WLI

Cattle futures weakened Tuesday, pressured by lower wholesale beef prices, the weaker cash outlook and worries about House Speaker Nancy Pelosi’s visit to Taiwan potentially straining the already frayed relationship between the U.S. and China.

Feeder Cattle futures closed an average of $1.08 lower (57¢ to $1.65 lower).

Live Cattle futures closed an average of 17¢ lower, except for 2¢ higher in Jun.

Grain and Soybean futures closed lower again Tuesday with weather pressure and steady crop condition ratings week to week and year over year.

Corn futures closed 11¢ to 15¢ lower through Sep ‘23 and then mostly 5¢ to 8¢ lower.

Soybean futures closed mostly 12¢ to 19¢ lower.

Negotiated cash fed cattle trade was slow on light demand in the western Corn Belt through Tuesday afternoon, according to the Agricultural Marketing Service. There were a few live trades at $143/cwt. but too few to trend. Elsewhere, trade was at a standstill.

Last week, live prices were $135/cwt. in the Southern Plains, $138 in Nebraska and $141-$145 in the western Corn Belt. Dressed prices were $225 in Nebraska and $224-$228 in the western Corn Belt.

Choice Boxed beef cutout value was $2.14 lower Tuesday afternoon at $268.46/cwt. Select was $1.35 lower at $241.55/cwt.

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Major U.S. financial indices settled lower Tuesday with the aforementioned concerns about increased tension between the U.S. and China.

The Dow Jones Industrial Average closed 402 points lower. The S&P 500 closed 27 points lower. The NASDAQ was down 20 points.

CME WTI Crude Oil futures closed 53¢ to $1.17 higher through the through the front six contracts.

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Agricultural producer sentiment increased 6 points from June to July to a reading of 103, according to the latest Purdue University/CME Group Ag Economy Barometer. The Index of Current Conditions rose 10 points to 109 and the Index of Future Expectations rose 4 points to 100. All three indices were still 23-24% lower than a year earlier.

“Even though we saw a slight uptick in sentiment this month, there is still a tremendous amount of uncertainty in the agricultural economy,” says James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture. “Key commodity prices, including wheat, corn and soybeans, all weakened during the month and producers remain concerned over rising input prices and input availability.”

Producers’ views on farmland values diverged this month as the Short-Term Farmland Value Index declined 9 points to 127, while the long-term index rose 9 points to 150. The short-term index is down 20% from its peak reading in 2021, while the long-term index is only 6% lower than the peak reached last year. Short-term there was a shift away from expectations that farmland values will go higher, with more producers in July expecting values to remain about the same.

“The short-run and long-term farmland indices don’t always move in tandem, but the magnitude of this month’s divergence between the short and long-term indices is unusual,” Mintert says. “Producers who expect values to rise over the upcoming five years continue to say that non-farm investor demand and inflation are the two primary reasons they expect values to rise.”

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 July 11-15.

A reprieve in Corn futures helped Feeder Cattle climb an average of $1.64 on Monday, further bolstered by last week’s strong cash trade.

Corn futures closed 9¢ to 10¢ lower through new-crop contracts and then mostly 1¢ to 2¢ lower. Pressure was likely due in part to reports that the first load of Ukraine grain exports in too many months left from the port at Odessa.

Live Cattle futures closed an average of 66¢ higher, with another day of higher wholesale beef prices.

Choice Boxed beef cutout value was $1.36 higher Monday afternoon at $270.60/cwt. Select was 65¢ higher at $242.90/cwt.

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 $135/cwt. in the Southern Plains, $138 in Nebraska and $141-$145 in the western Corn Belt. Dressed prices were $225 in Nebraska and $224-$228 in the western Corn Belt.

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Major U.S. financial indices closed narrowly lower Monday, with pressure from energy stocks.

The Dow Jones Industrial Average closed 46 points lower. The S&P 500 closed 11 points lower. The NASDAQ was down 21 points.

CME WTI Crude Oil futures closed $3.04 to $4.73 lower through the through the front six contracts.

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Nationally, year-to-date beef cow slaughter was 14.1% more year over year through mid-July, according to Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments.

“Beef cow slaughter would have to drop to a level less than 6% higher year over year for the remainder of the year before the annual beef cow slaughter would not be double-digit higher for the entire year,” Peel says. 

Further, Peel explains heifer slaughter is up 3.9% year over year so far in 2022. 

“The July 1 inventory of heifers in feedlots was up 2.9% over last year and confirms that heifers continue to be diverted into feeder channels rather being retained for breeding,” Peel explains. “The mid-year cattle inventory showed that the beef cow herd was down 2.4% year over year and the inventory of beef replacement heifers was down 3.5% from last year. The beef industry is poised to see the largest single year beef cow herd decrease in more than 35 years.”

Feeder Cattle futures closed an average of 98¢ higher on Friday with continued cash strength and stabilizing Corn futures. Week to week, though, they were an average of $3.37 lower, pressured by surging Corn futures, which were an average of 52’1¢ higher through the front six contracts.

Live Cattle futures closed an average of 32¢ higher on Friday, supported by firmer wholesale beef values.

Choice Boxed beef cutout value was $1.47 higher Friday afternoon at $269.24/cwt. Select was $1.44 higher at $242.25/cwt.

Negotiated cash fed cattle trade ranged from slow on light to moderate demand to mostly inactive on light demand through Friday afternoon, according to the Agricultural Marketing Service. There were a few live sales in the western Corn Belt at $144-$145/cwt., but too few to trend.

For the week, live prices were $1 lower in the Southern Plains at $135/cwt., $1.00-$5.50 lower in Nebraska at $139.00-$143.50 and steady in the western Corn Belt at $141-$145. Dressed prices were $2 lower in Nebraska at $225 and $3-$5 lower in the western Corn Belt at $224-$225.

Estimated total cattle slaughter for the week of 669,000 head was 4,000 head more than the previous week and 23,000 head more than the same week last year. Total estimated year-to-date cattle slaughter of 19.48 million head was 234,000 head more (+1.2%) than the previous year. Estimated total year-to-date beef production of 16.07 billion lbs. was 169.5 million lbs. more (+1.1%) than a year earlier.

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Major U.S. financial indices closed higher Friday, led by tech and energy stocks, and supported by a slight improvement in the closely watched University of Michigan Index of Consumer Sentiment.

The Dow Jones Industrial Average closed 315 points higher. The S&P 500 closed 57 points higher. The NASDAQ was up 228 points.

CME WTI Crude Oil futures closed $1.89 to $2.20 higher through the through the front six contracts.

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The CME Feeder Cattle Index closed $1.30 higher week to week on Thursday at $172.31/cwt. Andrew P. Griffith, agricultural economist at the University of Tennessee notes in his weekly market comments the Feeder Cattle Index increased $19/cwt. between June 1 and July 27, while spot Feeder Cattle futures increased about $8.

“The cash feeder cattle market and the Feeder Cattle futures are jockeying for position in an attempt to determine where prices should be,” Griffith says. “The basis, or the difference between cash prices and futures prices, has narrowed considerably as the market is moving into August. This is to be expected as cash prices and futures prices should converge. Part of the narrowing of basis has been from futures declining slightly, but most of the narrowing of the basis has come from higher cash prices. Prices will continue to converge through August. It is unknown if it will be through higher cash prices or lower futures prices. Producers should hope for the former.”

Feeder Cattle futures closed an average of $1.55 lower Thursday beneath the weight of higher Corn futures, which were 14¢ to 16¢ higher through new-crop contracts and then mostly 9¢ to 11¢ higher. Soybean futures closed mostly 27¢ to 31¢ higher — both supported by the hotter, drier weather forecast in the Corn Belt.

Live Cattle futures closed narrowly mixed, from an average of 37¢ lower to an average of 15¢ higher, supported by positive weekly exports but pressured from lower cash prices and weaker wholesale beef values.

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

So far, this week, live prices are $1 lower in the Southern Plains at $135/cwt., $1.00-$5.50 lower in Nebraska at $138 and steady in the western Corn Belt at $141-$145. Dressed prices are $2 lower in Nebraska at $225 and $3-$7 lower in the western Corn Belt at $224-$225.

Choice Boxed beef cutout value was 22¢ lower Thursday afternoon at $267.77/cwt. Select was $1.00 lower at $240.81/cwt.

Net U.S. beef export sales of 25,300 metric tons were 6% more than the previous week and 66% more than the prior four-week average, according to the U.S. Export Sales report for the week ending July 21. Increases were primarily for South Korea, Japan, China, Taiwan and Mexico.

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Major U.S. financial indices closed higher again Thursday, apparently driven by strong quarterly earnings reports from Apple and Amazon.

The Dow Jones Industrial Average closed 332 points higher. The S&P 500 closed 48 points higher. The NASDAQ was up 130 points.

CME WTI Crude Oil futures closed 43¢ to 84¢ lower through the through the front six contracts.

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U.S. consumers reduced their restaurant visits in the second quarter of 2022, amid rising inflation and menu prices, according to The NPD Group (NPD).

Physical and online restaurant traffic declined 2% year over year in the second quarter and was 6% below the pre-pandemic level in the second quarter of 2019. Consumer restaurant spending for the quarter, which reflects higher costs in contrast to increased visits, was 2% higher year over year and 3% more than the same quarter in 2019.

“We see three ways consumers respond to higher menu prices. They trade down to lower-priced items, cut back on the number of items ordered, or reduce restaurant visits altogether,” says David Portalatin, NPD Food Industry Advisor. “Operators and manufacturers can win in this environment by differentiating value, understanding that value doesn’t always translate to the lowest price. Quality and value become a critical differentiator when consumers spend on a restaurant meal during these challenging times.”

Visits to quick service restaurants (QSRs), represented 82% of total restaurant traffic in the second quarter. They were 2% less year over year and 3% less than the pre-pandemic level for the same period in 2019. QSR fast casual restaurant traffic was 1% less than a year ago but was 8% more than same quarter in 2019.

Full service restaurant (FSR) visits, represented 18% of restaurant visits in the second quarter. They were 3% less than a year earlier and 20% less than the second quarter of 2019.

Feeder Cattle futures rose an average of $1.08 Wednesday, bolstered by strong cash demand.

Live Cattle futures edged an average of 13¢ higher, except for an average of 6¢ lower in the front two contracts, despite the weaker cash outlook for the week and wobbly beef prices.

Negotiated cash fed cattle trade was moderate on moderate demand in Nebraska through Wednesday afternoon, according to the Agricultural Marketing Service. Live prices were $1.00-$5.50 lower at $138/cwt. Dressed prices were $2 lower at $225.

Elsewhere, trade ranged from limited on light demand to mostly inactive on very light demand.

Prices in the Southern Plains were $1 lower on Tuesday at $135.

In the western Corn Belt last week, prices were $141-$145 on a live basis and $227-$232 in the beef.

Choice Boxed beef cutout value was $1.12 lower Wednesday afternoon at $267.99/cwt. Select was $2.07 lower at $241.81/cwt.

Higher oil prices helped lift Soybean futures mostly 15¢ to 26¢ higher while Corn futures were up mostly 3¢.

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Major U.S. financial indices closed higher Wednesday, after the Fed raised lending rates by another 75 basis points. Apparently, a wide swath of investors believe that inflation can be controlled while avoiding a recession.

The Dow Jones Industrial Average closed 436 points higher. The S&P 500 closed 102 points higher. The NASDAQ was up 469 points.

CME WTI Crude Oil futures closed $2.28 to $2.50 higher through the front six contracts.

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Inflation is now the key risk to meat and poultry consumption, as the impact of COVID-19 on consumer food spending is diminishing, according to The Quarterly from CoBank’s Knowledge Exchange. Retail meat and poultry prices were 18% higher in May compared to 2021 and both spot market supplies and freezer inventories are below pre-pandemic levels. The combination of tight supplies and steady demand kept meat prices 20% higher than the five-year average for the March-May period, say CoBank analysts.

Among the report highlights:

• Effects from the pandemic and Ukraine war continue to reverberate through the global economy. Food and energy prices remain high, though prices for underlying commodities have lost upward momentum as economic fears rise.
• After more than two years, Covid-related supply chain complications are finally easing and various metrics indicate improvements to supply chain performance both domestically and globally. However, those improvements have been modest and agricultural supply chains in particular remain broadly mired in dysfunction.

“Warehouse and inventory costs are still rising at near-peak levels, and transportation costs are rising at a much higher rate than pre-pandemic,” says Dan Kowalski, vice president of CoBank’s Knowledge Exchange. “Grain rail car availability and prices were at multi-year lows and highs, respectively, in the second quarter. Although as consumer purchases of goods continues to soften, supply chains will slowly recover.”

• Declining cattle supplies are expected to converge with excess processing capacity over the next 12-18 months, which should contribute to more favorable conditions for producers.