WLI

It was deja vu all over again Wednesday as Wheat and Soybean futures blasted higher, carrying Corn along for the ride and weighing on Cattle futures.

Chicago wheat was 27¢ to 32¢ higher through May ’23. Soybean futures closed 19¢ to 40¢ higher in the front five contracts and then mostly 4¢ to 6¢ higher. Corn futures closed 5¢ to 9¢ higher through Jly ‘23 and then 1¢ to 2¢ higher.

Feeder Cattle futures closed average 85¢ lower (20¢ lower at the back to $1.45 lower in spot Mar).

Live Cattle futures closed an average 61¢ lower (25¢ to $1.27 lower).

Negotiated cash fed cattle trade ranged from a standstill to limited on light demand through Wednesday afternoon, according to the Agricultural Marketing Service. However, some private reports from the North suggested higher prices for the day.

Prices last week were $142/cwt. on a live basis in Nebraska and the Southern Plains and $142-$144 in the western Corn Belt. Dressed prices were at $226.

Choice Boxed beef cutout value was 76¢ lower Wednesday afternoon at $260.88/cwt. Select was $4.68 lower at $258.96.

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Major U.S. financial indices dredged lower Wednesday with follow-through pressure from the Russia-Ukraine turmoil. 

The Down Jones Industrial Average closed 464 points lower. The S&P 500 closed 79 points lower. The NASDAQ was down 344 points.

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Creighton University’s Rural Mainstreet Index (RMI) edged higher in February to 61.5, from 61.1 the previous month — above growth neutral for the 15th consecutive month. The RMI is based on a monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.

“Strong grain prices, the Federal Reserve’s record-low short-term interest rates, and growing agricultural exports have underpinned the Rural Mainstreet Economy,” says Ernie Goss, Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business.

The region’s farmland price index decreased to 78.8 from January’s 88.5 and December’s record high of 90.0. February’s reading represented the 17th consecutive month the index was above growth neutral.

The February farm equipment-sales index slipped to 72.0 from 72.4 in January — the 15th straight month above growth neutral.

This month, bankers were asked to project corn and soybean prices six months down the road. On average, bank CEOs expect corn prices per bushel to decline by 2.6% and soybean prices per bushel to drop by 2.3% over the next six months.

Grain futures surged Tuesday, led by Wheat futures, fueled by the tensions in Eastern Europe, with Chicago wheat was 40¢ to 48¢ higher through the front six contracts.

Corn futures closed 12¢ to 20¢ higher in the front four contracts and then mostly 7¢ to 8¢ higher.

Soybean futures closed 24¢ to 33¢ higher in the front four contracts and then mostly 12¢ to 14¢ higher.

Higher Corn prices weighing on Feeder Cattle futures, which closed average of 94¢ lower (37¢ lower at the back to $1.72 lower toward the front).

Recently stronger cash prices helped Live Cattle fade the heat. They closed an average 26¢ higher Tuesday.

Negotiated cash fed cattle trade ranged from a standstill to mostly inactive on very light demand through Tuesday afternoon, according to the Agricultural Marketing Service.

Prices last week were $142/cwt. on a live basis in Nebraska and the Southern Plains and $142-$144 in the western Corn Belt. Dressed prices were $2 higher at $226.

Tuesday was one of those rare occasions where the Choice-Select spread was negative, with Choice Boxed beef cutout value $2.45 lower in the afternoon at $261.64/cwt., while Select was $1.80 higher at $263.64.

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Major U.S. financial indices sank Tuesday in response to U.S. economic sanctions on Russia after that nation recognized breakaway regions in Ukraine and sent military assistance to them.

The Down Jones Industrial Average closed 480 points lower. The S&P 500 closed 44 points lower. The NASDAQ was down 166 points.

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“The fall run of calves has persisted because of the lack of forage and price of it and other feedstuffs,” says Stephen Koontz, agricultural economist at Colorado State University. “Dry weather in the Northern Plains and in the Mountain West, as well as deteriorating wheat pasture conditions, are pushing animals to the feeding sector…Feeder cattle movements are reasonably strong through January and February. Prices, likewise, remain strong as cattle feeding organizations are more aggressively chasing available animals and lighter animals.”

At the same time, the beef packing pace increased in recent weeks, helping work through long-fed cattle Koontz explains, in the latest issue of In the Cattle Markets from the Livestock Marketing Information Center (LMIC). 

“Federally inspected daily fed steer and heifer slaughter has been remarkable during February,” Koontz says. “…Daily slaughter in February has routinely been greater than 90,000 head and some days pushing 96,000. I anticipate the March Cattle on Feed report, which shows February marketings and placements, will reveal a drop in the number of cattle on feed over 120 or over 150 days.”

Negotiated cash fed cattle trade ranged from a standstill to mostly inactive on very light demand through Monday afternoon, according to the Agricultural Marketing Service.

Prices last week were $142/cwt. on a live basis in Nebraska and the Southern Plains and $142-$144 in the western Corn Belt. Dressed prices were at $226.

The five-area average weighted direct fed steer price last week was $1.88 higher at $142.36/cwt. The average steer price in the beef was $2.00 higher at $226.04.

Equity and futures markets were closed Monday in observance of President’s Day.

As mentioned in the previous day’s Cattle Current, Live Cattle futures were an average of 75¢ higher (37¢ to $1.37 higher) week to week on Friday, except for 30¢ lower in near Apr.

Feeder Cattle futures closed an average of $1.24 higher (15¢ to $1.80 higher) week to week on Friday except for 80¢ lower in spot Mar.

Choice boxed beef cutout value was $1.76 lower Monday afternoon at $264.09/cwt. Select was 79¢ lower at $261.84.

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As mentioned at the outset, equity markets were closed Monday, giving investors and traders an extra day to dwell on the inflation concerns and political tensions in eastern Europe that drove markets lower amid a volatile ride last week.

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Drought will be an obvious key factor to whether the nation’s beef cow herd continues to contract this year and by how much.

“Widespread drought in 2022 could result in much more pronounced cow herd liquidation and relocation than previously and the scenario will be all about what we have to do,” explained Derrell Peel, extension livestock marketing specialist at Oklahoma State University, in his market comments last week, offering one drought scenario.

This week, Peel consider the outlook if drought subsides.

“The cyclical peak in the beef cow herd inventory was in 2019 and the industry has been in liquidation for three years, significantly enhanced by drought in 2021 and to a minor extent in 2020. If drought is not a limitation in 2022, will cattle producers continue herd liquidation? The answer will be determined by what cattle producers want to do and can do relative to cow culling and heifer retention,” Peel says. “Higher cattle prices and expectations of continued higher prices may have producers interested in slowing liquidation, holding cattle numbers steady or even expanding.  However, the extent to which higher prices leads to expectations of higher profitability (and a desire to expand the herd) will be tempered by higher feed and other input costs.”  

Peel points out, herd rebuilding will be the first step for producers emerging from drought.

“The overall beef cow culling rate in 2021 was 11.55%, the highest since 2011. In drought areas, producers who culled heavily last year may be able to sharply reduce culling this year if forage conditions improve,” Peel says. “In other areas, producers may hold cow culling to a minimum. After increasing sharply in 2021, beef cow slaughter could drop by as much as 10-15% year over year in 2022. This would result in a beef cow-culling rate between 10% and 10.5%. An even lower culling rate might be possible…the average culling rate in the last herd expansion from 2014-2018 was 8.7%…but it doesn’t seem likely that expansion signals are that strong yet.”

Moreover, Peel points to the 3.3% year-over-year reduction in beef replacement heifers Jan. 1, which limits herd expansion opportunities this year.

“It appears to me that the most aggressive 2022 scenario is for the industry to hold the beef cow herd to a low level of liquidation…perhaps a 0.5% or less reduction in beef cows,” Peel says. “Achieving herd expansion is likely not feasible and even holding the herd to zero change stretches the numbers to unlikely levels. If the industry does try to minimize herd liquidation in 2022 and prepare for later herd expansion, the reduction in cow and heifer slaughter could result in a larger decrease in beef production this year than is currently forecast.”

Peel expects the most likely reality this year lies in between severe-drought and no-drought scenarios, with continued drought in some regions.

“The result could be modest levels of additional beef cow herd liquidation in 2022, perhaps less severe than 2021 but still significant continued reduction in the beef cow inventory. It is likely that cattle numbers will continue to tighten in 2022,” Peel says.

Negotiated cash fed cattle trade was limited on light demand in the western Corn Belt through Friday afternoon, according to the Agricultural Marketing Service. Although too few to trend, there were a few live sales at $144/cwt.

Elsewhere, trade was mostly inactive on light demand.

For the week, live prices were $2 higher in Nebraska and the Southern Plains at $142 and $1-$2 higher in the western Corn Belt at $142-$143. Dressed prices were $2 higher at $226.

Total estimated cattle slaughter last week was 663,000 head, which was 4,000 head more than the previous week and 114,000 head more than the same week last year. Total estimated year-to-date cattle slaughter of 4.49 million head is just 110,000 head fewer.

Feeder Cattle futures closing mixed, from an average of 42¢ lower in three contracts to an average of 44¢ higher.

Live Cattle futures closed an average of 35¢ lower except for unchanged to 35¢ higher in the back three contracts.

Choice Boxed beef cutout value was $3.74 lower Friday afternoon at $265.85/cwt. Select was $2.22 lower at $262.63.

Net U.S. beef export sales of 23,000 metric tons (2022) were 18% more than the previous week and 38% more than the prior four-week average, according to USDA’s U.S. Export Sales report for the week ending Feb. 10.

Increases were primarily for South Korea, Japan, Canada, Mexico, and China.

Corn futures closed mostly fractionally higher to 1¢ higher.

Soybean futures closed 3¢ to 9¢ higher.

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Major U.S. financial indices continued to erode Friday as worries grew about Russia invading Ukraine.

The Dow Jones Industrial Average closed 232 points lower. The S&P 500 closed 31 points lower. The NASDAQ was down 168 points.

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U.S. restaurants continue to claw back from the ravages of the pandemic, but the industry will likely remain changed going forward.

“Restaurants and their patrons have found themselves in a ‘new normal.’ Given emergent technology, changing consumer behavior and dining preferences, and the extraordinary challenges of the last two years, the industry is unlikely to ever completely return to its pre-pandemic state,” says Hudson Riehle, senior vice president of the Research and Knowledge Group at the National Restaurant Association (NRA). “While recovery speed varies across the industry by segment, the constant innovation and sustained flexibility of restaurant operators are creating a new future for the restaurant industry. There will continue to be ample opportunities for growth in 2022 and beyond.”

Earlier this month, NRA released its 2022 State of the Restaurant Industry report, which measures the restaurant industry’s continued recovery and examines the status of current and emerging trends across key categories including technology and off-premises business, operations, workforce, food and menus, and more.

Among highlights from the report:

• More than half of restaurant operators said it would be a year or more before business conditions return to normal. Food, labor, and occupancy costs are expected to remain elevated, and continue to impact restaurant profit margins in 2022.
• 96% of operators experienced supply delays or shortages of key food or beverage items in 2021 – and these challenges will likely continue in 2022.
• 60% of full-service operators say their menu contains fewer offerings now than it did before the pandemic.
• Roughly 50% of restaurant operators in the full-service, quick-service, and fast-casual segments expect recruiting and retaining employees to be their top challenge in 2022.
• 51% of adults say they aren’t eating at restaurants as often as they would like, which is an increase of six percentage points from before the pandemic. 
• 51% of adults say purchasing takeout or delivery food is essential to the way they live, including 72% of millennials and 66% of Gen Z adults.
• 57% of adults say they would likely participate in a meal subscription program if it was offered by one of their favorite restaurants. Eight in 10 millennials and Gen Z adults say they would use this option.

Feeder Cattle futures lost ground Thursday, closing an average of 81¢ lower amid lighter trade and firming Corn futures.

Live Cattle futures paddled in place awaiting more direction. Other than 27¢ higher in spot Feb, they closed an average of 21¢ lower.

Corn futures closed 2¢ to 4¢ higher. 

Soybean futures closed 3¢ to 5¢ higher through Mar ’23 and then mostly 1¢ lower.

Negotiated cash fed cattle trade was slow on light demand in Nebraska through Thursday afternoon, according to the Agricultural Marketing Service. There were a few live sales at $142.00-$142.50/cwt., but too few to trend.

Elsewhere, trade was limited in light demand. Although too few to trend, there were a few live trades in the Texas Panhandle at $142.

In established trade so far this week, live prices are $2 higher in Nebraska and the Southern Plains at $142 and $1-$2 higher in the western Corn Belt at $142-$143. Dressed prices are $2 higher at $226.

Choice Boxed beef cutout value was 3¢ lower Wednesday afternoon at $269.59/cwt. Select was $1.23 lower at $264.85.

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Major U.S. financial indices closed sharply lower Thursday with renewed concerns about the potential for Russia to invade Ukraine, as well as inflation worries.

The Dow Jones Industrial Average closed 622 points lower. The S&P 500 closed 94 points lower. The NASDAQ was down 407 points.

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Beef imports to the U.S. totaled 3.35 billion lbs. last year, near 2020 levels, according to livestock economists, in the latest Cattle Market Notes Weekly (CMNW).

“While cumulative imports lagged behind the previous year for most of 2021, strong fourth-quarter imports led to an annual year-over-year increase of just under 6 million lbs.,” say analysts with USDA’s Economic Research Service (ERS), in the recent monthly Livestock, Dairy and Poultry Outlook. “Fourth-quarter 2021 imports totaled 863 million lbs., 25% higher year over year. This was the second-highest fourth-quarter import level, behind 2004.”

“Canada (28%), Mexico (20%), and New Zealand (15%) were the primary sources of beef imports,” according to CMNW. “Australia, typically a top-two import source, was only the fourth largest at 12% followed by Brazil at 11%. Together, these five countries accounted for 87% of total beef imports. Imports from Australia were down 38% percent from 2020, however, their herd is expected to further rebuild in 2022 amid improving rainfall conditions.”

CMNW is authored by Josh Maples at Mississippi State University, James Mitchell at the University of Arkansas and Kenny Burdine at the University of Kentucky.

ERS projects U.S. beef imports this year slightly higher at 3.37 billion lbs. based on sustained strong domestic demand.

On the other side of the equation, ERS analysts say, “Although demand is expected to remain relatively strong in 2022, U.S. beef exports are forecast to decline 5% to 3.270 billion lbs. because of greater expected exportable supplies from Oceania and South America. U.S. exports are expected to pull almost 12% from production in 2022, second only to 2021.”