WLI

Feeder Cattle futures closed an average of $1.79 lower Tuesday, pressured by Corn futures that were 15¢ to 17¢ higher through new-crop contracts as traders added weather premium based on the latest crop conditions, along with further uncertainty regarding Ukrainian exports.

Soybean futures closed 31¢ to 59¢ higher through Jly ‘23 and then mostly 20¢ to 22¢ higher.

Live Cattle futures closed an average of 61¢ lower, uninspired by early cash direction.

Negotiated cash fed cattle trade was slow on light demand in the Texas Panhandle through Tuesday afternoon, according to the Agricultural Marketing Service. There were a few live trades $1 lower at $135/cwt.

Elsewhere, trade ranged from mostly inactive on light demand to a standstill with too few transactions to trend.

Last week, live prices were $136 in Kansas, $139.00-$143.50 in Nebraska and $141-$145 in the western Corn Belt. Dressed prices were $227-$232.

Choice Boxed beef cutout value was $1.00 higher Tuesday afternoon at $269.11/cwt. Select was $1.12 lower at $243.88/cwt.

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Major U.S. financial indices closed lower Tuesday, with much of the pressure attributed to Walmart cutting its profit forecast based on food inflation.

The Dow Jones Industrial Average closed 228 points lower. The S&P 500 closed 45 points lower. The NASDAQ was down 20 points.

CME WTI Crude Oil futures closed 78¢ to $1.72 lower through the front six contracts.

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The Creighton University Rural Mainstreet Index (RMI) fell for the fourth straight month — from 49.8 in June to 46.0 in July — sinking below growth neutral for a second consecutive month, according to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy. The index ranges between 0 and 100 with a reading of 50.0 representing growth neutral.

“The Rural Mainstreet economy is now experiencing a downturn in economic activity. Supply chain disruptions from transportation bottlenecks and labor shortages continue to constrain growth. Farmers and bankers are bracing for escalating interest rates — both long-term and short-term,” says Ernie Goss, Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business.

Bankers were asked to identify the greatest risk for ranchers and farmers over the next 12 months. These were the leading responses: rising input prices (53.9%), falling grain and livestock prices (34.6%) and drought (11.5%).

“It’s the combination of higher input costs and a potential fall in commodity prices that are the biggest risks to farmers. Not just one or the other,” says James Brown, CEO of Hardin County Savings Bank in Eldora, IA.

Even with significant input price increases this year, bankers expect a half percentage point decline in farm loan delinquencies over the next 12 months.

Among other highlights:

The region’s farmland price index for July declined to 66.0 from 76.8 in June, marking the 22nd straight month that the index was above growth neutral.

On average, bank CEOs expect farmland prices to advance by 2.1% over the next 12 months.

Feeder Cattle futures closed an average of $1.76 lower Monday, pressured by higher Corn futures, bearish feedlot placements in Friday’s Cattle on Feed report and likely profit taking.

Corn futures reversed direction and closed 15¢ to 19¢ higher through new-crop contracts after Russia attacked one of Ukraine’s deep seaports before the ink dried on the agreement signed Friday which was supposed to enable resumption of Ukraine grain exports in the Black Sea region. Soybean futures closed mostly 28¢ to 30¢ higher.

Live Cattle futures closed narrowly mixed, from an average of 22¢ lower in three contracts to an average of 25¢ higher, supported by stronger wholesale beef prices.

Choice Boxed beef cutout value was 99¢ higher Monday afternoon at $268.11/cwt. Select was $2.50 higher at $245.00/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 $136 in the Southern Plains, $139.00-$143.50 in Nebraska and $142-$144 in the western Corn Belt. Dressed prices were $227 in Nebraska and $227-$230 in the western Corn Belt.

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Major U.S. financial indices closed narrowly mixed Monday, as investors awaited earnings reports from some corporate giants later this week, as well as key economic data.

The Dow Jones Industrial Average closed 90 points higher. The S&P 500 closed 5 points higher. The NASDAQ was down 51 points.

CME WTI Crude Oil futures closed $1.94 to $2.00 higher through the front six contracts.

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Cattle producers are de-stocking at a rapid pace in the Southern Plains as pasture conditions deteriorate, according to Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments.

For instance, in Oklahoma, where pasture and range rated poor or very poor jumped from 18% in early July to 34% by mid-month, Peel explains the volume of feeder cattle trading at auction increased 24% year over year the last two weeks.

“Prices for Oklahoma steers dropped an average of 3.5% this past week with prices for 400-500 lb. steers down 7.9%,” Peel says. “Feeder heifer prices were down an average of 2.5% with prices for 400-500 lb. heifers down 6.3%. The auction volume of cull cows and bulls jumped nearly 124% over last year in the past two weeks. Prices for average dressing Boning cows decreased by nearly 22% from $85.22/cwt. in early July to $66.62 this past week. Anecdotal reports indicate that auctions in the Southern Plains and regional cow slaughter plants are being overwhelmed with volumes of cattle sales.”

Peel notes last week’s semiannual USDA Cattle report confirmed accelerated beef cow herd liquidation due to the cumulative effects of drought the past two years.

As mentioned in Cattle Current, there were 30.35 million beef cows in the national inventory July 1, which was 750,000 fewer (-2.4%) than the same time last year.

The 4.15 million beef heifers retained as replacements were 150,000 fewer (-3.5%) than a year earlier.

The calculated number of calves outside feedlots July 1 of 35.7 million head was 1 million head fewer (-2.7%) than the same time last year.

Total cattle and calves of 98.8 million head were 2 million fewer (-2.0%) year over year.

You can find more market insight from Peel here.

Cattle futures took a step higher Friday, apparently buoyed by bullish expectations for the USDA reports that came out later that day (see below).

Feeder Cattle futures closed an average of $2.38 higher.

Live Cattle futures closed an average of $1.42 higher (85¢ higher at the back to $2.02 higher toward the front).

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

For the week, live prices were $1 lower in the Southern Plains at $136/cwt. and $1.00 to $1.50 lower at $139.00-$143.50 in Nebraska and $142-$144 in the western Corn Belt. Dressed prices in Nebraska were $3 lower at $227.

Choice Boxed beef cutout value was 64¢ lower Friday afternoon at $267.12/cwt. Select was $1.97 higher at $242.50/cwt.

Estimated total cattle slaughter last week of 665,000 head was 9,000 head fewer than the previous week, but 10,000 head more than the same week last year. Estimated year-to-date cattle slaughter of 18.8 million head was 212,000 more (+1.1%). Estimated year-to-date beef production of 15.5 billion lbs. was 152.6 million lbs. more (+1.0%).

Corn futures closed 9¢ to 11¢ lower through new-crop contracts and then mostly 4¢ to 5¢ lower, apparently pressured by favorable weather and the agreement between Ukraine and Russia which is supposed to enable resumption of Ukraine grain exports in the Black Sea region.

Soybean futures closed mostly 12¢ to 16¢ higher.

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Major U.S. financial indices closed lower Friday, led by tech stocks, but closed higher week to week.

The Dow Jones Industrial Average closed 137 points lower. The S&P 500 closed 37 points lower. The NASDAQ was down 225 points.

CME WTI Crude Oil futures closed 94¢ to $1.65 lower through the front six contracts.

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USDA’s semiannual Cattle report published Friday provided some clarity to how much the nation’s beef cow herd is contracting, and how fast.

There were 30.35 million beef cows in the national inventory July 1, which was 750,000 fewer (-2.4%) than the same time last year.

There were 4.15 million beef heifers retained as replacements, which was 150,000 fewer (-3.5%) than a year earlier.

Dairy cows numbered 9.45 million head, which was 50,000 head fewer (-0.5%)

Total cattle and calves of 98.8 million head were 2 million fewer (-2.0%) year over year.

The calculated number of calves outside feedlots July 1 of 35.7 million head was 1 million head fewer (-2.7%) than the same time last year.

The 2022 calf crop is projected to be 34.6 million head, which would be 485,400 head fewer (-1.4%).

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Markets will likely view Friday’s monthly Cattle on Feed report as neutral to slightly bearish, due to more placements than expected.

Cattle feeders placed 1.63 million head on feed in June (feedlots with 1,000 head or more capacity). That was 40,000 head fewer (-2.4%) than the same time last year but about 3% more than analysts expected ahead of the report.

In terms of placements weights, 39% went on feed weighing 699 lbs. or less, 45% weighing 700-799 lbs. and 16% weighing 900 lbs. or more.

Cattle feeders marketed 2.06 million head in June, which was 40,000 head more (+2.0%) year over year, in line with expectations.

There were 11.34 million head of cattle on feed July 1, which was 45,000 head more (+0.4%) than the same time last year.

According to the semiannual Cattle report, cattle on feed in feedlots with more than 1,000 head capacity accounted for 84.6% of the cattle on feed July 1.

Corn futures dredged 15¢ to 16¢ lower through new-crop contracts and then mostly 12¢ to 13¢ lower, pressured by favorable weather and reports suggesting Ukraine, Russia, Turkey and the UN would sign an agreement Friday that would enable resumption of Ukraine Black Sea grain exports.

Soybean futures closed mostly 24¢ to 30¢ lower, also pressured by lower Crude Oil.

Feeder Cattle futures gained an average of 49¢ with the lower Corn futures, although reluctantly.

Live Cattle futures closed an average of 41¢ lower, except for 20¢ higher in the back contract, on the week’s lower cash tone and perhaps with some deference to Friday’s semiannual Cattle report and monthly Cattle on Feed report.

Negotiated cash fed cattle trade was limited on light trade through Thursday afternoon, according to the Agricultural Marketing Service. Although too few to trend, there were some live trades in Kansas at $136/cwt. and a few dressed sales in the western Corn Belt at $232.

In established trade for the week, live prices are $1 lower in the Texas Panhandle at $136 and $1.00-$1.50 lower in Nebraska at $139.00-$143.50, where dressed prices are $3 lower at $227.

Last week, live prices were $137 in Kansas and $143.50-$145.00 in the western Corn Belt, where dressed prices were $228-$230.

Wholesale beef values resumed the seasonal decline. Choice Boxed beef cutout value was $2.77 lower Thursday afternoon at $267.76/cwt. Select was $1.72 lower at $240.53/cwt.

U.S. net beef export sales of 23,800 metric tons for the week of July 14 were up noticeably from the previous week and were 97% more than the prior four-week average, according to the weekly U.S. Export Sales report. Increases were primarily for South Korea, Japan, China, Mexico and Hong Kong.

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Major U.S. financial indices extended gains Thursday, buoyed by tech stocks and despite a negative labor report. Initial weekly unemployment insurance claims for the week ending July 16 were 7,000 more than the previous week at 251,000, according to the U.S. Department of Labor.

The Dow Jones Industrial Average closed 162 points higher. The S&P 500 closed 39 points higher. The NASDAQ was up 161 points.

West Texas Intermediate Crude Oil futures on the CME closed $2.11 to $3.53 lower through the front six contracts. 

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The U.S. Chamber of Commerce (USCC) agrees with those in the cattle business who oppose the Cattle Price Discovery and Transparency Act circulating in Congress, which would mandate minimum regional cash fed cattle trade.

“…the cattle price bill would displace free market fundamentals with government-controlled pricing. In a nutshell, the bill would require cattle feeders to sell cattle to packers, and packers to buy from feeders a mandatory minimum of fed cattle on a cash, spot market. As a result, the bill would reduce the ability of all levels of the supply chain to negotiate freely through formula and contract sales, also known as alternative marketing arrangements—a system that has helped to increase consumer demand and improve beef quality by effectively transmitting market signals about consumers’ preferences to producers,” says Sean Heather, USCC senior vice president of international regulatory affairs and antitrust, in a recent blog.

“In other words, the bill would replace a market structure that has evolved naturally over time with one created and managed by bureaucrats in Washington,” Heather continued. “When has that ever been a good idea? Instead, Congress should let these post-COVID markets adjust naturally. Indeed, fed cattle prices reached a seven-year high earlier this year, benefitting suppliers up and down the chain, and these price signals ultimately will work to expand production and keep prices in check for consumers.”

Negotiated cash fed cattle prices were $1-$3 lower in Nebraska Wednesday at $139-$142/cwt. Dressed prices were $3 lower at $227. That was on slow trade and light demand, according to the Agricultural Marketing Service.

Elsewhere, trade was limited on light demand with too few transactions to trend.

Live sales were $1 lower in the Texas Panhandle on Tuesday at $136.

Last week, live sales were $137 in Kansas and $143.50-$145.00 in the western Corn Belt, where dressed prices were $228-$230.

Despite the softer cash tone, recently firmer wholesale beef values helped Live Cattle close narrowly mixed, from 32¢ lower to 25¢ higher.

However, Choice Boxed beef cutout value was $2.04 lower Wednesday afternoon at $270.53/cwt. Select was $1.48 lower at $242.25/cwt.

Feeder Cattle futures closed an average of 80¢ lower with likely profit taking and retrenching ahead of Friday’s semiannual Cattle report and the monthly Cattle on Feed report.

Favorable weather pressured Corn and Soybean futures Wednesday.

Corn futures closed 3¢ to 5¢ lower through new-crop contracts and then mostly fractionally lower to 1¢ lower.

Soybean futures closed mostly 22¢ to 25¢ lower.

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Major U.S. financial indices closed higher Wednesday, maintaining steep gains from the previous session and buoyed by mostly positive quarterly corporate earnings.

The Dow Jones Industrial Average closed 47 points higher. The S&P 500 closed 23 points higher. The NASDAQ was up 184 points.

WTI Crude Oil futures on the CME closed mixed through the front six contracts, from 18¢ higher in Dec to $1.96 lower in spot Aug. 

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More calves headed to market earlier will change the complexion of available supplies in the Southern Plains this fall, as producers respond to drought and dwindling supplies of high-priced feed.

For instance, drought continues to encompass virtually the entire state of Texas — much of it extreme (D3) or exceptional (D4) — according to the July 12 U.S. Drought Monitor. Sale barns across Texas reported higher sale volumes over the last few months, including historically wetter parts of the state, according to Texas A&M AgriLife Extension.

Mark Welch, AgriLife Extension grain economist says feed-use numbers remain high for all livestock this year, but cattle producers around the state are experiencing below-average hay and grazing capacity. 

“The question is how long that can continue before cattle producers work the numbers or run out of grazing and supplemental feed substitutes they can use to efficiently feed grain?” Welch wonders. “Cash prices for feed-grade grain in Texas are still at a premium. We’re still living on supplies, and harvests in southern parts of the state are trickling in, but yields are below average.”

Of course, extreme heat in the Corn Belt has folks concerned about overall U.S. corn production this year.

Welch notes USDA’s recent corn harvest-area adjustment based on the June Acreage report, while holding expected yield steady at 177 bu./acre.

“Further down the road is more uncertain,” Welch says. “We need every bushel and every acre. The umbrella over all the markets is the economic slowdown and what that could do to demand on everything from corn to crude oil and cattle. That is an overarching concern.”

Approximately 56% of the nation’s cattle were in drought areas July 12, according to USDA’s Ag in Drought report.