WLI

Grain futures marched higher Thursday, buoyed by the latest monthly World Agricultural Supply and Demand Estimates (see below), led by Kansas City Wheat, which closed 63¢ to 69¢ higher in the front five contracts.

Corn futures closed mostly 8¢ to 16¢ higher, while Soybean futures closed 3¢ to 10¢ higher through Aug ‘23 and then mostly unchanged to 4¢ lower.  

Cattle futures stepped lower beneath the weight of the outlook for continued higher feed prices.

Feeder Cattle futures closed an average of $2.88 lower ($1.27 to $3.50 lower). Live Cattle futures closed an average of $1.30 lower (50¢ lower at the back to $2.07 lower toward the front).

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

So far this week, live prices are steady in the Southern Plains at $140/cwt., $2 lower in Nebraska at $144 and steady to $2 lower in the western Corn Belt at $144-$145. Dressed prices are $2 lower in Nebraska at $232 and $2-$3 lower in the western Corn Belt at $227-$230. Live prices in Colorado last week were at $142-$148.

Choice Boxed beef cutout value was $2.12 higher Thursday afternoon at $257.20/cwt. Select was $2.18 higher at $244.36.

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Major U.S. financial indices continued to waver Thursday, with inflation worries and concerns about economic growth.

The Dow Jones Industrial Average closed 103 points lower. The S&P 500 closed 5 points lower. The NASDAQ was up 6 points.

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USDA’s Economic Research Service (ERS) increased both forecast beef production and fed steer prices slightly for this year, in the latest monthly World Agricultural Supply and Demand Estimates.

ERS increased the annual average five-area direct fed steer priced for this year by 60¢ to $140.10/cwt. That was based on current prices and expectations of tighter supplies in the second half of this year. Average prices are projected at $140 in the second quarter, $136 in the third quarter and $145 in the fourth quarter.

The average annual price next year is forecast to be $153, lifted by tighter supplies.

ERS increased expected beef production slightly for this year, compared to the previous month, to 27.84 billion lbs. That would be 106 million lbs. less than last year (-0.4%).

“Beef production is raised, with more cattle placed in feedlots sooner than normally expected due to drought conditions, supporting higher annual fed cattle slaughter,” say ERS analysts. “Additionally, cow slaughter is forecast higher.”

Beef production next year is forecast at 25.95 billion lbs., which would be 1.89 billion lbs. less (-6.8%) compared to this year.

Total red meat and poultry production this year is projected to be 106.38 billion lbs., slightly more than the previous month’s estimate. The total would be 431 million lbs. less than last year (-0.4%). Total red meat and poultry production next year is forecast to be 105.34 billion lbs., which would be 1.04 billion lbs. less than this year (-0.97%) less than this year.

Turning to crops, ERS analysts emphasize, “Russia’s recent military invasion of Ukraine significantly increased the uncertainty of agricultural supply and demand conditions in the region and globally. The May WASDE represents an ongoing assessment of the short-term impacts as a result of this action.”

Corn

The 2022-23 U.S. corn outlook is for lower production, domestic use, exports, ending stocks, and higher prices.

The season-average corn price received by producers is projected at $6.75/bu., up 85¢ from a year ago. If realized, it would be the highest average price since $6.89 in 2012-13.

Soybeans

The 2022-23 outlook for U.S. soybeans is for higher supplies, crush, exports, and ending stocks compared with 2021-22.

The 2022-23 U.S. season-average soybean price is forecast at $14.40/bu., compared with $13.25 in 2021-22. Soybean meal prices are forecast down $20 per short ton from 2021-22 to $400/short ton and soybean oil prices are forecast down 5¢ to average 70¢/lb., as oilseed and product supplies rebound in foreign markets.

Wheat

The outlook for 2022-23 U.S. wheat is for reduced supplies, exports, domestic use stocks, and higher prices.

The projected 2022-23 season-average farm price is a record high $10.75/bu., up $3.05 from last year’s revised price.

Cattle futures were mixed Wednesday, with Feeder Cattle pressured by a surge in Corn futures

prices, while Live Cattle was supported by the discount to cash.

Feeder Cattle futures closed an average of $1.19 lower (35¢ lower at the back to $1.85 lower toward the front).

Live Cattle futures closed an average of 47¢ higher (10¢ to $1.17 higher), except for an average of 6¢ lower in three contracts.

Negotiated cash fed cattle trade was slow on moderate demand in the Texas Panhandle, Nebraska and the western Corn Belt through Wednesday afternoon, according to the Agricultural Marketing Service.

So far this week, live prices are steady in the Southern Plains at $140/cwt. and $2 lower in Nebraska at $144. Dressed prices in Nebraska are $2 lower at $230.

Live prices last week were $142-$148 in Colorado and $144-$147 in the western Corn Belt, where dressed prices were $230-$232.

Choice Boxed beef cutout value was 16¢ lower Wednesday afternoon at $255.08/cwt. Select was 17¢ lower at $242.18.

Corn and Soybean futures rose on South American wonderments and likely positioning ahead of Thursday’s World Agricultural Supply and Demand Estimates.

Corn futures closed mostly 15¢ to 17¢ higher through Jly ‘23 and then mostly 4¢ to 5¢ higher.

Soybean futures closed 11¢ to 20¢ higher through Aug ‘23 and then mostly 2¢ higher.  

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Major U.S. financial indices closed sharply lower Wednesday, pressured by higher inflation than investors expected.

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3% in April on a seasonally adjusted basis after rising 1.2% in March, according to the U.S. Bureau of Labor Statistics. Over the last 12 months, the all-items index increased 8.3% before seasonal adjustment.

The Dow Jones Industrial Average closed 362 points lower. The S&P 500 closed 65 points lower. The NASDAQ was down 373 points.

West Texas Intermediate Crude Oil futures on the CME closed $4.62 to $5.95 higher through the front six contracts, apparently fueled by a day of increased fears about shortages.

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Choosing to consume beef or plant-based proteins designed to mimic the real thing is not an either/or proposition, according to a new study from agricultural economists¹ at Kansas State University and Purdue University.

The analysis — Benchmarking U.S. consumption and perceptions of beef and plant-based proteins — comprised two separate studies. One documents factors affecting beef and plant-based consumption. The other focuses on factors motivating consumers to include beef and/or plant-based proteins in their diets.

“An interesting insight comes from evaluating beef and plant-based consumption together. Of the 6% of respondents who ate plant-based proteins, 58% also ate beef during the prior day. In other words, 4% of respondents ate both beef and plant-based proteins in the same day,” according to the study. “This indicates beef and plant-based protein consumption are not necessarily exclusive of each other. More participants ate both proteins than ate plant-based protein only and not beef.”

Around 6% of all respondents consumed plant-based proteins (patties and crumbs specifically) at least once during the previous day, while 53% ate beef at least once.

The fact that some consumers already consume beef and plant-based proteins in the same day could motivate development of blended products, according to the researchers.

“Blending may be an attractive consideration for the beef industry if these proteins (plant) become much cheaper to produce and consumers perceive them as close alternatives to animal-derived meat. Blending products could decrease the price of these hybrid products, increasing the quantity demanded of both traditional beef and plant-based proteins,” according to the study. “In this way, plant-based proteins could compete with imports of lean beef destined for blending into ground products and thus fulfill a market segment for U.S.-produced products.”

Keep in mind, alternative protein market share is exceptionally small, relative to beef, as demonstrated in a number of studies.

“Current consumer preferences do not support projected major demand changes, especially since whole muscle products such as steaks and roasts are currently only available from animal sources,” say researchers.

¹Researchers included agricultural economists: Glynn Tonsor and Ted Schroeder, Kansas State University (K-State); Jayson Lusk, Purdue University; Hannah Taylor, USDA-ERS, who was with K-State when the study was conducted. 

Negotiated cash fed cattle trade was light to moderate on moderate demand in the Southern Plains through Tuesday afternoon, according to the Agricultural Marketing Service. Prices were steady to $1 lower in the Texas Panhandle at $139-$140/cwt. And steady in Kansas at $140.

Elsewhere, trade ranged from limited on light demand to a standstill. Live prices last week were $146 in Nebraska, $142-$148 in Colorado and $144-$147 in the western Corn Belt. Dressed prices were $230-$232.

Cattle futures lost more ground Tuesday, as cash fed cattle prices ran out of steam in the South and Corn futures rose.

Feeder Cattle futures closed an average of $1.83 lower (87¢ lower to $2.37 lower).

Live Cattle futures closed an average of 93¢ lower (25¢ to $1.27 lower), except for 7¢ higher in the back contract.

Choice Boxed beef cutout value was $3.05 lower Tuesday afternoon at $255.24/cwt. Select was 78¢ lower at $242.35.

Corn and Soybean futures were supported by the sluggish planting pace.

Corn futures closed mostly 3¢ to 8¢ higher. Soybean futures closed 5¢ to 10¢ higher through Jly ‘23 and then fractionally higher to 4¢ higher. 

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Major U.S. financial indices closed mixed Tuesday as investors grasped for some stability and waited for the release of the Consumer Price Index Wednesday.

The Dow Jones Industrial Average closed 84 points lower. The S&P 500 closed 9 points higher. The NASDAQ was up 114 points.

West Texas Intermediate Crude Oil futures on the CME closed $2.74 to $3.33 lower through the front six contracts. Pressure included continued concerns about COVID lockdowns in China. That was $8.24 to $10.01 lower in those contracts over the last two sessions.

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Feeder cattle loans grew in size and the number of months before maturity on those loans increased over recent years, according to Elliott Dennis, Extension livestock economist the University of Nebraska-Lincoln. He provides insights about the impact of rising interest rates on cattle loans, in the most recent issue of In the Cattle Markets.

“Between 2000 and 2009, the average number of months before maturity on feeder cattle loans was 8.82 months. Between 2010 and 2019 that increased to 10.74 months. Now, between 2020 and present it has increased slightly to 10.92 months,” Dennis says. “At the same time, the average loan size and total feeder cattle loan volume have increased. The average loan size over the last 10 years has been about $80,000.”

Ultimately, of course, higher interest rates mean raising cattle with borrowed money gets more expensive.

Dennis explains feeder livestock interest rates are primarily tracked by the Kansas City and Dallas Federal Reserve Districts.

“Interest rates in these two primary cattle feeding areas are different from each other and reflect different supply and demand of money and relative production risks,” Dennis explains. “In 2022:Q1, the Dallas Federal Reserve feeder cattle interest rates were 5.42%. This rate has been relatively unchanged since 2020:Q2 fluctuating between 5.23-5.42%. In 2022:Q1, the Kansas City Federal Reserve feeder cattle interest rates were 3.92%. This rate has been much more variable, oscillating between 2.90-5.03% since 2020:Q2.”

Further, Dennis points to the inverse relationship between feeder cattle interest rates and average pastureland values over time. Generally, speaking, he says the cost of owning pastureland increases as the cost to raise feeder cattle decreases and visa vera.

“Lower interest rates cheapen the cost to raise feeder cattle. These lower costs create more economic incentives for (a) new producers to enter the market, (b) existing producers to increase the intensity of their operations, or (c) some combination of (a) and (b). Ultimately, this means that the demand for feeder cattle is passed down from feedlots to cow-calf/stocker producers who then expand by competing for a limited land base, raising land prices,” Dennis explains.

“…The potential for higher interest rates this year could raise the cost of production in the short term for cattle producers by making debt more expensive. However, it does ease some of the longer-term pressure of rising land values which landowners capitalize into pasture rental rates,” Dennis says.

Cattle futures weakened Monday, pressured by recently waning wholesale beef values and sharply lower outside markets, but supported by lower Corn futures.

Feeder Cattle futures closed an average of 44¢ lower, except for 25¢ higher in spot May.

Live Cattle futures closed an average of 37¢ lower, except for 80¢ and 2¢ higher in the front two contracts.

Corn futures closed mostly 9¢ to 13¢ lower, while Soybean futures closed mostly 20¢ to 34¢ lower, pressured my optimism the forecast will enable rapid planting progress.

As of May 8, 22% of corn was planted, which was 42% less than last year and 28% less than average, according to the latest USDA Crop progress report. Twelve percent of soybeans were in the ground, which was 27% less than last year and 12% less than the average.

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

Live prices last week were steady at $140/cwt. in the Southern Plains and at $146 in Nebraska. Prices were $2 lower to $3 higher in Colorado at $142-$148; steady to $1 lower in the western Corn Belt at $144-$147. Dressed prices were steady in Nebraska at $232, but steady to $2 lower in the western Corn Belt at $230-$232.

The weighted average five-area direct fed steer price last week was 8¢ higher at $143.42. The average steer price in the beef was $1.62 lower at $230.69.

Although lower week to week, Choice Boxed beef cutout value was $4.57 higher through Monday afternoon at $259.01/cwt. Select was 81¢ lower at $244.25.

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Wall Street’s selloff continued Monday as investors try to recalibrate value in the face of inflation and the Fed’s plans to battle inflation.

The Dow Jones Industrial Average closed 653 points lower. The S&P 500 closed 132 points lower. The NASDAQ was down 521 points.

West Texas Intermediate Crude Oil futures on the CME closed $5.50 to $6.68 lower through the front six contracts.

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Currently, there are no broad-based indications of weakening beef demand, but some red flags could be ready to unfold, says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University.

“In the last three weeks, Choice boxed beef values have dropped below year-ago levels, which were surging higher at this time in 2021,” Peel explains in his weekly market comments. “Beef demand is not likely to repeat last year’s levels, but current levels are still relatively high compared to recent years. Comparisons to last year will look weaker for boxed beef and many wholesale cut values but that is not really a valid comparison to judge beef demand in 2022.”  

Peel points out beef demand was exceptionally strong over the last 12 months, driven by pent-up, post-pandemic demand and exports.

“A bellwether indicator of summer grilling demand is strip loin prices, which typically and reliably increase seasonally going into summer,” Peel says. “So far this year, strip loin prices have increased only modestly and have actually weakened since mid-April. This may indicate some demand weakness and bears watching in the coming weeks. Relative weakness in some chuck product prices may be related to slower growth in export demand. The ground beef market continues very strong due to fundamental demand.”

Potential demand headwinds include near record-high retail beef prices and inflation that is weighing on consumer wallets.

“However, all proteins are higher priced and the ratio of retail beef price to retail broiler chicken and pork prices is actually lower now compared to six months ago,” Peel says. “Still, we watch for indications that consumers are ‘trading down’ from the most expensive beef cuts to cheaper value cuts,” Peel says.

For perspective, according to the Livestock Marketing Information Center (LMIC), retail beef prices were $7.67/lb. in March, up $1.20 or 18.6% from a year earlier.

Retail pork prices were record high at $4.84/lb. in March, which was 16.1% or 67¢ higher than last year.

The retail broiler price in March was the second highest on record at $1.72/lb., an increase of 11.7% or 18¢ from a year earlier. The retail broiler composite price was record high at $2.32/lb., up 15.5% (+31¢) year over year.

Corn futures closed mostly 11¢ to 18¢ lower on Friday, which helped lift Feeder Cattle futures an average of 77¢ higher (32¢ higher toward the front to $1.37 higher at the back), except for 77¢ lower in spot May. Soybean futures closed 20¢ to 25¢ lower. 

On the other hand, Live Cattle futures closed an average of 50¢ lower (25¢ lower toward the back to $1.02 lower in spot Jun), except for 35¢ higher in the back contract. They sagged with lower wholesale beef prices and waning cash momentum.

Week to week on Friday, Choice boxed beef cutout value was $6.34 lower at $254.44/cwt. Select was $2.91 lower at $245.06. That’s $13.47 lower for Choice over the last two weeks and $9.71 lower for Select.

Estimated total cattle slaughter last week of 657,000 head was 8,000 head more than the previous week and 18,000 more than the same week last year. Estimated total year-to-date cattle slaughter of 11.66 million head was 61,000 head more (+0.5%) than the same time last year. Estimated total year-to-date beef production of 9.74 billion lbs. was 81.6 million lbs. more (+0.8%) year over year.

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

Last week, live prices were steady at $140/cwt. in the Texas Panhandle and at $146 in Nebraska. Prices were steady to $2 lower in Kansas at $138-$140, $2 lower to $1 higher in Colorado at $142-$146 and $1 higher to $1 lower in the western Corn Belt at $146. Dressed prices were steady in Nebraska at $232 and steady to $2 lower in the western Corn Belt at $230-$232.

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Follow-through bearishness pressured major U.S. financial indices lower Friday, despite a bullish jobs report.

Total non-farm payroll increased by 428,000 in April, according to the U.S. Bureau of Labor Statistics. That left the unemployment rate unchanged at 3.6%. Average hourly earnings for all employees on non-farm payrolls increased 10¢ in April to $31.85.

The Dow Jones Industrial Average closed 98 points lower. The S&P 500 closed 25 points lower. The NASDAQ was down 173 points.

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Recent rains continued to provide slight improvement to the nationwide drought last week. As of May 5, 63.9% of the nation was experiencing either abnormally dry conditions or some degree of drought, compared to 64.1% the previous week and 65.6% the previous year, according to the U.S. Drought Monitor. However, the Drought Severity Coverage Index (DSCI) for the week was 5 points higher than the previous year at 181. Of course, that’s another way of saying it’s been way too dry for way too long.

The same week, approximately 56% of the nation’s cattle inventory was in areas experiencing drought. Looking at primary cattle states, that included 85% of the cattle in Texas, 79% in Kansas, 98% in Nebraska, and 100% in Oklahoma. At the same time, approximately 41% of the nation’s hay acreage was in areas experiencing drought.

As for other crops in areas experiencing drought (approximate percentage of production): 23% of corn; 14% of soybean; 69% of winter wheat; 71% of barley; 90% of sorghum.

“There may be some relief in the 7-day forecast for the Southern Plains, however it is likely insufficient to provide substantial relief,” says Aaron Smith, crop marketing specialist at the University of Tennessee, in his weekly market comments.

Plenty of eyes will be on Thursday’s monthly World Agricultural Supply and Demand Estimates, which will include the first glimpse of 2022-23 crop expectations.

“Will the USDA modify U.S. planted acres and Ukraine production? Both could have significant impacts on commodity markets, even when accounting for market expectations.” Smith says.

According to Smith, the relative change in prices from February 1 to May 5 favors increased corn and cotton planted acres over soybeans. “However, with the drought in the Southern Plains and fertilizer prices increasing 2-16% over the same 3-month time period, the acreage estimates continue to be uncertain,” he says.