WLI

Negotiated cash fed cattle trade was light to moderate on moderate demand in the Southern Plains through Tuesday afternoon, according to the Agricultural Marketing Service. Prices were steady to $1 lower in the Texas Panhandle at $139-$140/cwt. And steady in Kansas at $140.

Elsewhere, trade ranged from limited on light demand to a standstill. Live prices last week were $146 in Nebraska, $142-$148 in Colorado and $144-$147 in the western Corn Belt. Dressed prices were $230-$232.

Cattle futures lost more ground Tuesday, as cash fed cattle prices ran out of steam in the South and Corn futures rose.

Feeder Cattle futures closed an average of $1.83 lower (87¢ lower to $2.37 lower).

Live Cattle futures closed an average of 93¢ lower (25¢ to $1.27 lower), except for 7¢ higher in the back contract.

Choice Boxed beef cutout value was $3.05 lower Tuesday afternoon at $255.24/cwt. Select was 78¢ lower at $242.35.

Corn and Soybean futures were supported by the sluggish planting pace.

Corn futures closed mostly 3¢ to 8¢ higher. Soybean futures closed 5¢ to 10¢ higher through Jly ‘23 and then fractionally higher to 4¢ higher. 

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Major U.S. financial indices closed mixed Tuesday as investors grasped for some stability and waited for the release of the Consumer Price Index Wednesday.

The Dow Jones Industrial Average closed 84 points lower. The S&P 500 closed 9 points higher. The NASDAQ was up 114 points.

West Texas Intermediate Crude Oil futures on the CME closed $2.74 to $3.33 lower through the front six contracts. Pressure included continued concerns about COVID lockdowns in China. That was $8.24 to $10.01 lower in those contracts over the last two sessions.

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Feeder cattle loans grew in size and the number of months before maturity on those loans increased over recent years, according to Elliott Dennis, Extension livestock economist the University of Nebraska-Lincoln. He provides insights about the impact of rising interest rates on cattle loans, in the most recent issue of In the Cattle Markets.

“Between 2000 and 2009, the average number of months before maturity on feeder cattle loans was 8.82 months. Between 2010 and 2019 that increased to 10.74 months. Now, between 2020 and present it has increased slightly to 10.92 months,” Dennis says. “At the same time, the average loan size and total feeder cattle loan volume have increased. The average loan size over the last 10 years has been about $80,000.”

Ultimately, of course, higher interest rates mean raising cattle with borrowed money gets more expensive.

Dennis explains feeder livestock interest rates are primarily tracked by the Kansas City and Dallas Federal Reserve Districts.

“Interest rates in these two primary cattle feeding areas are different from each other and reflect different supply and demand of money and relative production risks,” Dennis explains. “In 2022:Q1, the Dallas Federal Reserve feeder cattle interest rates were 5.42%. This rate has been relatively unchanged since 2020:Q2 fluctuating between 5.23-5.42%. In 2022:Q1, the Kansas City Federal Reserve feeder cattle interest rates were 3.92%. This rate has been much more variable, oscillating between 2.90-5.03% since 2020:Q2.”

Further, Dennis points to the inverse relationship between feeder cattle interest rates and average pastureland values over time. Generally, speaking, he says the cost of owning pastureland increases as the cost to raise feeder cattle decreases and visa vera.

“Lower interest rates cheapen the cost to raise feeder cattle. These lower costs create more economic incentives for (a) new producers to enter the market, (b) existing producers to increase the intensity of their operations, or (c) some combination of (a) and (b). Ultimately, this means that the demand for feeder cattle is passed down from feedlots to cow-calf/stocker producers who then expand by competing for a limited land base, raising land prices,” Dennis explains.

“…The potential for higher interest rates this year could raise the cost of production in the short term for cattle producers by making debt more expensive. However, it does ease some of the longer-term pressure of rising land values which landowners capitalize into pasture rental rates,” Dennis says.

Cattle futures weakened Monday, pressured by recently waning wholesale beef values and sharply lower outside markets, but supported by lower Corn futures.

Feeder Cattle futures closed an average of 44¢ lower, except for 25¢ higher in spot May.

Live Cattle futures closed an average of 37¢ lower, except for 80¢ and 2¢ higher in the front two contracts.

Corn futures closed mostly 9¢ to 13¢ lower, while Soybean futures closed mostly 20¢ to 34¢ lower, pressured my optimism the forecast will enable rapid planting progress.

As of May 8, 22% of corn was planted, which was 42% less than last year and 28% less than average, according to the latest USDA Crop progress report. Twelve percent of soybeans were in the ground, which was 27% less than last year and 12% less than the average.

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

Live prices last week were steady at $140/cwt. in the Southern Plains and at $146 in Nebraska. Prices were $2 lower to $3 higher in Colorado at $142-$148; steady to $1 lower in the western Corn Belt at $144-$147. Dressed prices were steady in Nebraska at $232, but steady to $2 lower in the western Corn Belt at $230-$232.

The weighted average five-area direct fed steer price last week was 8¢ higher at $143.42. The average steer price in the beef was $1.62 lower at $230.69.

Although lower week to week, Choice Boxed beef cutout value was $4.57 higher through Monday afternoon at $259.01/cwt. Select was 81¢ lower at $244.25.

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Wall Street’s selloff continued Monday as investors try to recalibrate value in the face of inflation and the Fed’s plans to battle inflation.

The Dow Jones Industrial Average closed 653 points lower. The S&P 500 closed 132 points lower. The NASDAQ was down 521 points.

West Texas Intermediate Crude Oil futures on the CME closed $5.50 to $6.68 lower through the front six contracts.

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Currently, there are no broad-based indications of weakening beef demand, but some red flags could be ready to unfold, says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University.

“In the last three weeks, Choice boxed beef values have dropped below year-ago levels, which were surging higher at this time in 2021,” Peel explains in his weekly market comments. “Beef demand is not likely to repeat last year’s levels, but current levels are still relatively high compared to recent years. Comparisons to last year will look weaker for boxed beef and many wholesale cut values but that is not really a valid comparison to judge beef demand in 2022.”  

Peel points out beef demand was exceptionally strong over the last 12 months, driven by pent-up, post-pandemic demand and exports.

“A bellwether indicator of summer grilling demand is strip loin prices, which typically and reliably increase seasonally going into summer,” Peel says. “So far this year, strip loin prices have increased only modestly and have actually weakened since mid-April. This may indicate some demand weakness and bears watching in the coming weeks. Relative weakness in some chuck product prices may be related to slower growth in export demand. The ground beef market continues very strong due to fundamental demand.”

Potential demand headwinds include near record-high retail beef prices and inflation that is weighing on consumer wallets.

“However, all proteins are higher priced and the ratio of retail beef price to retail broiler chicken and pork prices is actually lower now compared to six months ago,” Peel says. “Still, we watch for indications that consumers are ‘trading down’ from the most expensive beef cuts to cheaper value cuts,” Peel says.

For perspective, according to the Livestock Marketing Information Center (LMIC), retail beef prices were $7.67/lb. in March, up $1.20 or 18.6% from a year earlier.

Retail pork prices were record high at $4.84/lb. in March, which was 16.1% or 67¢ higher than last year.

The retail broiler price in March was the second highest on record at $1.72/lb., an increase of 11.7% or 18¢ from a year earlier. The retail broiler composite price was record high at $2.32/lb., up 15.5% (+31¢) year over year.

Corn futures closed mostly 11¢ to 18¢ lower on Friday, which helped lift Feeder Cattle futures an average of 77¢ higher (32¢ higher toward the front to $1.37 higher at the back), except for 77¢ lower in spot May. Soybean futures closed 20¢ to 25¢ lower. 

On the other hand, Live Cattle futures closed an average of 50¢ lower (25¢ lower toward the back to $1.02 lower in spot Jun), except for 35¢ higher in the back contract. They sagged with lower wholesale beef prices and waning cash momentum.

Week to week on Friday, Choice boxed beef cutout value was $6.34 lower at $254.44/cwt. Select was $2.91 lower at $245.06. That’s $13.47 lower for Choice over the last two weeks and $9.71 lower for Select.

Estimated total cattle slaughter last week of 657,000 head was 8,000 head more than the previous week and 18,000 more than the same week last year. Estimated total year-to-date cattle slaughter of 11.66 million head was 61,000 head more (+0.5%) than the same time last year. Estimated total year-to-date beef production of 9.74 billion lbs. was 81.6 million lbs. more (+0.8%) year over year.

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

Last week, live prices were steady at $140/cwt. in the Texas Panhandle and at $146 in Nebraska. Prices were steady to $2 lower in Kansas at $138-$140, $2 lower to $1 higher in Colorado at $142-$146 and $1 higher to $1 lower in the western Corn Belt at $146. Dressed prices were steady in Nebraska at $232 and steady to $2 lower in the western Corn Belt at $230-$232.

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Follow-through bearishness pressured major U.S. financial indices lower Friday, despite a bullish jobs report.

Total non-farm payroll increased by 428,000 in April, according to the U.S. Bureau of Labor Statistics. That left the unemployment rate unchanged at 3.6%. Average hourly earnings for all employees on non-farm payrolls increased 10¢ in April to $31.85.

The Dow Jones Industrial Average closed 98 points lower. The S&P 500 closed 25 points lower. The NASDAQ was down 173 points.

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Recent rains continued to provide slight improvement to the nationwide drought last week. As of May 5, 63.9% of the nation was experiencing either abnormally dry conditions or some degree of drought, compared to 64.1% the previous week and 65.6% the previous year, according to the U.S. Drought Monitor. However, the Drought Severity Coverage Index (DSCI) for the week was 5 points higher than the previous year at 181. Of course, that’s another way of saying it’s been way too dry for way too long.

The same week, approximately 56% of the nation’s cattle inventory was in areas experiencing drought. Looking at primary cattle states, that included 85% of the cattle in Texas, 79% in Kansas, 98% in Nebraska, and 100% in Oklahoma. At the same time, approximately 41% of the nation’s hay acreage was in areas experiencing drought.

As for other crops in areas experiencing drought (approximate percentage of production): 23% of corn; 14% of soybean; 69% of winter wheat; 71% of barley; 90% of sorghum.

“There may be some relief in the 7-day forecast for the Southern Plains, however it is likely insufficient to provide substantial relief,” says Aaron Smith, crop marketing specialist at the University of Tennessee, in his weekly market comments.

Plenty of eyes will be on Thursday’s monthly World Agricultural Supply and Demand Estimates, which will include the first glimpse of 2022-23 crop expectations.

“Will the USDA modify U.S. planted acres and Ukraine production? Both could have significant impacts on commodity markets, even when accounting for market expectations.” Smith says.

According to Smith, the relative change in prices from February 1 to May 5 favors increased corn and cotton planted acres over soybeans. “However, with the drought in the Southern Plains and fertilizer prices increasing 2-16% over the same 3-month time period, the acreage estimates continue to be uncertain,” he says.

Cattle futures sagged Thursday with higher Corn futures and lower wholesale beef values helping stall recent momentum. Sharply lower outside markets also clouded optimism.

Feeder Cattle an average of $1.14 lower, from 47¢ lower at the back to $1.92 lower in spot May.

Live Cattle futures closed an average of 73¢ lower, from 12¢ lower to $1.12 lower.

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, like prices are steady at $140/cwt. in the Southern Plains and at $146 in Nebraska. Prices are $2 lower to $1 higher in Colorado at $142-$146 and $1 higher to $1 lower in the western Corn Belt at $146. Dressed prices are steady in Nebraska at $232 and steady to $2 lower in the western Corn Belt at $230-$232.

Choice Boxed beef cutout value was $4.56 lower Thursday afternoon at $255.18/cwt. Select was $1.87 lower at $245.81.

Net U.S. beef export sales for the week ending April 28 were 14,600 metric tons, according to the weekly U.S. export sales report. That was 28% more than the previous week and 1% more than the prior four-week average. Increases were primarily for Japan, South Korea, Taiwan, China and Canada.

Corn futures closed mostly 1¢ to 3¢ higher. Soybean futures closed mostly 4¢ to 5¢ higher. 

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Major U.S. financial indices dropped like the proverbial rock Thursday, following what was apparently a relief rally during the previous session, in the wake of the Fed’s 50-basis point increase in the lending rate. Stocks tied to tech and economic growth led the decline.

Weekly initial unemployment insurance claims were 200,000, according to the U.S. Department of Labor. That was 19,000 more than the previous week and more than expected.

The Dow Jones Industrial Average closed 1,063 points lower. The S&P 500 closed 153 points lower. The NASDAQ was down 647 points.

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U.S. beef exports set another new value record in March, according to data released by USDA and compiled by the U.S. Meat Export Federation (USMEF).

Beef exports totaled 126,285 metric tons (mt) in March, up 1% from a year ago, the third most on record, while value climbed 33% to a record $1.07 billion. First-quarter exports increased 6% to 353,852 mt. Value in the first quarter was 41% more than last year at just over $3 billion.

“Global demand for U.S. beef has eclipsed anything I have seen in many years in the meat business,” says Dan Halstrom, USMEF President and CEO. “While this momentum is fueled by mainstay markets such as South Korea, Japan and Taiwan, demand is also very strong in China/Hong Kong and key Latin American markets, while exports to the Middle East have rebounded impressively.”

March beef export value equated to $472.73 per head of fed slaughter, up 36% from a year ago. The first quarter average was $474.10 per head, up 41%. Exports accounted for 14.7% of total March beef production, up from 14.5% a year ago, while the ratio for muscle cuts was steady at 12.7%.

Halstrom cautions that first-quarter results do not fully reflect the impact of recent COVID-19 lockdowns in China that slowed product movement and forced many restaurants to suspend or limit service. These obstacles are likely to have a greater impact on April and May export data. He notes that while beef demand has been very resilient, inflation represents a potential headwind.

“Consumers throughout the world have shown how much they value the quality of U.S. beef, but disposable income is under increasing pressure as they pay more for energy and other daily needs,” Hailstorm says. He adds that pork, beef and lamb exporters continue to face logistical obstacles and delays when moving product overseas. The situation is especially challenging for chilled meat shipments to key Asian markets.

Negotiated cash fed cattle trade and demand were moderate in the Texas Panhandle through Wednesday afternoon with prices steady at $140/cwt. Trade in Nebraska was moderate on moderate to good demand, also at steady prices of $146 on a live basis and $232 in the beef.

Elsewhere, trade was slow on light to moderate demand, with too few transactions to trend. However, there were some early live sales at $140 in Kansas and at $145-$146 in the North.

Last week, live prices were $140 in Kansas, $146-$147 in Colorado and $145-$147 in the western Corn Belt, where dressed prices were $232.

The weighted average five-area direct fed steer price in April was $141.66/cwt., which was $20.78 higher than a year earlier (+17%). The average steer price in the beef was $36.55 higher (+16%) at $228.86.

Choice Boxed beef cutout value was 19¢ higher Wednesday afternoon at $259.74/cwt. Select was 34¢ higher at $247.68.

Cattle futures held their ground in the face of firmer Corn futures.

Live Cattle futures closed narrowly mixed, from an average of 26¢ lower to an average of 13¢ higher.

Feeder Cattle futures closed an average of 42¢ higher except for an average of 28¢ lower in three contracts, amid light trade.

Corn futures closed mainly fractionally higher to 1¢ higher. Soybean futures closed 6¢ 10¢ higher. 

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Major U.S. financial indices closed sharply higher Wednesday, apparently fueled by optimism the Fed can slow inflation while maintaining economic growth, based on comments from Federal Reserve Chair, Jerome Powell, suggesting incremental rate increases will be no more than 50 basis points each time. On Wednesday, the Federal Reserve raised the lending rate 0.5%, as widely expected.

The Dow Jones Industrial Average closed 932 points higher. The S&P 500 closed 124 points higher. The NASDAQ was up 401 points.

Crude oil futures stepped higher with announced plans from the European Union (EU) for a phased ban of crude oil imports from Russia to the EU over the next six months, as well as an embargo on imports of Russian refined oil products in about the same length of time.

West Texas Intermediate Crude Oil Futures closed $4.54 to $5.40 higher through the front six contracts.

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Higher food and energy costs weighed on restaurant industry recovery in the first quarter, according to The NPD Group (NPD).

Online and physical visits to restaurants declined 2% year over year in the first quarter, compared to a 3% increase last year when stimulus payments and relaxed pandemic restrictions provided a boost. Consumer restaurant spending, which reflects higher costs, as opposed to increased visits, was up 4% in the quarter.

Online and physical visits to quick service restaurants (QSRs) declined by 2% in the first quarter compared to a 6% increase the previous year. Consumer spending at QSRs was 2% more year over year.

Conversely, full service restaurant (FSR) traffic increased by 2% in the first quarter, compared to last year’s 7% decline. FSR spending was up 10% versus the same quarter a year ago when spending fell by 6%.

“With the first quarter behind us, I’m optimistic that seasonal demand and the improving on-premises trends can help get the restaurant industry’s recovery back on track,” says David Portalatin, NPD food industry advisor.