ higher in the back two contracts.

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 $155/cwt. in the Southern Plains and $155-$157 in Nebraska and the western Corn Belt. Dressed prices were $248.

Choice Boxed beef cutout value was $1.00 higher Monday afternoon at $263.83/cwt. Select was $3.12 higher at $238.57/cwt.

Corn futures weakened on positive South American moisture. They closed 2¢ to 5¢ lower through May ‘24 and then mostly fractionally mixed.

Soybean futures closed 12¢ to 20¢ lower through Sep ’23 and then mostly 2¢ to 8¢ lower.

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Major U.S. financial indices closed lower again Monday with carry-over pressure from continued recessionary fears. 

The Dow Jones Industrial Average closed 162 points lower. The S&P 500 closed 34 points lower. The NASDAQ was down 159 points.

West Texas Intermediate Crude Oil futures (CME) closed 75¢ to 90¢ higher through the front six contracts.

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Although steer byproduct values softened recently, they remain significantly higher than the five-year average, according to the Livestock Marketing Information Center (LMIC).

“Last week it was $14.67/cwt., down 2% from the same week last year but 49% above the five-year average,” according to LMIC analysts, in the latest Livestock Monitor. “Since September, the value has averaged $14.73/cwt., slightly lower than the same period last year, which ranged from $15-16. The five-year average is typically below $10/cwt. during the latter part of the year.”

According to the LMIC folks, prices for livers, tongues and cheek meats provided support during the last several months. They add that hide prices held relatively steady over the same period.

The cow byproduct price remains elevated, too.

“Last week, the cow by-product value was $13.59/cwt., down 6% from last year but 51% higher than the five-year average. During the last year, the weekly cow by-product value has ranged from $12.54 to $15.19 with an average of $13.55/cwt.,” say LMIC analysts.

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.”