WLI

Kansas City Wheat futures plummeted Wednesday (limit-down 85¢ in the front two contracts) on apparently more positive ceasefire talks between Ukraine and Russia. Corn and Soybean futures went along for the ride.

Corn futures closed mostly 14¢ to 28¢ lower.

Soybean futures closed mostly 6¢ to 9¢ lower.

That helped Feeder Cattle futures close an average of 37¢ higher (2¢ to 90¢ higher) except for 2¢ lower in May and 20¢ lower in the back contract.

Live Cattle futures closed an average of 69¢ lower (10¢ lower toward the back to $1.50 lower in spot Apr), except for unchanged in the back contract.

Negotiated cash fed cattle trade ranged from limited on light demand to a standstill through Wednesday afternoon, according to the Agricultural Marketing Service (AMS). Country chatter suggested some early bids at steady money.

Live prices last week were at $138/cwt. in the Southern Plains and Nebraska and at $138-$140 in the western Corn Belt. Dressed prices were $220 in Nebraska and $219-$222 in the western Corn Belt.

Choice Boxed beef cutout value was 18¢ higher Wednesday afternoon at $258.08/cwt. Select was $1.43 higher at $250.27.

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Major U.S. financial indices closed sharply higher again Wednesday, amid a volatile session as investors reacted to the Fed’s decision to raise interest rates for the first time in about three years. Although the increase was widely anticipated, intimation the Fed will continue raising interest rates to nearly 2% (1.9% median projection) by the end of the year caught some off guard.

For now, the Federal Open Market Committee decided to raise the target range for the federal funds rate to 0.25% to 0.50% and expects to begin reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities at a coming meeting.

The Dow Jones Industrial Average closed 518 points higher. The S&P 500 closed 95 points higher. The NASDAQ was up 487 points.

West Texas Intermediate Crude Oil futures on the CME closed $1.20 to $1.40 lower in the front six contracts.

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USDA’s Economic Research Service revised the expected average feeder steer price for this year slightly lower to $160.50/cwt., in the latest monthly Livestock, Dairy and Poultry Outlook. The price is basis steers weighing 750-800 lbs. selling at Oklahoma City.

“The first-quarter forecast was lowered $2 from last month to $156/cwt., but the second-quarter forecast was raised by $1 to $159 on tightening feeder cattle supplies and higher forecast fed cattle prices,” ERS analysts say. “However, due to higher anticipated feed prices in the second half of 2022, the feeder steer forecasts for the third and fourth quarters were reduced by $1 to $161 and $166, respectively.”

ERS analysts note first-quarter feedlot placements are expected to be less year over year, although deteriorating pasture conditions and wheat prices could encourage more rapid placements than projected.

“Fed cattle marketings are expected to be slightly higher in the second half of 2022 than the previous month’s forecast, reflecting a larger number of placements in the first quarter as well as higher feed prices likely encouraging feedlot operators to be as current as possible in cattle marketings,” say ERS analysts.

Kansas City Wheat futures charged higher 47¢ to 53¢ in old-crop contracts. Corn futures closed mostly 1¢ to 2¢ lower, though, and Soybean futures closed 9¢ to 14¢ lower through Sep ‘23.

That helped Cattle futures hold on to most of the previous session’s strong gains.

Feeder Cattle futures closed mixed from an average of 33¢ lower to an average of 25¢ higher.

Live Cattle futures closed unchanged to an average of 47¢ higher, from (2¢ to $1.10 higher).

Wholesale beef prices continued to show signs of the seasonal bloom. Choice Boxed beef cutout value was $2.39 higher Tuesday afternoon at $257.90/cwt. Select was $1.10 lower at $248.84.

Negotiated cash fed cattle trade remained stuck at the gate.

Live prices last week were at $138/cwt. in the Southern Plains and Nebraska and at $138-$140 in the western Corn Belt. Dressed prices were $220 in Nebraska and $219-$222 in the western Corn Belt.

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Major U.S. financial indices closed sharply higher Tuesday, buoyed by declining crude oil prices and a slightly more positive inflation gauge than some expected.

The Producer Price Index (PPI) for final demand rose 0.8% in February, compared to the previous month, but the core PPI — less food, energy and trade services — rose just 0.2%, according to the U.S. Bureau of Labor Statistics.

The Dow Jones Industrial Average closed 599 points higher. The S&P 500 closed 89 points higher. The NASDAQ was up 367 points.

West Texas Intermediate Crude Oil futures on the CME closed $3.83 to $6.57 lower in the front six contracts.

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U.S. beef exports maintained their blistering pace in January, according to data released by USDA and compiled by the U.S. Meat Export Federation (USMEF).

Beef exports for the month totaled 119,066 metric tons (mt), up 13% year over year, while value soared 57% to $1.03 billion. That was the third-highest value total on record — trailing only August and November of last year. Export value per head of fed slaughter set a new record, exceeding $500 for the first time.

“This is a truly remarkable run for U.S. beef exports, and the momentum is not limited to our large Asian markets,” says USMEF President and CEO Dan Halstrom. “Regions such as Central America and the Caribbean contributed significantly to January export growth, and export value made strong gains in the Middle East.”

U.S. pork exports were 16% less year over year in January and value was 14% less at $555.6 million, challenged by China’s recovering domestic production, as well as logistics.

Port congestion and shipping costs, for instance, are weighing on the U.S. pork industry’s ability to serve some markets, according to Halstrom.

“Australia, for example, has been a very reliable destination for U.S. hams for further processing, but shipping raw material to Oceania is becoming cost-prohibitive. The low price of European pork is also impacting demand in other further-processing markets such as Southeast Asia and Taiwan,” Halstrom explains. “This underscores the importance of our Western Hemisphere markets, where the U.S. industry continues to pursue new strategies for increasing pork consumption and expanding demand. It is also a reminder that the U.S. industry must continue to strive for market diversification, so we are well-prepared for shifts in the competitive landscape.”

Cattle futures rallied higher Monday, helped along by sharply lower nearby Corn futures prices, as well as the nascent seasonal increase in wholesale beef prices.

Feeder Cattle futures closed an average of $3.08 higher from $2.07 higher at the back to $4.42 toward the front.

Live Cattle futures closed an average of $1.65 higher, from $1.17 higher in the back contract to $3.02 higher in spot Apr.

Weakness in grain futures was apparently tied to a risk-off mentality across many commodities, including Crude Oil, as well as reports China is releasing some of its state-owned soybean stocks to combat domestic inflation.

Expiring spot Corn futures closed 36¢ lower, but mostly other contracts were mainly 1¢ to 3¢ lower.

Soybean futures closed 7¢ to 8¢ lower.

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

Live prices last week were at $138/cwt. in the Southern Plains and Nebraska and at $138-$140 in the western Corn Belt. Dressed prices were $220 in Nebraska and $219-$222 in the western Corn Belt.

The five-area direct average fed steer price was $2.30 less last week at $138.30/cwt. The average steer price in the beef was $4.50 less at $220.01.

Early chatter anticipated cash fed cattle prices trading steady to a touch higher this week.

Choice Boxed beef cutout value was 80¢ higher Monday afternoon at $255.51/cwt. Select was 83¢ higher at $249.94.

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Major U.S. financial indices closed steady to lower Monday, as investors digested more ceasefire talks between Russia and Ukraine, and awaited the Fed’s interest rate decision this week.

The Dow Jones Industrial Average closed 1 points higher. The S&P 500 closed 31 points lower. The NASDAQ was down 262 points.

West Texas Intermediate Crude Oil futures on the CME closed $4.13 to $6.32 lower in the front six contracts.

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Despite the recent, volatile surge in feed costs, feedlot returns should remain positive for most of this year, according to the Livestock Marketing Information Center (LMIC). Specifically, analysts there peg feedlot breakevens for a steers place at 750 lbs. to be $129-$133/cwt. for cattle already on feed — closeouts now through August — below anticipated fed cattle prices.

“One of the large risks for cattle feeders will be feeder cattle prices moving forward,” say LMIC analysts, in the latest Livestock Monitor. “The LMIC bases its cattle feeding returns on cash prices of raising a 750-lb. steer to slaughter weight. So far, 700-800 lb. steer prices have been limited in their upward mobility. The opposite has been true for lighter weight calves, whose prices across different regions of the country have ranged from $187-230/cwt. for 400-600-lb. animals. At those prices, and current grain prices, putting a 500-lb. animal on feed that was bought north of $185/cwt. would need a breakeven fed cattle price of $160 or higher.”

Noting increased year-over-year January feedlot placements of cattle weighing less than 699 lbs., LMIC analysts explain, “Our assessment is that some of the price increase is linked to the availability of feeder cattle supplies after so many months of strong placements. Additionally, feedlots are flush with cash from the last couple of months of closeouts, and even though it does not appear that these expensive lightweight cattle will be profitable, cattle feeders may be using them for other strategies such as keeping pens full to maintain cash flow.”

Cattle feeding returns were positive for most of the last 12 months, with gains surging to $200 per head in the fourth quarter of last year, according to LMIC. The organization calculated returns at just less than $100 per head in February.

“Returns faded in the last two months due to increasing total costs. Feeder steers were 13% higher at the time of purchase compared to those that came out in November when closeouts were in the black $200 per head,” LMIC analysts explain. “Feed costs have also continued to rise and are expected to do so for the coming months with ongoing concerns in the grain space related to the Ukraine and Russia conflict. For closeouts in February, feed costs increased 7% from November closeouts. In the wake of Ukraine/Russia, the grain markets look to challenge last year’s highs again. This will likely erode some profitability, however closeouts through the next couple of months had lower feeder cattle input costs at time of placement, which should offset some of the rising feed costs for the next four months.”

Cattle futures stepped higher Friday, helped along by higher wholesale beef prices, stronger Lean Hog futures and moderating feed futures.

Live Cattle futures closed an average of 50¢ higher, from 10¢ higher in the back contract to $1.40 higher in spot Apr. Week to week, they closed an average of $1.17 higher (42¢ to $1.80 higher), recovering about half of the previous week’s losses.

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

For the week, live prices were $2 lower in the Southern Plains and Nebraska at $138/cwt. and $2-$4 lower in the western Corn Belt at $138-$140. Dressed prices were $4-$5 lower in Nebraska at $220; $3-$5 lower in the western Corn Belt at $219-$222.

“Cattle feeders should be experiencing strong profit margins with cattle coming off feed in today’s market, but the budget for placing cattle on feed is changing,” explains Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “A month ago, cattle feeders were faced with strengthening feeder cattle prices and what now seems like relatively low feed prices. However, the sudden increase in feed grain prices has resulted in higher feed cost expectations, which has resulted in bidding lower prices for cattle to be placed in the near term.”

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Based on weekly auctions monitored by Cattle Current, calf and feeder cattle prices were mainly lower last week.

Feeder Cattle futures closed an average of $1.46 higher on Friday. That helped lift them to an average of 63¢ higher week to week on Friday (7¢ to $1.37 higher), barely denting the average $5.85 decline the previous week.

Corn futures closed mostly 1¢ to 3¢ higher.

Soybean futures closed 1¢ to 10¢ lower through Jan ‘23, and then mostly 1¢ to 3¢ higher.

Week to week Corn futures closed an average of 7.9¢ lower through the front three contracts, and then an average of 24.2¢ higher in the next three. During the same period, Soybean futures closed an average of 26.1¢ higher through the front six contracts (14¢ lower in spot Mar to 43.6¢ higher in near Sep).

“Markets are trying to find where values should be,” explains Aaron Smith, crop marketing specialist at the University of Tennessee, in his weekly market comments. “There continues to be a large amount of uncertainty regarding commodity prices, due to the Ukraine-Russia conflict and political responses by external nations. Futures markets have been very volatile, and are likely to continue to be volatile, as traders try to determine value between commodities and across time.”

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Wholesale beef prices showed signs of turning the seasonal corner higher. Choice boxed beef cutout value was 38¢ higher week to week on Friday at $254.71/cwt. Select was 70¢ higher at $249.11.

Estimated total cattle slaughter of 644,000 head last week was 10,000 head fewer than the previous week and 5,000 head fewer than the same week last year. Year-to-date estimated total cattle slaughter of 6.46 million head is just 22,000 head fewer. Estimated year-to-year beef production of 5.42 billion lbs. is 8.5 million lbs. less year over year.

“Monthly retail meat prices for February were recently released by USDA. The retail price of beef remains elevated with the Choice retail beef price coming in near $7.62/lb., which is a marginal decline from January and $1.20/lb. higher than one year ago,” Griffith says.

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Major U.S. financial indices continued lower Friday, pressured by higher energy prices, lingering uncertainty tied to Russia’s war on Ukraine and declining consumer confidence.

The closely monitored University of Michigan Consumer Sentiment index declined to 59.7 in March from 62.8 the previous month and 84.9 a year earlier, as consumer incomes lose ground with higher inflation.

The Dow Jones Industrial Average closed 229 points lower. The S&P 500 closed 55 points lower. The NASDAQ was down 286 points.

West Texas Intermediate Crude Oil futures on the CME closed $3.31 to $3.81 higher in the front six contracts.

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Potentially, Livestock Mandatory Reporting (LMR) received yet another reprieve Thursday of last week when the U.S. Senate passed the Fiscal Year 2022 Omnibus Appropriations package. The $1.5 trillion bill would fund the U.S. government through the end of its fiscal year (Sept. 30). The U.S. House of Representatives approved the bill the previous day.

So, if President Biden signs the bill, as expected, LMR will be funded through the end of the government fiscal year. According to the National Cattlemen’s Beef Association (NCBA), the bill also provides funding for, among other things: the Electronic Logging Device exemption for livestock haulers, important EPA regulatory relief and a Cattle Contract Library pilot program.

A cattle contract library — specifics of alternative marketing arrangement contracts packers utilize — is viewed by many as a step toward increased market transparency and price discovery. Others believe the fine points of the one outlined in the bill could do more harm than help.

“Congress and the Administration say they value transparency in the beef and cattle market yet they bury this rider without debate in a giant spending bill and direct USDA to create the pilot program without any feedback from beef companies or cattle producers,” says Julie Anna Potts, president and CEO of the North American Meat Institute (Meat Institute). “There will be no opportunity for companies to provide valuable perspective on what information should be included or how it should be reported.”

The law is vague and provides no guardrails for the type or amount of data and leaves program development up to the U.S. Department of Agriculture’s (USDA) Agricultural Marketing Service (AMS), Potts explains. She adds the law contains a provision enabling AMS to promulgate the rules without a comment period as normally required by law.

Feeder Cattle futures tumbled lower Thursday, pressured once again by surging Corn futures, tied to strong weekly U.S. export sales.

Feeder Cattle futures closed an average of $3.17 lower.

Corn futures closed 15¢ to 22¢ higher through Jly ‘23, and then mostly 6¢ to 9¢ higher.

Soybean futures closed mostly 15¢ to 22¢ higher.

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 $2 lower in the Southern Plains and Nebraska at $138/cwt. and $2-$4 lower in the western Corn Belt at $138-$140. Dressed prices are $4-$5 lower in Nebraska at $224-$225; $3-$5 lower in the western Corn Belt at the same money.

Lower cash prices pressured Live Cattle futures an average of 70¢ lower, from 2¢ lower in the back contract to $1.67 lower in spot Apr.

Choice Boxed beef cutout value was $1.24 higher Thursday afternoon at $253.94/cwt. Select was $2.58 higher at $247.37.

On another positive note, net U.S. beef export sales for the week ending March 3 of 27,500 metric tons were a marketing year high, up 16% from the previous week and 36% higher than the prior four-week average, according to USDA data. Increases were primarily for China, Japan, South Korea, Canada and Taiwan. 

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Major U.S. financial indices closed lower Thursday, with continued volatility and uncertainty stemming from Russia’s war on Ukraine. Inflation was a touch higher than expected, too. Through February, the Consumer Price Index (all items) increased 7.9% over the last 12 months, according to the U.S. Bureau of Labor Statistics. That’s the steepest increase for the date since 1982.

The Dow Jones Industrial Average closed 112 points lower. The S&P 500 closed 18 points lower. The NASDAQ was down 125 points.

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The U.S. restaurant industry’s recovery stalled in January after 10 consecutive months of traffic gains over steep pandemic-related declines, according The NPD Group (NPD).

Physical and online visits to U.S. restaurants were down 2% in January compared to an 8% decline at the same time last year. Consumer spending at restaurants was 4% higher, though, reflecting higher food and operational costs. Total restaurant traffic, online and physical, is down 10% from the pre-pandemic level in January 2020, according to NPD’s continual tracking of the U.S. foodservice industry.

Online and physical visits to quick service restaurants represent the bulk of industry traffic and historically have led the industry out of challenging times. However, they were 3% less year over year in January and 7% less than January 2020. Full service restaurant traffic increased 2% year over year but was 21% less than two years ago, before the pandemic.

Dine-in traffic increased by 40% in January, compared to a year earlier but were 46% less than the pre-pandemic level in January 2020. 

“No one ever said the road to recovery would be smooth and steady. Right now, we’re experiencing a dip in the road due to the omicron variant and stimulus money expiring,” says David Portalatin, NPD Food Industry Advisor. “Looking ahead, we should expect volatility. February restaurant numbers will be compared to a rough February last year because of extreme weather. My advice is don’t get too discouraged by January or too elated if February seems great. Just stay the course because we’re on a steady path of gradual improvement.”