WLI

Slightly lower nearby Corn futures prices helped Feeder Cattle futures recover some lost ground Wednesday, closing an average of 86¢ higher, except for 55¢ lower in the back contract.

Corn futures closed unchanged to 3¢ lower through July ’23 and then fractionally higher to 2¢ higher.

Soybean futures closed mostly 6¢ to 12¢ lower.

Live Cattle futures closed an average of 57¢ higher (17¢ to $1.05 higher), supported by recently blooming wholesale beef prices.

However, Choice Boxed beef cutout value was 49¢ lower Wednesday afternoon at $271.04/cwt. Select was $1.85 lower at $261.05.

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

So far this week, prices are generally steady on a live basis at $138/cwt. in the Southern Plains and Colorado, $138-$140 in Nebraska and $140 in the western Corn Belt. Dressed prices are steady at $222.

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Major U.S. financial indices closed lower Wednesday, apparently due at least in part to the Fed’s recent hawkish comments regarding inflation and interest rates.

The Dow Jones Industrial Average closed 144 points lower. The S&P 500 closed 43 points lower. The NASDAQ was down 315 points.

CME Crude Oil futures on the CME were $3.90 to $5.73 lower through the front six contracts.

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“Cattle feeders who use distiller’s grains, primarily in the wet form, are closely watching ethanol production numbers, given the potential for ethanol plant slowdowns,” says Elliott Dennis, Extension livestock economist at the University of Nebraska-Lincoln. “Over the past two years, distiller’s grain prices (as a percentage of corn price on a dry matter basis) have been very volatile due to both more movement in the corn market and ethanol idling.”

In the latest issue of In the Cattle Markets, Dennis explains current weekly ethanol production is near pre-COVID levels, even with higher corn prices.

“Since oil and ethanol are highly correlated, one would expect ethanol plants to continue to be profitable even at higher corn prices. However, Iowa State University Ethanol Profitability Tracker indicates the relative price increase in ethanol ($/gal.) have not been sufficiently high compared to the cost of corn ($/bu.). Net returns are calculated to be -$0.28/gal. of ethanol, its lowest level since last winter in the last run-up in grain prices,” according to Dennis.

Dennis points out distillers’ grains generally are fed up to a 40% inclusion but the level and type of distiller’s grain used can vary, given local availability. Obviously, he explains increasing prices for corn and distillers grains increase feedlot cost of gain.

Prior to USDA’s cattle-bearish Prospective Plantings report, Dennis notes CME Live Cattle futures were trending higher. “Since the release, Live Cattle prices have eroded between $2-4/cwt. with larger declines occurring in more nearby months. This is further narrowing profit margins,” he says.

Soybean and corn futures gained Tuesday with stronger demand and bearish weather conditions in South America. Corn futures closed 3¢ to 9¢ higher. Soybean futures were up 7¢ to 28¢.

That weighed on Cattle futures once again, with Feeder Cattle an average of $2.26 lower and Live Cattle down an average of $1.21. So far today, they’re gaining some of that back.

Negotiated cash fed cattle prices continued mainly steady Tuesday with live prices at $138-$140/cwt. in Nebraska and dressed prices at $222, on moderate trade and demand, according to the Agricultural Marketing Service.

So far this week, live prices are steady in the Southern Plains at $138 and $140 in the western Corn Belt.

Choice Boxed beef cutout value was $3.49 higher Tuesday afternoon at $271.53/cwt. Select was $1.20 higher at $262.90.

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Major U.S. financial indices lost ground Tuesday. Federal Reserve Governor Lael Brainard spoke at a conference where she indicated the central bank is ready to implement additional tightening to tackle inflation. Brainard noted the effects of inflation are worse for working families, who spend proportionally much more of their income on basic necessities – up to 77% for lower income families.

The Dow Jones Industrial Average closed 281 points lower. The S&P 500 closed 58 points lower. The NASDAQ was down 328 points.

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Agricultural producer sentiment slipped last month, according to the Purdue University/CME Group Ag Economy Barometer. It was down 12 points from the previous month and 26% less year over year at 113. That was the lowest since March 2020.

The Index of current conditions was 19 points lower at 113; 44% less than a year earlier. The Index of Future Expectations was 9 points lower at 113, which was 31% less than the same time last year.

“Concern about the war’s impact on input prices and input availability on their farming operations was paramount in the minds of producers responding to the March survey and was a major factor in this month’s decline in sentiment,” says James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture.

The March survey provided the first opportunity to ask producers how they expect the war in Ukraine to affect U.S. agriculture. Producers overwhelmingly said they expect input prices to be most affected (63% of respondents), followed by crop prices (33% of respondents), and livestock prices (3% of respondents). Responding to a related question, 19% of respondents chose “availability of inputs” as their primary concern this year, which was equal to the percentage of producers who chose “lower crop and/or livestock prices” as their biggest concern.

Relative to input prices, 57% expect them to increase by 20% or more and 36% think input prices will rise by 30% or more. Just more than 25% say they’ve had difficulty purchasing crop inputs for the 2022 crop season. Producers report that supply chain problems persist across a wide range of inputs with herbicides, fertilizer, and farm machinery parts posing the most problems.

Agricultural Producers continue to say that they expect their operation’s financial performance to decline in 2022 compared to 2021. The March Farm Financial Performance Index, which asks producers whether they expect their farm’s financial performance in 2022 to be better than, worse than or about the same as in 2021, was up slightly (4 points) at a reading of 87, but remains 30% lower than a year earlier.

“When producers think about how their farm will fare financially in 2022, it’s clear they do not expect commodity price strength to offset the dramatic rise in farm production costs they are experiencing,” Mintert says.

Feeder Cattle futures were pressured sharply lower by rising feed costs once again Monday.

Feeder Cattle futures closed an average of $2.29 lower ($1.50 lower toward the back to $3.65 lower toward the front).

Corn futures closed mostly 7¢ to 15¢ higher

Soybean futures closed mostly 22¢ to 31¢ higher.

Live Cattle futures, closed an average of 55¢ lower, except for 17¢ higher in away Apr.

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

Live prices were at $138/cwt. In the Southern Plains, $138-$140 in Nebraska and $139-$143 in the western Corn Belt at $139-$143. Dressed prices were $222.

The five-area direct average steer price was 37¢ higher at $139.32/cwt. The average steer price in the beef was 15¢ higher at $222.61.

Choice boxed beef cutout value was 90¢ higher Monday afternoon at $268.04/cwt. Select was 82¢ lower at $261.70.

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Major U.S. financial indices closed higher Monday, led by tech stocks.

The Dow Jones Industrial Average closed 103 points higher. The S&P 500 closed 36 points higher. The NASDAQ was up 271 points.

West Texas Intermediate Crude Oil futures on the CME closed an average of $3.78 higher.

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Declining beef and pork production may offset increased broiler production and lead to a decrease in total meat production in 2022, according to Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his week market comments. He explains the current forecast from the Livestock Marketing Information Center (LMIC) pegs Beef production this year at 27.39 billion lbs., which would be 2.2% less than last year.

LMIC forecasts total red meat and poultry production at 106.25 billion lbs., which would be slightly less than last year.

If realized, Peel says it would be the first decrease in total meat production since 2014, following seven consecutive years of increasing production. 

“High feed prices will impact all livestock industries and may moderate meat production going forward,” Peel explains. “Feed costs increased significantly in 2021 and will push even higher in the coming months. Beef will be additionally impacted by drought conditions and reduced production of pasture and hay. Drought may impact the timing of beef production with drought liquidation potentially increasing beef production temporarily but leading to a larger decline in beef supplies later.”

Grain markets Friday continued to adjust to the previous day’s Prospective Plantings report.

Soybean futures closed 5¢ to 35¢ lower across the board on more planted acres than expected.

New-crop Corn futures mostly gained again Friday, mostly 4¢ to 7¢ higher on fewer anticipated acres.

Rising feed costs once again helped pressure Feeder Cattle futures an average of $1.61 lower, except for 18¢ higher in spot April.

Cash calves and feeder cattle sold mixed last week, based on weekly auctions monitored by Cattle Current — mainly higher early, driven by demand for grass-suited cattle and then with more pressure later in the week with another bounce higher in Corn and full-to-the-brim feedlots.

“Feedlots will have plenty of cattle to market for another few months, but tighter placements are ahead and feedlot production will decline in the second half of the year, says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “If drought conditions persist, feedlots may perhaps continue to borrow against the future with early-weaned calves available through the spring and summer before facing the full reality of tighter feeder cattle supplies. On the other hand, if drought conditions abate, higher cattle prices might result in increased heifer retention by the end of the year, thereby squeezing feeder supplies even more and more quickly.”

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Negotiated cash fed cattle trade was mostly inactive on light demand in all major cattle feeding regions through Friday afternoon, with too few transactions to trend, according to the Agricultural Marketing Service.

Live prices last week were steady in the Southern Plains at $138/cwt., steady to $2 higher in Nebraska at $138-$140/cwt. And $1-$2 higher in the western Corn Belt at $140-$143. Dressed prices were $1 higher in Nebraska at $222 and steady to $3 lower in the western Corn Belt at $222.

Estimated total cattle slaughter last week of 639,000 head was 20,000 head fewer than the previous week. Estimated year-to-date total cattle slaughter of 8.39 million head was 29,000 head more.

Estimated year-to-date beef production of 7.03 billion lbs. was 47.4 million lbs. more.

Live Cattle futures, closed an average of 64¢ lower, except for 10¢ to 30¢ higher in the back two contracts, challenged by volatile markets and the looming bulge in second-quarter fed cattle supplies amid limited shackle space once again.

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Major U.S. financial indices edged higher Friday, despite a slightly gloomier jobs report than anticipated.

Total non-farm payroll employment increased by 431,000 month-to-month in March, according to the U.S. Bureau of Labor Statistics.

The Dow Jones Industrial Average closed 140 points higher. The S&P 500 closed 15 points higher. The NASDAQ was up 41 points.

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Wholesale beef prices continue their seasonal push higher.

Choice boxed beef cutout value was $12.42 higher week to week on Friday at $267.14/cwt. Select was $13.41 higher at $262.52.

Beyond seasonal beef prices, consumers will continue to face sharp increases in retail meat prices.

“Relative to 2019, beef retail prices are projected to be 26% higher this year, with pork up 21% and chicken 18% more expensive,” according to the 2022 Agricultural Outlook from the Food and Agricultural Policy Institute (FAPRI) at the University of Missouri. “To this point consumers have continued to spend their dollars on meat, particularly higher-value products, but the risk of some consumers being priced out of the market is increasing. With energy and other goods taking a larger share of consumer finances, recent meat demand strength could be tested given projected price levels.”

Although meat prices have driven the trend toward higher food inflation, FAPRI analysts explain prices for other food products are also increasing.

“Even if food inflation slows in the months ahead, the annual rate for 2022 is likely to be the highest since 2008,” says Patrick Westhoff, FAPRI director. “Higher farm commodity and energy prices caused by the Ukraine war could make it more difficult for consumer food price inflation to return to normal levels in the near term.

Corn futures closed sharply higher and Soybean futures closed sharply lower Thursday, all fueled by the Prospective Plantings and quarterly Grain Stock reports from USDA (see below).

Corn futures closed 20¢ to 27¢ higher in new-crop contracts.

Soybean futures closed 36¢ to 49¢ lower through Sep ‘23 and then 23¢ to 27¢ lower.

The sharp bounce higher in Corn futures helped push Feeder Cattle futures an average of $2.25 lower, except for 7¢ lower in expiring Mar.

Sharply lower outside markets helped pressure Live Cattle an average of 49¢ lower, except for unchanged in away Apr.

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

Live prices were steady to $2 higher than last week in Nebraska at $138-$140/cwt. Dressed prices were $1 higher at $222.

In the western Corn Belt, live prices were $1-$2 higher at $140-$143. Dressed prices there last week were $221-$225.

So far this week, live prices are steady in the Southern Plains at $138.

Choice Boxed beef cutout value was $1.35 higher Thursday afternoon at $268.39/cwt. Select was $4.88 higher at $262.34.

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Major U.S. financial indices sank Thursday, with the end of the month and quarter, and as 2-year and 10-year Treasury yields inverted, which some view as signal of coming recession.

The Dow Jones Industrial Average closed 550 points lower. The S&P 500 closed 72 points lower. The NASDAQ was down 221 points.

West Texas Intermediate Crude Oil futures on the CME closed $4.26 to $7.54 lower through the front six contracts.

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USDA’s Prospective Plantings report drove grain markets Thursday with significantly fewer corn acres than many expected and significantly more soybean acres.

Corn planted area for all purposes in 2022 was estimated at 89.5 million acres, down 4% or 3.87 million acres from last year. Planted acreage is expected to be down or unchanged in 43 of the 48 estimating States.

Corn stocks in all positions on March 1, of 7.85 billion bu. were 2% more than a year earlier, according to USDA’s quarterly Grain Stocks report. Of the total stocks, 4.08 billion bu. were stored on farms, up 1% from a year earlier. Off-farm stocks of 3.77 billion were 3% more than the previous year.

Soybean planted area for 2022 was estimated at a record 91.0 million acres, up 4% from last year. Compared with last year, planted acreage is up or unchanged in 24 of the 29 estimating States.

Soybeans stored in all positions on March 1 totaled 1.93 billion bu., up 24% year over year. Soybean stocks stored on farms were estimated at 750 million bu., up 26% from a year ago. Projected off-farm stocks of 1.18 billion bu. were 22% more than last March.

All wheat planted area for 2022 was estimated at 47.4 million acres, up 1% from 2021. If realized, this represents the fifth lowest all wheat planted area since records began in 1919.

All wheat stored in all positions March 1 totaled 1.02 billion bu., down 22% from a year earlier. On-farm stocks were estimated at 174 million bu., down 39% from last March. Off-farm stocks of 850 million bushels were 17% less. 

All hay harvested area this year is projected at 50.33 million acres, which would be 404,000 fewer acres than last year.

Cattle futures closed mostly lower Wednesday, under pressure from higher grain futures prices, but they retained the majority of the previous day’s gains.

Feeder Cattle futures closed an average of 92¢ lower (50¢ to $1.32 lower), giving back about a third of what was gained in the previous session.

Live Cattle futures closed an average of 47¢ lower, except for an average of 6¢ higher in three contracts.

Rising Grain futures prices on the day were likely due in part to Russia’s continued bombardment on Ukraine, despite optimism surrounding ceasefire talks a day earlier.

Corn futures closed mostly 3¢ to 5¢ higher, except for 11¢ higher in the front two contracts.

Soybean futures closed mostly 13¢ to 21¢ higher.

Negotiated cash fed cattle trade was moderate on moderate demand in the Southern Plains through Wednesday afternoon at steady money of $138/cwt., according to the Agricultural Marketing Service.

Elsewhere, trade ranged from slow on light demand to limited on light demand with too few transactions to trend. There were a few early live trades in Nebraska at $138-$140. Live prices there last week were $138; $221 in the beef. Live and dressed prices in the western Corn Belt last week were $138-$142 and 221-$225, respectively.

Choice Boxed beef cutout value was $2.04 higher Wednesday afternoon at $266.54/cwt. Select was $2.62 higher at $257.46.

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Major U.S. financial indices softened Wednesday, pressured by tech stocks and another day of higher oil prices. West Texas Intermediate Crude Oil futures (CME) closed $3.43 to $3.67 higher in the front six contracts.

The Dow Jones Industrial Average closed 65 points lower. The S&P 500 closed 29 points lower. The NASDAQ was down 177 points.

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Depending on your particular leanings, details released earlier this week regarding a previously announced modification to the Cattle Price Discovery and Transparency Act does little to appease opponents or proponents.

For those opposed, regional mandates remain, dictating specific levels of cash trade, thereby also dictating how many cattle producers can market by various means.

On the other hand, those in favor of mandates likely are disappointed at the relatively innocuous penalty proposed for packers who violate the mandated cash minimum.

According to Senator Deb Fischer’s (R-Neb.) office, who introduced the modified bill with fellow Senators, Chuck Grassley (R-Iowa), Jon Tester (D-Mont.) and Ron Wyden (D-Ore.), the updated bill would:

Require the Secretary of Agriculture to establish five to seven regions encompassing the continental U.S. and then establish minimum levels of fed cattle purchases made through approved pricing mechanisms. Approved pricing mechanisms are fed cattle purchases made through negotiated cash, negotiated grid, at a stockyard, and through trading systems that multiple buyers and sellers regularly can make and accept bids.

Establish a maximum penalty for covered packers of $90,000 for mandatory minimum violations. Covered packers are defined as those packers that during the immediately preceding five years have slaughtered five percent or more of the number of fed cattle nationally.

The bill also includes provisions to create a publicly available library of marketing contracts, mandating box beef reporting to ensure transparency, expediting the reporting of cattle carcass weights, and requiring a packer to report the number of cattle scheduled to be delivered for slaughter each day for the next 14 days. The contract library would be permanently authorized and specify key details about the contents that must be included in the library like the duration of the contract and provisions in the contract that may impact price such as schedules, premiums and discounts, and transportation arrangements.

As debate continues, surely all on both sides recognize price improvements and narrowing packer margins as cattle markets continue to rebalance and normalize following the extreme shocks of the past few years. Markets reacted as economics expected them to during the shocks and are now in the aftermath.

“Supply and demand has already driven the cattle markets back into balance without the radical government interference and convoluted mandates called for in the latest draft of the Grassley-Fischer bill. “Make no mistake, the bill still contains government mandates directing how producers market their cattle,”says Meat Institute President and CEO Julie Anna Potts. “If this bill becomes law, there will be cattle producers who want alternative marketing arrangements but will instead be forced to sell on the cash-market, and the industry will turn back time to the days of commodity cattle, or worse, to government-controlled markets.”

Potts shared an observation made by Stephen Koontz, agricultural economist at Colorado State University, during the recent American Farm Bureau Federation Annual Convention: “Mandated cash trade is not going to get you better price discovery. It’s going to put a $50 cost on calves impacted.” Ultimately, the cost likely would be borne by cow-calf producers.