WLI

Cattle futures sagged Thursday with higher Corn futures and lower wholesale beef values helping stall recent momentum. Sharply lower outside markets also clouded optimism.

Feeder Cattle an average of $1.14 lower, from 47¢ lower at the back to $1.92 lower in spot May.

Live Cattle futures closed an average of 73¢ lower, from 12¢ lower to $1.12 lower.

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, like prices are steady at $140/cwt. in the Southern Plains and at $146 in Nebraska. Prices are $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 are steady in Nebraska at $232 and steady to $2 lower in the western Corn Belt at $230-$232.

Choice Boxed beef cutout value was $4.56 lower Thursday afternoon at $255.18/cwt. Select was $1.87 lower at $245.81.

Net U.S. beef export sales for the week ending April 28 were 14,600 metric tons, according to the weekly U.S. export sales report. That was 28% more than the previous week and 1% more than the prior four-week average. Increases were primarily for Japan, South Korea, Taiwan, China and Canada.

Corn futures closed mostly 1¢ to 3¢ higher. Soybean futures closed mostly 4¢ to 5¢ higher. 

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Major U.S. financial indices dropped like the proverbial rock Thursday, following what was apparently a relief rally during the previous session, in the wake of the Fed’s 50-basis point increase in the lending rate. Stocks tied to tech and economic growth led the decline.

Weekly initial unemployment insurance claims were 200,000, according to the U.S. Department of Labor. That was 19,000 more than the previous week and more than expected.

The Dow Jones Industrial Average closed 1,063 points lower. The S&P 500 closed 153 points lower. The NASDAQ was down 647 points.

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U.S. beef exports set another new value record in March, according to data released by USDA and compiled by the U.S. Meat Export Federation (USMEF).

Beef exports totaled 126,285 metric tons (mt) in March, up 1% from a year ago, the third most on record, while value climbed 33% to a record $1.07 billion. First-quarter exports increased 6% to 353,852 mt. Value in the first quarter was 41% more than last year at just over $3 billion.

“Global demand for U.S. beef has eclipsed anything I have seen in many years in the meat business,” says Dan Halstrom, USMEF President and CEO. “While this momentum is fueled by mainstay markets such as South Korea, Japan and Taiwan, demand is also very strong in China/Hong Kong and key Latin American markets, while exports to the Middle East have rebounded impressively.”

March beef export value equated to $472.73 per head of fed slaughter, up 36% from a year ago. The first quarter average was $474.10 per head, up 41%. Exports accounted for 14.7% of total March beef production, up from 14.5% a year ago, while the ratio for muscle cuts was steady at 12.7%.

Halstrom cautions that first-quarter results do not fully reflect the impact of recent COVID-19 lockdowns in China that slowed product movement and forced many restaurants to suspend or limit service. These obstacles are likely to have a greater impact on April and May export data. He notes that while beef demand has been very resilient, inflation represents a potential headwind.

“Consumers throughout the world have shown how much they value the quality of U.S. beef, but disposable income is under increasing pressure as they pay more for energy and other daily needs,” Hailstorm says. He adds that pork, beef and lamb exporters continue to face logistical obstacles and delays when moving product overseas. The situation is especially challenging for chilled meat shipments to key Asian markets.

Negotiated cash fed cattle trade and demand were moderate in the Texas Panhandle through Wednesday afternoon with prices steady at $140/cwt. Trade in Nebraska was moderate on moderate to good demand, also at steady prices of $146 on a live basis and $232 in the beef.

Elsewhere, trade was slow on light to moderate demand, with too few transactions to trend. However, there were some early live sales at $140 in Kansas and at $145-$146 in the North.

Last week, live prices were $140 in Kansas, $146-$147 in Colorado and $145-$147 in the western Corn Belt, where dressed prices were $232.

The weighted average five-area direct fed steer price in April was $141.66/cwt., which was $20.78 higher than a year earlier (+17%). The average steer price in the beef was $36.55 higher (+16%) at $228.86.

Choice Boxed beef cutout value was 19¢ higher Wednesday afternoon at $259.74/cwt. Select was 34¢ higher at $247.68.

Cattle futures held their ground in the face of firmer Corn futures.

Live Cattle futures closed narrowly mixed, from an average of 26¢ lower to an average of 13¢ higher.

Feeder Cattle futures closed an average of 42¢ higher except for an average of 28¢ lower in three contracts, amid light trade.

Corn futures closed mainly fractionally higher to 1¢ higher. Soybean futures closed 6¢ 10¢ higher. 

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Major U.S. financial indices closed sharply higher Wednesday, apparently fueled by optimism the Fed can slow inflation while maintaining economic growth, based on comments from Federal Reserve Chair, Jerome Powell, suggesting incremental rate increases will be no more than 50 basis points each time. On Wednesday, the Federal Reserve raised the lending rate 0.5%, as widely expected.

The Dow Jones Industrial Average closed 932 points higher. The S&P 500 closed 124 points higher. The NASDAQ was up 401 points.

Crude oil futures stepped higher with announced plans from the European Union (EU) for a phased ban of crude oil imports from Russia to the EU over the next six months, as well as an embargo on imports of Russian refined oil products in about the same length of time.

West Texas Intermediate Crude Oil Futures closed $4.54 to $5.40 higher through the front six contracts.

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Higher food and energy costs weighed on restaurant industry recovery in the first quarter, according to The NPD Group (NPD).

Online and physical visits to restaurants declined 2% year over year in the first quarter, compared to a 3% increase last year when stimulus payments and relaxed pandemic restrictions provided a boost. Consumer restaurant spending, which reflects higher costs, as opposed to increased visits, was up 4% in the quarter.

Online and physical visits to quick service restaurants (QSRs) declined by 2% in the first quarter compared to a 6% increase the previous year. Consumer spending at QSRs was 2% more year over year.

Conversely, full service restaurant (FSR) traffic increased by 2% in the first quarter, compared to last year’s 7% decline. FSR spending was up 10% versus the same quarter a year ago when spending fell by 6%.

“With the first quarter behind us, I’m optimistic that seasonal demand and the improving on-premises trends can help get the restaurant industry’s recovery back on track,” says David Portalatin, NPD food industry advisor.

Follow-through support lifted Cattle futures for a second consecutive day, helped along by another down day for Corn.

Feeder Cattle futures closed an average of $1.13 higher, (5¢ higher toward the back to $2.20 higher toward the front), except for unchanged in the back two contracts.

Live Cattle futures closed an average of 61¢ higher, from 12¢ higher at the front to $1.00 higher at the back.

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

Last week, live prices were steady in the Southern Plains at $140/cwt, $2 higher ion Colorado at $145-$147, steady to $2 higher in Nebraska at $146 and steady to $1 higher in the western Corn Belt at $145-$147. Dressed prices were $2 higher at $232.

Choice Boxed beef cutout value was $3.00 lower Tuesday afternoon at $259.55/cwt. Select was 89¢ lower at $247.34.

As mentioned, Corn and Soybean futures continued to soften Tuesday despite slow planting progress.

Corn futures closed mostly 6¢ to 7¢ lower, while Soybean futures closed 10¢ to 15¢ lower through Mar ‘23 and then mostly 2¢ to 4¢ lower.

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Major U.S. financial indices eased higher Tuesday, as investors await the Fed’s next interest rate decision Wednesday.

The Dow Jones Industrial Average closed 67 points higher. The S&P 500 closed 20 points higher. The NASDAQ was up 27 points.

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Agricultural producer sentiment increased in April, but remains significantly lower year over year, according to the Purdue University/CME Group Ag Economy Barometer. It rose 8 points in April to 121, which was 32% less than last year.

The Index of Current Conditions improved 7 points to 120. The Index of Future Expectations improved 9 points to 122.

“Rising prices for major commodities, especially corn and soybeans, appear to be leading the change in producers’ improved financial outlook,” says James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture. “However, it’s hard to overstate the magnitude of the cost increases producers say they are facing.”

Producers continue to say higher input costs are their top concern. In April, 42% of producers said higher input costs were their biggest concern, which was more than twice as many who chose government policies (21%) or lower output prices (19%). In April, 60% of survey respondents said they expect input prices to rise by 30% over the next 12 months.

When asked specifically for their expectations for 2023 crop input prices compared to prices paid for 2022 crop inputs, 36% of respondents said they expect prices to rise 10% or more, while 21% of crop producers said input price increases of 20% or more are likely. The war in Ukraine added a new level of uncertainty for producers. Sixty percent of survey respondents said the biggest impact of the war on U.S. agriculture will be on input prices.

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 April 18-22.

Cattle futures rallied Monday, helped along by lower Corn futures, oversold conditions, expanding open interest and opening the books on a new month.

Feeder Cattle futures closed an average of $5.04 higher.

Live Cattle futures closed an average of $1.67 higher (97¢ higher toward the back to $2.55 higher in new spot Jun).

Negotiated cash fed cattle trade was at a standstill in all major cattle feeding regions through Monday afternoon, according to the Agricultural Marketing Service.

Last week, live prices were steady in the Southern Plains at $140/cwt, $2 higher in Colorado at $145-$147, steady to $2 higher in Nebraska at $146 and steady to $1 higher in the western Corn Belt at $145-$147. Dressed prices were $2 higher at $232.

Choice Boxed beef cutout value was $1.77 higher Monday afternoon at $262.55/cwt. Select was 26¢ higher at $248.23.

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Grain futures tumbled to start the week, pressured by needed moisture in the Corn Belt, although it could further delay planting. As of May 1, according to USDA’s latest Crop Progress report, 14% of corn was planted, which was 28% less than last year and 19% less than average.

Corn futures closed mostly 7¢ to 10¢ lower.

Soybean futures closed 22¢ to 39¢ lower in the front six contracts and then mostly15¢ to 19¢ lower. Eight percent of soybeans were in the ground, which was 14% less than last year and 5% less than the average.

National pasture and range conditions are beginning the season in expectedly tough shape with 18% rated as Good (17%) or Excellent (1%) compared to 22% a year earlier. Conversely, 56% was rated as Poor (27%) or Very Poor (29%), compared to 47% a year earlier.

Also of note, 27% of winter wheat was rated in Good (24%) or Excellent (3%) condition, compared to 48% a year earlier. 42% was rated Poor (21%) or Very Poor (22%) compared to 19% at the same time last year.

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Major U.S. financial indices closed higher Monday, finding some firmness following the previous session’s massive downturn, but amid volatile two-sided trading as investors try to peg value.

The Dow Jones Industrial Average closed 84 points higher. The S&P 500 closed 23 points higher. The NASDAQ was up 201 points.

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“Through mid-April, beef cow slaughter was up 16.9% year over year; a surprisingly strong rate of cow slaughter for this time of year,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “This likely reflects continuing drought impacts carried over from last year, combined with very strong cull cow prices and limited forage prospects going forward. The fast pace of cow slaughter thus far implies the likelihood of significant beef cow herd liquidation in 2022.”

Peel explains the current pace of beef cow slaughter suggests an annual beef herd culling rate of 13.8%, a record in data back to 1986. Culling at that level suggests the beef cow inventory would likely decrease by 4% year over year and decline below 29 million head Jan. 1, 2023. That would be the largest annual beef cow herd decrease since the mid-1980s.

However, Peel says it’s unlikely the pace of culling so far this year will continue throughout 2022.

By way of comparison, he explains if beef cow slaughter averaged 9% more year over year — the same as last year and unlikely at this point — it would imply an annual culling rate of just less than 13%, still a record. The 2023 beef cow herd would be roughly 29.2 million head, down about 3% year over year.

On the other hand, if beef cow slaughter ended up 13% more year over year, net beef herd culling would be more than 13%, resulting in a Jan. 1 beef cow inventory of approximately 29.0 million head (3.5% less year over year).

“Dramatic and immediate improvement in drought conditions could allow the industry to avoid these rather dire results,” Peel says. “The next few months will likely have impacts on the cattle industry for several years. Drought conditions that result in the levels of liquidation described above would also prevent retention of replacement heifers. This implies that, if conditions do not improve until late this year or into next year, better conditions in 2023 would, at best, allow the industry to stabilize inventories and lay the groundwork to begin recovery in 2024 at the earliest.”

Cattle futures bounced around last week, but never outran the shadow of the unexpectedly large March feedlot placements suggested by the latest Cattle on Feed report that came out the previous Friday.

Sagging wholesale beef values and worries that elevated retail beef prices are beginning to chip at demand added pressure to Live Cattle futures, which closed an average of $2.90 lower week to week on Friday. They closed an average of 84¢ lower on Friday, except for $3.40 higher in expiring Apr.

Choice boxed beef cutout value was $7.13 lower week to week on Friday at $260.78/cwt. Select was $6.80 lower at $247.97.

However, negotiated cash fed cattle prices were steady to higher amid snugger supplies before the anticipated summer bulge.

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

Live prices last week were steady in the Southern Plains at $140/cwt.; steady to $1 higher in the Northern Plains at $144-$146 and in the Western Corn Belt at $145-$147. Dressed prices were $2 higher at $232.

Through Thursday, the weighted average direct fed steer price was 31¢ higher on a live basis at $143.31/cwt. The average steer price in the beef was 42¢ higher at $232.32.

Estimated total cattle slaughter last week of 656,000 head was 9,000 head fewer than the previous week but 3,000 head more than the same week last year. Year-to-date total estimated cattle slaughter of 11.01 million head is 51,000 head more than the same time last year. Total estimated year-to-date beef production through last week was 9.20 billion lbs., which was 706,000 lbs. more (+0.77 %) than a year earlier.

Feeder cattle futures closed an average of $1.87 lower on Friday and an average of $7.73 lower week to week, as Corn futures gained an average of 25.6¢ in the front six contracts during the same time.

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Major U.S. financial indices tumbled Friday, led by tech stocks and growing uncertainty about domestic and global economic growth, challenged by high inflation and COVID hotspots.

The Dow Jones Industrial Average closed 939 points lower. The S&P 500 closed 155 points lower. The NASDAQ was down 536 points.

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“The main conclusion is that there is no relationship between price discovery and the volume of negotiated cash trade. There is no clear overall problem that price discovery is somehow deficient in regional fed cattle markets. Mandating cash trade does not address a price discovery problem that is observed today or since the beginning of Livestock Mandatory Reporting.”

That was one of the insights Stephen Koontz, agricultural economist at Colorado State University provided in testimony during last week’s Senate hearing to review the Cattle Price Discovery and Transparency Act of 2022, and the Meat and Poultry Special Investigator Act of 2022.

Koontz’s insights are based on a bevy of research during his career exploring cash price discovery in cattle markets.

“It is also important to recognize what price discovery is not – price discovery is not higher prices,” Koontz explained. “Price discovery is the market moving quickly and clearly to the appropriate price level. At times this is a lower fed cattle price and other times a higher price. It is a common misconception that better price discovery implies better prices for the individual contemplating the issue. And there is no scientific evidence that improved price discovery has value not already revealed in price nor will improve prices to producers.”

On the other hand, mandating minimum levels of regional cash fed cattle trade, thereby reducing the use of alternative marketing arrangements, would come at a heavy cost, likely borne mostly by cow-calf producers.

“Mandating minimum cash trade is substantially costly. Costs are at least hundreds of millions of dollars and more likely billions of dollars. These costs will be leveled on cow‐calf producers nationwide and consumers of beef both domestically and internationally,” Koontz explained. “Primary research which discovered these costs is almost 20 years old – but the economic concepts are foundational and the costs today are likely substantially higher. There is no research which can attribute higher cattle prices to mandated cash trade. Likewise, my preliminary work has revealed to me that price discovery is not improved with mandated cash trade. The price discovery we currently have in regional fed cattle markets is not deficient. And the cost‐benefit of mandated cash trade is clear.”