WLI

Friday’s bearish Cattle on Feed report took Cattle futures down a peg on Monday.

Feeder Cattle futures closed an average of $1.78 lower ($1.25 to $2.57 lower), and Live Cattle futures closed an average of $1.83 lower (72¢ lower toward the back to $3.35 lower in spot Apr).

Negotiated cash fed cattle trade opened the week at steady money of $140/cwt. in the Texas Panhandle on moderate trade and light demand. Elsewhere, trade was mostly inactive on light demand with too few transactions to trend, according to the Agricultural Marketing Service.

Last week, live prices were $1 higher in the Southern Plains at $140/cwt., $4 higher in Nebraska at $144-$146, $3-$4. higher in Colorado at $144-$145  and $3 higher in the western Corn Belt at $145-$146. Dressed prices were $4 higher at $230.

The weighted average five-area direct steer price last week was $2.00 higher on a live basis at $143.02/cwt. The average dressed steer price was $6.40 higher at $232.29.

Corn futures closed mostly 7¢ to 14¢ higher, but Soybean futures closed 10¢ to 12¢ lower through Jan ‘23 and then mostly 3¢ to 9¢ lower.

 Wholesale beef prices were mixed with Choice Boxed beef cutout value $1.31 lower Monday afternoon at $266.60/cwt. , while Select was $1.75 higher at $256.52.

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Major U.S. financial indices clawed back some of the previous session’s steep losses on Monday, amid another volatile day of trade and supported by positive quarterly corporate earnings reports.

The Dow Jones Industrial Average closed 238 points higher. The S&P 500 closed 24 points higher. The NASDAQ was up 165 points.

West Texas Intermediate Crude Oil futures closed $2.68 to $3.53 lower through the front six contracts, apparently pressured by slowing economic growth that could be compounded by the recent COVID outbreak in China.

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“The unexpectedly large March feedlot placement total may indicate unusual movement of feeder cattle out of the country. It is possible that some heifers originally designated as replacements on Jan. 1 are already being diverted to feedlots,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments.

As noted in the last issue of Cattle Current, according to the latest monthly Cattle on Feed report (feedlots with 1,000 head or more capacity), March feedlot placements were slightly less (-8,000 head) than a year earlier at 1.99 million head. However, pre-report expectations expected a decrease of about 8%, based on auction totals and other data.

Peel notes the largest increase in placements occurred in Nebraska (+6.8%), while placements were even with the previous year in Kansas and Colorado. Placement were lower year over year in Texas (-6.5%) and Iowa (-10.7%).

“As May approaches and widespread drought conditions persist, cattle industry impacts are expected to accelerate in the coming weeks,” Peel says. “However, there are indications that drought is already impacting cattle markets significantly.”

Heading into the new week, the primary focus is likely reaction to Friday’s monthly Cattle on Feed report for feedlots with 1,000 head or more capacity.

On the surface, it confirms the severity and duration of the current drought, with March placements about 8% more than expected, following surging placements the previous month. Beneath the surface, though, there likely will be some head scratching about how they square with USDA numbers at the beginning of the year suggesting the feeder supply outside of feedlots was 676,000 head fewer (-2.6%) than last year.

March placements of 1.99 million head were 8,000 less year over year — fractionally less — which was about 8% more than expectations ahead of the report.

In terms of placement weights, 35% went on feed weighing 699 lbs. or less, 53% weighing 700-899 lbs. and 12% weighing 900 lbs. or more.

Marketings in March of 2.0 million head were 41,000 head fewer (-2.0%) than the previous year, about even with pre-report expectations.

Cattle on feed April 1 of 12.11 million head were 208,000 head more (+1.7%) than the previous year. That’s the most for the date since the data series began in 1996 and slightly more than expectations ahead of the report.

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Cattle futures softened to end an otherwise positive week.

Perhaps there was some profit taking, but pressure in Live Cattle mirrored the logical response to numbers revealed in the monthly Cattle on Feed report. Presumably, however, the report was not released until after trading hours.

Feeder Cattle futures closed mixed, from an average of 53¢ lower to an average of 36¢ higher, while Live Cattle futures closed an average of 97¢ lower (20¢ lower at the back to $1.65 lower in spot Apr).

Week to week, though — from the previous Thursday through Friday — Feeder Cattle futures an average of $2.15 higher, except for 25¢ lower in waning spot Apr, and Live Cattle futures closed an average of $1.41 higher.

For much of the week, Cattle futures received support from a reprieve in the relentless surge of Corn futures prices and mostly from stronger cash fed cattle prices.

Negotiated cash fed cattle prices last week were $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 were $4 higher at $230.

Through Thursday, the weighted average five-area direct steer price was $1.98 higher on a live basis at $143.00/cwt. The average dressed steer price was $6.03 higher at $231.90.

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Major U.S. financial indices plunged Friday on disappointing quarterly corporate earnings reports and follow-through pressure from the previous day tied to inflation and hawkish comments from the Fed suggesting a stronger response via interest rate hikes.

The Dow Jones Industrial Average closed 981 points lower. The S&P 500 closed 121 points lower. The NASDAQ was down 335 points.

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.”