WLI

Feeder Cattle futures firmed Thursday, closing an average of 87¢ higher, except for 27¢ lower in expiring Apr. They were helped along by the mainly narrowly mixed close in Corn futures. 

The overall continued decline in wholesale beef prices and weaker weekly exports helped pressure Live Cattle Live futures an average of 47¢ lower, except for unchanged in almost-spent spot Apr.

Choice Boxed beef cutout value was 69¢ higher Thursday afternoon at $262.60/cwt. Select was $1.26 lower at $251.06.

Negotiated cash fed cattle trade ranged from a standstill to mostly inactive, with too few transactions too trend, according to the Agricultural Marketing Service.

So far this week, live prices are 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 are $2 higher at $232.

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Major U.S. financial indices surged Thursday, fueled by tech stocks and positive quarterly corporate earnings reports. That was despite news from the Bureau of Economic Analysis (BEA) that real gross domestic product (GDP) decreased at an annual rate of 1.4% in the first quarter of this year, according to the advance estimate. In the fourth quarter, real GDP increased 6.9%.

According to BEA, the decline reflected decreases in private inventory investment, exports, federal government spending, and state and local government spending, while imports, which are a subtraction in the calculation of GDP, increased.

The Dow Jones Industrial Average closed 614 points higher. The S&P 500 closed 103 points higher. The NASDAQ was up 382 points.

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The Creighton University Rural Mainstreet Index (RMI) declined to 62.0 in April from 65.4 a month earlier but remained above growth-neutral for the 17th consecutive month. The RMI results from a monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.

“The region recorded a 34% gain in farm commodity prices over the past 12 months, but low short-term interest rates and healthy farm income have underpinned the Rural Mainstreet Economy,” says Ernie Goss, the Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heifer College of Business.

Among highlights from the latest survey:

The region’s farmland price index for April climbed 2 points to 80.0, marking the 19th straight month the index was above growth neutral. For the past several months, the RMI survey registered the strongest, most consistent growth in farmland prices since the survey was launched in 2006.

Russia’s invasion of Ukraine, along with accompanying global trade tensions and surging inflation, pushed the business confidence index to its lowest level since the beginning of the pandemic in Spring 2020. The index, which reflects bank CEO expectations for the economy six months out, plummeted to 39.1 from 54.0 in March.

This month bankers were asked to forecast the impact of President Biden’s emergency waiver on the summer production of E-15 ethanol. Fewer than 4 of 10 bankers (39.1%) expect President Biden’s emergency waiver on the summer production of E-15 ethanol to have a positive impact. More than half (56.5%) expect the waiver to have little or no impact.

Another day of higher Corn futures weighed heavily on Feeder Cattle futures, Wednesday, which closed an average of $3.35 lower ($2.57 to $4.20 lower), except for unchanged in expiring Apr

After 12¢ and 10¢ higher in the front two contracts, Corn futures closed mostly fractionally higher to 6¢ higher, pushed along by Soybean futures, which closed 20¢ to 22¢ higher through Jan ‘23.  

Technical pressure and looming large supplies pressured Live Cattle futures an average of $1.03 lower, replacing early-week bullishness tied to stronger weekly cash prices.

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

So far this week, live prices are 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 are $2 higher at $232.

Choice Boxed beef cutout value was $2.26 lower Wednesday afternoon at $261.91/cwt. Select was $3.91 lower at $252.32.

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Major U.S. financial indices closed little changed Wednesday, as investors appeared to take a breath and wait for further direction from corporate earnings reports.

The Dow Jones Industrial Average closed 61 points higher. The S&P 500 closed 8 points higher. The NASDAQ was up 1 point.

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Both the U.S. Senate and House of Representatives held hearings this week regarding the Cattle Price Discovery and Transparency Act of 2022, which would mandate regional minimum levels of negotiated cash fed cattle trade. A team of America’s foremost livestock economists assessed the proposed bill ahead of the hearings. Here are some of the highlights from their report:

• “There is no research evidence of any significant or persistent fed cattle price discovery problem at this time. This legislation is attempting to solve a problem that does not exist. As such, this legislation offers zero benefits for fed cattle markets and imposes many millions of dollars of additional cost, added risk, and lost value. The exact cost will depend on details of implementation, but the cost is minimally hundreds of millions of dollars resulting in lower feeder cattle prices and higher consumer beef prices.”
• “The incentives to reduce risks and transactions costs for producers and packers associated with quality and timing of sales and deliveries to plants will still exist with implementation of this bill. As such, forcing “minimum thresholds” will increase these risks and transactions costs for both producers and packing plants utilizing AMAs at a level beyond whatever the prescribed minimums, that cannot be objectively justified, turn out to be if this bill is implemented.”
• “There is no academic literature that indicates any analysis pointing toward benefits that can be quantified with these minimum thresholds. Benefits of reduced AMA use (alternatively, higher negotiated cash trade) are generally speculative. As noted, evidence that higher negotiated trade will positively impact prices, reduce marketing margins, or improve price discovery is lacking. However, many market participants clearly see negotiated cash trade as a good in and of itself. To the extent the industry desires greater cash market engagement, lower cost means of achieving this outcome are available.”

Steady to stronger negotiated cash fed cattle prices helped Live Cattle futures closed an average of 65¢ higher.

Negotiated cash fed cattle trade was moderate through Tuesday afternoon  in Nebraska and the Southern Plains, according to the Agricultural marketing Service.

So far this week, live prices are steady in the Southern Plains at $140/cwt. and steady to $1 higher in Nebraska at $145-$146. Dressed prices are unevenly steady at $232 in Nebraska.

Feeder Cattle futures closed an average of $1.18 lower, pressured by Corn futures, which were up mostly 3¢ to 9¢, supported by slow planting progress. Soybean futures closed mostly 1¢ to 11¢ higher.

Choice Boxed beef cutout value was $2.43 lower Tuesday afternoon at $264.17/cwt. Select was 29¢ lower at $256.23.

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Major U.S. financial indices fell Tuesday on mixed corporate earnings, news of Russia cutting energy supplies to Poland and Bulgaria, continued Covid lockdowns in China and uncertainty over the Fed’s ability to rein in inflation without the economy weakening.

The Dow Jones Industrial Average closed 809 points lower. The S&P 500 closed 121 points lower. The NASDAQ was down 514 points.

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“Every producer wants fair market value for the animals we raise and produce and many of us achieve that true value through value-based alternative marketing arrangements. Accordingly, I do not support a government mandate, of any kind,” said Shawn Tiffany, Kansas Livestock Association president-elect. That was during Tuesday’s Senate Committee on Agriculture, Nutrition, and Forestry hearing to discuss transparency and oversight within cattle marketing, specifically the Cattle Price Discovery and Transparency Act.

The Cattle Price Discovery and Transparency Act would mandate regional minimums for cash fed cattle trade. Tiffany testified in opposition to a government mandate as it could result in fewer marketing opportunities and less incentive for producers to invest in genetics and innovative production techniques that lead to higher-quality beef.

“Regardless of how well intentioned the concept of helping producers obtain fair market value for their animals, the end result will be fewer marketing options for U.S. producers,” Tiffany explained.

Friday’s bearish Cattle on Feed report took Cattle futures down a peg on Monday.

Feeder Cattle futures closed an average of $1.78 lower ($1.25 to $2.57 lower), and Live Cattle futures closed an average of $1.83 lower (72¢ lower toward the back to $3.35 lower in spot Apr).

Negotiated cash fed cattle trade opened the week at steady money of $140/cwt. in the Texas Panhandle on moderate trade and light demand. Elsewhere, trade was mostly inactive on light demand with too few transactions to trend, according to the Agricultural Marketing Service.

Last week, live prices were $1 higher in the Southern Plains at $140/cwt., $4 higher in Nebraska at $144-$146, $3-$4. higher in Colorado at $144-$145  and $3 higher in the western Corn Belt at $145-$146. Dressed prices were $4 higher at $230.

The weighted average five-area direct steer price last week was $2.00 higher on a live basis at $143.02/cwt. The average dressed steer price was $6.40 higher at $232.29.

Corn futures closed mostly 7¢ to 14¢ higher, but Soybean futures closed 10¢ to 12¢ lower through Jan ‘23 and then mostly 3¢ to 9¢ lower.

 Wholesale beef prices were mixed with Choice Boxed beef cutout value $1.31 lower Monday afternoon at $266.60/cwt. , while Select was $1.75 higher at $256.52.

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Major U.S. financial indices clawed back some of the previous session’s steep losses on Monday, amid another volatile day of trade and supported by positive quarterly corporate earnings reports.

The Dow Jones Industrial Average closed 238 points higher. The S&P 500 closed 24 points higher. The NASDAQ was up 165 points.

West Texas Intermediate Crude Oil futures closed $2.68 to $3.53 lower through the front six contracts, apparently pressured by slowing economic growth that could be compounded by the recent COVID outbreak in China.

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“The unexpectedly large March feedlot placement total may indicate unusual movement of feeder cattle out of the country. It is possible that some heifers originally designated as replacements on Jan. 1 are already being diverted to feedlots,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments.

As noted in the last issue of Cattle Current, according to the latest monthly Cattle on Feed report (feedlots with 1,000 head or more capacity), March feedlot placements were slightly less (-8,000 head) than a year earlier at 1.99 million head. However, pre-report expectations expected a decrease of about 8%, based on auction totals and other data.

Peel notes the largest increase in placements occurred in Nebraska (+6.8%), while placements were even with the previous year in Kansas and Colorado. Placement were lower year over year in Texas (-6.5%) and Iowa (-10.7%).

“As May approaches and widespread drought conditions persist, cattle industry impacts are expected to accelerate in the coming weeks,” Peel says. “However, there are indications that drought is already impacting cattle markets significantly.”

Heading into the new week, the primary focus is likely reaction to Friday’s monthly Cattle on Feed report for feedlots with 1,000 head or more capacity.

On the surface, it confirms the severity and duration of the current drought, with March placements about 8% more than expected, following surging placements the previous month. Beneath the surface, though, there likely will be some head scratching about how they square with USDA numbers at the beginning of the year suggesting the feeder supply outside of feedlots was 676,000 head fewer (-2.6%) than last year.

March placements of 1.99 million head were 8,000 less year over year — fractionally less — which was about 8% more than expectations ahead of the report.

In terms of placement weights, 35% went on feed weighing 699 lbs. or less, 53% weighing 700-899 lbs. and 12% weighing 900 lbs. or more.

Marketings in March of 2.0 million head were 41,000 head fewer (-2.0%) than the previous year, about even with pre-report expectations.

Cattle on feed April 1 of 12.11 million head were 208,000 head more (+1.7%) than the previous year. That’s the most for the date since the data series began in 1996 and slightly more than expectations ahead of the report.

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Cattle futures softened to end an otherwise positive week.

Perhaps there was some profit taking, but pressure in Live Cattle mirrored the logical response to numbers revealed in the monthly Cattle on Feed report. Presumably, however, the report was not released until after trading hours.

Feeder Cattle futures closed mixed, from an average of 53¢ lower to an average of 36¢ higher, while Live Cattle futures closed an average of 97¢ lower (20¢ lower at the back to $1.65 lower in spot Apr).

Week to week, though — from the previous Thursday through Friday — Feeder Cattle futures an average of $2.15 higher, except for 25¢ lower in waning spot Apr, and Live Cattle futures closed an average of $1.41 higher.

For much of the week, Cattle futures received support from a reprieve in the relentless surge of Corn futures prices and mostly from stronger cash fed cattle prices.

Negotiated cash fed cattle prices last week were $1 higher on a live basis in the Southern Plains at $140/cwt., $4 higher in Nebraska at $144-$146 and $3 higher in the western Corn Belt at $145-$146. Dressed prices were $4 higher at $230.

Through Thursday, the weighted average five-area direct steer price was $1.98 higher on a live basis at $143.00/cwt. The average dressed steer price was $6.03 higher at $231.90.

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Major U.S. financial indices plunged Friday on disappointing quarterly corporate earnings reports and follow-through pressure from the previous day tied to inflation and hawkish comments from the Fed suggesting a stronger response via interest rate hikes.

The Dow Jones Industrial Average closed 981 points lower. The S&P 500 closed 121 points lower. The NASDAQ was down 335 points.