WLI

A hard break in Corn futures and likely positioning ahead of Friday’s monthly Cattle on Feed report gave Feeder Cattle futures more room to run, up an average of $2.32.

Corn futures closed mostly 9¢ to 16¢ lower on leaner weekly export sales and ethanol production, as well as likely profit taking.

Soybean futures closed 1¢ to 5¢ higher, helped along by vegetable oil prices.

Feeder Cattle support also came from stronger cash fed cattle prices this week that helped Live Cattle futures close an average of $1.05 higher.

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

So far this week, negotiated cash fed cattle prices are $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 are $4 higher at $230.

Choice Boxed beef cutout value was $1.35 higher Thursday afternoon at $270.17/cwt. Select was 85¢ lower at $255.68.

Carcass weights continue higher year over year. For the week ending April 9, the average dressed steer weight was 12 lbs. heavier at 912 lbs., according to USDA’s Actual Slaughter Under Federal Inspection report. The average dressed heifer weight was 11 lbs. heavier at 840 lbs. The same week, 78,681 beef cows were slaughtered, which was 20.8% more year over year.

Net U.S. beef export sales of 15,000 metric tons (mt) were 13% less than the previous week and 27% less than the prior four-week average, according to the U.S. Weekly Export Sales for the week ending April 14. Increases were primarily for Japan, South Korea, China, Canada, and Taiwan.

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Major U.S. financial indices closed sharply lower Thursday, pressured by inflation concerns and rising Treasury yield rates. Earlier in the session, indices were sharply higher on positive quarterly corporate earnings reports.

The Dow Jones Industrial Average closed 368 points lower. The S&P 500 closed 65 points lower. The NASDAQ was down 278 points.

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Recent widespread winter storms eased drought conditions a bit last week. According to the latest U.S. Drought Monitor, 65.82% of the nation is classified from abnormally dry (D0) to exceptional drought (D4), compared to 67.44% a week earlier and 64.68% a year earlier when drought was already prevalent in some regions.

However, areas affected by Extreme (D3) or exceptional drought expanded from 19.37% the previous week to 20.24%; it was 21.14% at the same time last year.

In the High Plains, except for North Dakota and areas of bordering states, “…windy, dry weather raised dust, resulting in fast-spreading wildfires, and led to a broad increase in the coverage of abnormal dryness (D0) and moderate to extreme drought (D1 to D3),” according to the U.S. Drought Summary (USDS).

USDS analysts say a classic La Niña regime developed in the West during recent weeks, bringing moisture to northern California and the Pacific Northwest, eastward to the northern Rockies.

“At the same time, dry, often windy weather has affected the nation’s southwestern quadrant. As a result, deterioration has been observed in parts of the Southwest, particularly in New Mexico,” analysts say.

Another day of stronger cash trade added lift to Cattle futures an average of $1.60 higher.

So far this week, negotiated cash fed cattle prices are $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 are $4 higher at $230.

Through Wednesday afternoon, trade was slow on light demand in Nebraska at $146 and in the western Corn Belt at $145, but too few to trend, according to the Agricultural Marketing Service.

Choice Boxed beef cutout value was $1.11 lower Wednesday afternoon at $268.82/cwt. Select was $2.68 lower at $256.53.

Mainly firm Corn futures continued to add support to Feeder Cattle, which closed an average of $1.47 higher.

Corn futures closed mostly fractionally higher to 1¢ higher, except for 11¢ and 10¢ higher in the front two contracts.

Soybean futures closed 12¢ to 30¢ higher in the front four contracts and then mostly 7¢ to 9¢ higher.

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Major U.S. financial indices closed mixed Wednesday with pressure in tech stocks but mostly positive quarterly corporate earnings reports in other sectors.

The Dow Jones Industrial Average closed 249 points higher. The S&P 500 closed 2 points lower. The NASDAQ was down 166 points.

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Global economic recovery from the pandemic declined considerably due to Russia’s invasion of Ukraine, according to the latest semiannual World Economic Outlook from the International Monetary Fund (IMF).

IMF projects global economic growth to slow from an estimated 6.1% last year to 3.6% this year, which is 0.8% less than the organization’s expectations in January.

“The economic effects of the war are spreading far and wide—like seismic waves that emanate from the epicenter of an earthquake—mainly through commodity markets, trade, and financial linkages,” according to the report. “Because Russia is a major supplier of oil, gas, and metals, and, together with Ukraine, of wheat and corn, the current and anticipated decline in the supply of these commodities has already driven their prices up sharply.”

Compared to its January projection, IMF increased expected inflation in advanced economies this year 1.8% to 5.7%. Inflation expectations for emerging and developing economies grew 2.8% to 8.7%.

“The war in Ukraine will amplify economic forces already shaping the global recovery from the pandemic,” say IMF analysts. “The war has further increased commodity prices and intensified supply disruptions, adding to inflation. Even before Russia invaded Ukraine, broad price pressures had led central banks to tighten monetary policy and indicate increasingly hawkish future stances. As a result, interest rates had risen sharply and asset price volatility had increased since the start of 2022—hitting household and corporate balance sheets, consumption, and investment. The prospect of higher borrowing costs has also increased the cost of extended fiscal support. These changes are occurring faster than previously expected even as many parts of the global economy—particularly countries with low vaccination rates—must contend with continued strain on health care systems because of the pandemic.”

Negotiated cash fed cattle trade jumped out to an early and positive start Tuesday with prices $1 higher in the Southern Plains at $140/cwt. on moderate trade and demand, according to the Agricultural Marketing Service.

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

Last week, live prices were at $140-$142 in the Northern Plains and at $142-$143 in the western Corn Belt. Dressed prices were $225-$227 in Nebraska and $226 in the western Corn Belt.

Choice Boxed beef cutout value was $1.15 lower Tuesday afternoon at $269.93/cwt. Select was 25¢ lower at $259.21.

Stronger cash fed cattle prices helped Live Cattle futures close an average of 49¢ higher, except for 15¢ lower in the back two contracts.

Softer front-month Corn futures helped give Feeder Cattle a reprieve, closing an average of 69¢ higher, except for 2¢ land 5¢ lower in two contracts.

Corn futures closed 1¢ to 9¢ lower through new-crop contracts and then 1¢ to 5¢ higher.

Soybean futures closed mixed; fractionally lower to 1¢ higher through Nov ’22 and then mostly 7¢ to 9¢ higher.

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Major U.S. financial indices rallied Tuesday on mainly positive quarterly corporate earnings reports, a day of lower energy prices and positive news on the housing front.

Privately‐owned housing units authorized by building permits in March were 1.87 million, which was 0.4% more than the previous month and 6.7% more than the previous year, according to the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.

Privately‐owned housing starts in March were 1.79 million, which was 0.3% more than the previous month and 3.9% more than the previous year.

The Dow Jones Industrial Average closed 499 points higher. The S&P 500 closed 70 points higher. The NASDAQ was up 287 points.

West Texas Intermediate Crude Oil futures on the CME closed $4.58 to $5.65 lower through the front six contracts.

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“Beef heifer retention was lower coming into 2022, which suggests continued contraction in beef cow numbers. It is still early in the year, but beef cow slaughter through the end of March points to another year of heavy culling,” says Kenny Burdine, Extension livestock economist at the University of Kentucky. “The combination of dry weather and strong cull cow prices are likely to keep cows moving and encourage producers to pull the trigger a little sooner on those cows as they approach the end of their productive lives. This is definitely something to watch as we move through the current year, and it is hard to imagine that we won’t be discussing another decrease in beef cow numbers at the start of 2023.”

Burdine provides a perspective in the latest Cattle Market Notes Weekly. Year to date, through the end of March, he explains beef cow slaughter is 17% more than last year. Even if you adjust for paltry slaughter numbers during last year’s February ice storm, he notes beef cow slaughter is still more than 14% higher year over year.

Cattle futures closed lower Monday as Corn futures continued to rally 12¢ to 23¢ higher through old-crop and new-crop contracts, perhaps also buoyed by the slow planting pace.

According to the latest USDA Crop progress report, 4% of the corn is in the ground compared to 7% last year and the five-year average of 6%.

Feeder Cattle futures closed an average of $2.36 lower, while Live Cattle futures closed an average of 69¢ lower, except for 2¢ higher in the back contract.

For much of last week, Cattle futures got a boost from stronger negotiated cash fed cattle prices that were $1-$4 higher on a live basis, depending on the region at $139-$143/cwt. Dressed prices were $3-$5 higher at $225-$227.

On Monday, negotiated cash fed cattle trade ranged from inactive on light demand to a standstill, according to the Agricultural Marketing Service.

The five-area direct weighted average steer price last week was $141.02/cwt., which was $2.20 more than the previous week. The average steer price in the beef was $3.46 higher at $225.89.

Choice Boxed beef cutout value was $1.54 lower Monday afternoon at $271.08/cwt. Select was 56¢ higher at $259.46.

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Major U.S. financial indices edged lower in a volatile session Monday, as investors considered inflation, surging commodity markets and quarterly corporate earnings reports due out this week.

The Dow Jones Industrial Average closed 39 points lower, The S&P 500 closed fractionally lower. The NASDAQ was down 18 points.

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Reduced production and high prices will likely mean fewer U.S. beef exports this year, although exports are expected to remain at historically high levels.

Last year, U.S. beef exports comprised 12.3% of domestic production at 3.45 billion lbs. This year, USDA’s Economic Research Service (ERS) projects exports at 3.3 billion lbs., which would be 11.9% of production.

Globally, beef production is expected to grow this year and global beef trade is projected to continue at record levels, according to Derrell Peel, Extension livestock marketing specialist at Oklahoma State University.

Specifically, in his weekly market comments, Peel says beef production this year is expected to grow in Brazil, China, India, Australia and Mexico. Projections anticipate reduced production in the U.S., Canada, the European Union (E.U.) and Argentina.

“Brazil is projected to be the largest beef exporting country again in 2022 with exports forecast to increase 12.1% year over year,” Peel says. “Brazil has been the largest beef exporting country for the last five years consecutively and the largest in 14 of the last 20 years after first becoming the largest exporting country in 2004. Brazil is projected to account for 22% of global beef exports this year.”

By way on contrast, Peel explains the U.S. is expected to be the second-largest global beef exporter this year. India is third largest and Australia will likely rank fourth. These four countries would represent about 60% of global beef exports this year, according to Peel.

On the other side of the scale, Peel says the U.S. is projected to be the second largest beef importer in the world behind China/Hong Kong. Much of the beef imported to the U.S. is lean trim used in ground beef blends.

“Although global beef trade is summarized in terms of total quantities, it is important to recognize that beef consists of many different products and most beef exports and imports are specific products moving between specific destinations for specific uses,” Peel says. “Trade in beef products helps balance both the overall quantity of beef and the preferred mix of beef products in various markets. Beef trade adds value for both exporters and importers and increases the total value of the global beef industry.”

Futures and equity markets were closed Friday, in observance of Good Friday. Through Thursday, from the previous Friday, Cattle futures were able to claw back some losses, supported by stronger cash sales and the continued seasonal increase in Choice wholesale beef value.

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

Live prices last week were $1 higher in the Southern Plains at $139/cwt., $2 higher in Nebraska at $140-$142, $3 higher in the western Corn Belt at $143 and $2-$4 higher in Colorado at $140-$142. Dressed prices were $4 higher at $226.

“It is not surprising that finished cattle prices increased this week as the April market tends to be strong and the highlight of the spring,” says Andrew P. Griffith, agricultural economist at the University of Tennessee (UT). “However, pessimism has started to set in due to the failure of the market to break out of its narrow trading range. As was said last week, it will still be difficult for finished cattle prices to exceed the high price experienced in February, but there is more of a chance now than last week. The hope is that prices push higher and even challenge the $145 price mark, which would be $2 higher than the $143 price in February.”

Estimated total cattle slaughter last week of 634,000 head was 37,000 head fewer than the previous week and 7,000 head fewer than the same week last year. Year-to-date estimated total cattle slaughter of 9.69 million head was 50,000 more than last year. Year-to-date estimated beef production of 8.1 billion lbs. was 61.8 million lbs. more than in 2021.

Choice boxed beef cutout value was $2.15 higher week to week on Friday at $272.62/cwt. Select was $1.43 lower at $258.90.

Live Cattle futures closed an average of $1.97 higher from the previous Friday through Thursday ($1.42 higher at the back to $2.85 higher at the front).

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Calf and feeder cattle prices sold mixed but with mainly more week-over-week strength through the gut of the country, based on weekly auctions monitored by Cattle Current.

As mentioned in Cattle Current last week, optimism remains for higher prices in the latter half of this year.

USDA’s Economic Research Service (ERS) increased the anticipated annual feeder steer price this year to $163/cwt., in the latest monthly Livestock, Dairy and Poultry Outlook.

“With higher placements in the first quarter, it is likely that calves that might have remained on pastures later in the year were pulled forward. As a result, from last month, tighter anticipated feeder cattle supplies in second-half 2022 will likely support elevated prices,” say ERS analysts.

The projected third-quarter average feeder steer price (basis 750-800 lbs. Oklahoma City) was raised $4 to $165; the fourth-quarter price was bumped $6 higher to $172.

In the meantime, though, an assortment of challenges continues to cap price potential, including higher feedlot placements last month, apparently induced by drought, and continued heavy beef production on the back of heavier fed cattle carcass weights and increased non-fed volume.

From the previous Friday through Thursday last week, Feeder Cattle futures closed an average of 97¢ higher (32¢ to $2.40 higher), gaining back about a third of the previous week’s losses. 

That was despite Corn futures closing an average of 17.9¢ higher through the front six contracts during the same period, about 50¢ higher over the last two weeks.

“Russia’s invasion of Ukraine, drought in the Southern Plains and Western U.S., high fertilizer prices, strong export demand, and the recent USDA Prospective Plantings report have all provided fuel to the rally,” explains Aaron Smith UT crop marketing specialist, in his weekly market comments. “The December contract has closed up 16 of the last 20 trading days. Prices are rapidly approaching the August 2012 high of $8.43 ¾. Prices will not go up forever, but right now there appears to be little that can slow the ascent in the short term.”

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CF Industries Holdings, Inc. (CF Industries) — a leading global manufacturer of hydrogen and nitrogen products — provided perspective to customers last week regarding ongoing supply chain disruptions that are adding an extra layer of heft to input prices.

CF Industries informed customers it serves by Union Pacific (UP) rail lines that railroad-mandated shipping reductions would result in nitrogen fertilizer shipment delays during the spring application season and that it would be unable to accept new rail sales involving Union Pacific for the foreseeable future.

UP shipping restrictions stem from efforts by that railroad to ease congestion, according to a letter to customers from Kenny Rocker, UP executive Vice President, marketing and sales.

“Over the last few weeks, our network has experienced some setbacks – including numerous service interruptions, crew shortages in select areas and delays to our network – as we have seen our operating inventory continue to climb over the past 60 days. This additional inventory has led to more congestion in yards, an imbalance of our resources, and further slowdown of our operational performance,” Rocker explains.

Among steps taken to ease congestion, Rocker cites the addition of 50 locomotives since January with 100 more to come, heavy recruitment and current training of 450 employees and asking come customers, like CF Industries, to voluntarily reduce their rail car inventories.

“If we do not see reductions to the operating inventory through their voluntary efforts, then we will begin metering traffic after April 18,” according to Rocker.

According to CF Industries, UP told it to reduce shipments by nearly 20% and that noncompliance will result in the embargo of its facilities by the railroad.

“The timing of this action by Union Pacific could not come at a worse time for farmers,” says Tony Will, CF Industries president and chief executive officer. “Not only will fertilizer be delayed by these shipping restrictions, but additional fertilizer needed to complete spring applications may be unable to reach farmers at all. By placing this arbitrary restriction on just a handful of shippers, Union Pacific is jeopardizing farmers’ harvests and increasing the cost of food for consumers.”

CF Industries believes it will still be able to fulfill delivery of product already contracted for rail shipment to Union Pacific destinations, albeit with likely delays. The company intends to engage directly with the federal government to ask that fertilizer shipments be prioritized so that spring planting is not adversely impacted.

CF Industries ships to customers via Union Pacific rail lines primarily from its Donaldsonville Complex in Louisiana and its Port Neal Complex in Iowa. The rail lines serve key agricultural areas such as Iowa, Illinois, Kansas, Nebraska, Texas and California. Products that will be affected include nitrogen fertilizers such as urea and urea ammonium nitrate as well as diesel exhaust fluid, an emissions control product required for diesel trucks. CF Industries is the largest producer of urea, urea ammonium nitrate and diesel exhaust fluid in North America. Its Donaldsonville Complex is the largest single production facility for the products in North America.