WLI

Bearish sentiment from the sharp volatility in Choice boxed beef cutout values helped pressure negotiated cash fed cattle prices lower Wednesday. Live prices in Nebraska were $1 lower on a live basis at $156/cwt. and $1-$2 lower in the beef at $247, on slow trade and light to moderate demand.

Elsewhere, trade was limited on light demand with too few transactions to trend, according to the Agricultural Marketing Service. Last week, live prices were $155 in the Southern Plains, $157 in Colorado and $157-$158 in the western Corn Belt, where dressed prices were $249.

Choice Boxed beef cutout value was $6.31 higher through Wednesday afternoon at $248.96/cwt. It was $6.62 lower on Monday. Select was 63¢ higher at $219.66/cwt.

Live Cattle futures found some footing Wednesday, while a bounce in Corn futures weighed on Feeder Cattle.

Feeder Cattle futures closed an average of 56¢ lower (25¢ to 90¢ lower).

Live Cattle futures closed an average of 35¢ higher, except for unchanged to 12¢ lower in four contracts.

Corn futures closed mostly 2¢ to 3¢ higher.

Soybean futures closed mostly 11¢ to 15¢ higher.

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

Major U.S. financial indices closed little changed Wednesday as investors retrenched and assessed the likelihood of a recession.

The Dow Jones Industrial Average closed 1 point higher. The S&P 500 closed 7 points lower. The NASDAQ was down 56 points.

West Texas Intermediate Crude Oil futures (CME) closed $1.91 to $2.24 lower through the front six contracts.

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

U.S. beef exports remain resilient and on a record annual pace, according to data released by USDA and compiled by the U.S. Meat Export Federation (USMEF).

October beef exports totaled 125,466 metric tons (mt), which was 8% more than a year ago. Export value was $929.8 million, down 3% from the large total reported in October 2021.

In the first 10 months of 2022, beef export value increased 18% from last year’s record pace to reach $10.05 billion – topping $10 billion in a single year for only the second time. January-October export volume was 1.25 million mt, up 4% from a year ago. October beef export value equated to $424.82 per head of fed slaughter, down 3% from a year ago, but the January-October average was still up 17% to $459.50.

“The October results were remarkable considering the headwinds facing U.S. beef, especially in our large Asian markets,” says Dan Halstrom, USMEF president and CEO. “Key currencies such as the Japanese yen and Korean won had sunk to their lowest levels in decades versus the U.S. dollar, which obviously affected importers’ buying power. COVID lockdowns in China were also a concerning factor, especially for buyers in the foodservice sector. But despite all that, U.S. beef still performed very well in Asia and achieved solid growth in North America and the Middle East. With some recent improvement in exchange rates, beef exports are well-positioned to surpass last year’s records.”

China/Hong Kong was the leading destination for U.S. beef in October, with export value topping $240 million. Export volume to Japan was steady with last year and shipments increased to South Korea, but export value to both markets was negatively impacted by slumping currencies. October beef exports achieved strong growth to the ASEAN, Middle East and Canada.

Also of note, October’s U.S. pork exports were the most in 16 months.

Pork exports reached 238,198 mt in October, up 5% from a year ago and the largest since June 2021. Pork export value increased 13% to $697.3 million, the highest since May 2021.

Halstrom notes that the October pork results were bolstered by outstanding growth in variety meat exports, which set a new value record at $126.2 million.

Cattle futures and some other ag commodities lost ground Tuesday with much of the pressure apparently tied to recessionary fears in outside markets. The recent sharp decline in wholesale beef prices didn’t help.

Feeder Cattle futures closed an average of $2.08 lower ($1.75 to $2.25 lower).

Live Cattle futures closed an average of $1.69 lower ($1.32 to $2.20 lower).

Corn futures closed mostly 1¢ to 3¢ lower.

Soybean futures closed 14¢ to 17¢ higher through Aug ‘23 and then mostly 4¢ to 6¢ 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 at $155/cwt. in the Southern Plains, $157 in Nebraska, $157 in Colorado and $157-$158 in the western Corn Belt. Dressed prices were $248-$249.

Choice Boxed beef cutout value was 66¢ lower Tuesday afternoon at $242.65/cwt. Select was $1.97 lower at $219.14/cwt.

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

Major U.S. financial indices closed sharply lower again Tuesday as investors seemed to grow increasingly concerned about the threat of a recession as the Fed tries to rein back inflation.

The Dow Jones Industrial Average closed 350 points lower. The S&P 500 closed 57 points lower. The NASDAQ was down 225 points.

West Texas Intermediate Crude Oil futures (CME) closed $2.48 to $2.68 lower through the front six contracts.

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

Agricultural producer sentiment was static month to month, according to the latest Purdue University/CME Group Ag Economy Barometer. The index in November was unchanged from the prior month at 102. However, the Current Conditions Index declined 3 points to a reading of 98 while the Future Expectations Index increased 2 points to a reading of 104.

“Even though sentiment remained relatively unchanged in November, producers are continuing to look at their bottom line,” says James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture. “Rising interest rates combined with high input and energy costs are creating a lot of uncertainty at the farm level.” 

The Farm Financial Performance Index improved modestly, up 5 points from October to 91, but it remains 14% lower year over year. Nearly a third of producers continue to express concern that their farms’ financial performance this year will be worse than the prior year. But the remainder expect their farms’ 2022 financial performance to be equal to or exceed 2021’s. Still, high input costs continue to weigh on producers’ minds with 42% of respondents in this month’s survey citing that as their top concern in the year ahead. Other concerns include rising interest rates, input availability and declining commodity prices.

Given the sharp rise in energy prices this year, the latest survey asked producers how they’ve responded to the cost increase. Just over a fourth (27%) of this month’s respondents indicated they’ve made changes in their operation because of rising prices for energy. Of those who indicated they made changes, 33% indicated they reduced tillage, 24% reduced nitrogen rates and/or changed application timing, 11% increased their use of no-till, and 8% said they reduced crop drying.

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 after the U.S. mid-term elections from November 14-18.

Cattle futures gained again Monday, supported by further erosion in Corn futures.

Feeder Cattle futures closed an average of 79¢ higher (27¢ to $1.32 higher).

Live Cattle futures closed mixed, from an average of 7¢ lower to an average of 11¢ higher.

Corn futures closed mostly 2¢ to 6¢ lower.

Soybean futures closed fractionally mixed 1¢ 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.

For the week, live prices were at $155/cwt. in the Southern Plains, $157-$159 in Nebraska, $157 in Colorado and $157-$158 in the western Corn Belt. Dressed prices were $248-$249.

Choice Boxed beef cutout value was $6.62 lower Monday afternoon at $243.31/cwt. Select was $3.45 lower at $221.11/cwt.

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

Major U.S. financial indices closed sharply lower Monday with carryover concerns from last week that recently strong economic data will encourage the Fed to continue its aggressive stance on raising interest rates.

The Dow Jones Industrial Average closed 482 points lower. The S&P 500 closed 72 points lower. The NASDAQ was down 221 points.

West Texas Intermediate Crude Oil futures (CME) closed $2.39 to $3.05 lower through the front six contracts.

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

“Cattle slaughter and beef production are tightening in the final weeks of the year,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “Total weekly beef production was down 1.0% in the most recent weekly data. This is the largest weekly decline in weekly beef production since the first few weeks of the year. The expectations are to begin seeing consistent week-over-week decreases in beef production.”

The most recent weekly data continued pointing to fewer heifers being retained with steer slaughter down 6.4% compared to the same week last year, while heifer slaughter was up 4.6%, according to Peel.

“Beef production in 2022 has also been boosted by increased cow slaughter,” Peel says. “Beef cow slaughter is up 12.1% year over year for the year to date. However, beef cow slaughter has been up only about 3% the past two weeks, suggesting that herd liquidation may be slowing down.”

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

For the week, live prices were steady to $1 higher in the Southern Plains at $155/cwt., steady to $1 higher in Nebraska at $157-$159 and $1-$2 higher in the western Corn Belt at $157-$158. Dressed prices were $4 higher at $249.

Choice Boxed beef cutout value was $3.64 lower Friday afternoon at $249.93/cwt. Select was 44¢ lower at $224.56/cwt.

Cattle futures gained more ground Friday, led by Feeder Cattle and supported by lower Corn futures.

Feeder Cattle futures closed an average of 88¢ higher (65¢ to $1.37 higher).

Live Cattle futures closed an average of 30¢ higher.

Corn futures closed 9¢ to 15¢ lower through the front four contracts and then mostly 1¢ to 3¢ lower.

Soybean futures closed mostly 8¢ to 11¢ higher.

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

Major U.S. financial indices closed little changed Friday after pressure early in the session from a stronger jobs report than expected, elevating concerns it would encourage the Fed to maintain its aggressive interest rate hikes.

Total nonfarm payroll employment increased by 263,000 in November, according to the U.S. Bureau of Labor Statistics. The unemployment rate was unchanged at 3.7%.

Average hourly earnings for all employees on private nonfarm payrolls rose by 18¢ cents in November to $32.82.

The Dow Jones Industrial Average closed 34 points higher. The S&P 500 was unchanged. The NASDAQ was down 20 points.

West Texas Intermediate Crude Oil futures closed 59¢ to $1.24 lower through the front six contracts.

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

The U.S. government averted a railroad strike on Friday with President Biden’s signature to legislation passed by the U.S. House and Senate that implemented most of the contract brokered in September.

“A rail shutdown would have had significant and long-lasting effects on American food and agriculture and would have been devastating to the nation’s economy,” said U.S. Agriculture Secretary, Tom Vilsack,.

Likewise, Colin Woodall, CEO of the National Cattlemen’s Beef Association said in a statement, “A rail shutdown would have been disastrous to our supply chain, and would have interrupted the essential feed, fuel, and fertilizer shipments cattle producers need. We are pleased that this joint resolution was swiftly passed by Congress and signed into law.”

Feeder Cattle futures bounced an average of $2.01 higher Wednesday, helped along by lower Corn futures and bullish outside markets. Live Cattle futures closed an average of 53¢ higher.

Corn futures closed mostly 3¢ to 5¢ lower.

Soybean futures closed mostly 3¢ to 5¢ higher, supported by stronger Crude Oil prices.

Negotiated cash fed cattle trade was slow on light demand in the Southern Plains through Wednesday afternoon, according to the Agricultural Marketing Service. Although too few to trend, there were some early live sales in the Texas Panhandle steady at $155/cwt. Prices in Kansas last week were $154-$155.

Elsewhere, trade ranged from inactive on light demand to a standstill. Live prices last week were $157-$158 in Nebraska and $155-$157 in the western Corn Belt. Dressed prices were $245.

Choice Boxed beef cutout value was 14¢ higher Wednesday afternoon at $254.88/cwt. Select was 81¢ lower at $225.01/cwt.

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

Major U.S. financial indices surged higher Wednesday, apparently mainly fueled by dovish comments from Federal Reserve Chair, Jerome Powell, suggesting the central bank may become less aggressive with interest rate hikes.

“Monetary policy affects the economy and inflation with uncertain lags, and the full effects of our rapid tightening so far are yet to be felt. Thus, it makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down,” Chairman Powell explained in a speech at the Brookings Institution in Washington, D.C. “The time for moderating the pace of rate increases may come as soon as the December meeting.”

The Dow Jones Industrial Average closed 737 points higher. The S&P 500 closed 122 points higher. The NASDAQ was up 484 points.

West Texas Intermediate Crude Oil futures (CME) closed $2.35 to $2.50 higher through the front six contracts.

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

Although achievable, it’s likely going to be tougher than earlier imagined for cash feeder cattle prices to intersect with current late spring and early summer Feeder Cattle futures prices, says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments.

“The dichotomy of feeder cattle prices lies in the optimism displayed in Feeder Cattle futures prices and the less optimistic CME Feeder Cattle Index,” Griffith explains. “The Feeder Cattle Index price has been stuck in the mid to low $170s for two months while Feeder Cattle futures have the May contract near $190 and the August contract near $200.”

Moreover, Griffith says the general economy and consumers’ ability to purchase beef will play a much larger role in beef and cattle prices than in recent history.

“As interest rates and inflation continue to rage, the quantity of disposable income available for beef purchases is likely to diminish given that income growth has not kept pace with inflation rates,” Griffith explains “The past 15 years have been filled with homeowners refinancing mortgages to reduce their monthly payments and thus result in more disposable income for other goods. However, the current interest rate environment will not provide many opportunities to refinance to reduce the monthly payment. This again begs the question if cattle prices can actually achieve the levels predicted by the futures market. Prices will certainly increase, but they may not reach current expectations.”