WLI

Cattle futures mostly eased lower in light trade Thursday as traders awaited more concrete direction from the packing pace.

Feeder Cattle futures closed an average of 82¢ lower except for 20¢ higher in expiring Jan.

Live Cattle futures closed an average of 43¢ lower, except for 20¢ higher in the back contract.

Negotiated cash fed cattle trade was limited on light demand through Thursday afternoon, according to the Agricultural Marketing Service.

So far for the week, live prices are steady in the Texas Panhandle at $137/cwt., $1 lower in Kansas at $136, steady to $1 lower in Nebraska at $137 and steady in the western Corn Belt at $137-$139. Dressed trade is steady at $218.

Choice Boxed beef cutout value was 35¢ lower Thursday afternoon at $289.11/cwt. Select was 62¢ lower at $279.10.

The average dressed steer weight the week ending Jan. 15 was 922 lbs., according to the latest weekly Actual Slaughter Under Federal Inspection report. That was 6 lbs. lighter than the previous week and 3 lbs. lighter than the previous year. The average dressed heifer weight of 851 lbs. was the same as a week earlier and 1 lb. heavier than the same time last year.

Net U.S. beef export sales for 2022 totaled 14,300 metric tons the week ending Jan. 20, according to the weekly U.S. Export Sales report. Sales were primarily for South Korea, Japan, Mexico, China, and Indonesia.

Grain exports helped underpin prices.

Net U.S. corn export sales (2021-22) were 29% more than the previous week and 84% more than the prior four-week average.

Net U.S. soybean export sales were up 53% from the previous week and 77% from the prior four-week average.

Net U.S. wheat export sales were 78% higher than the previous week and up noticeably from the prior four-week average.

Corn futures closed mostly 3¢ to 6¢ lower.

Soybean futures closed 2¢ to 8¢ higher through Jan ‘23 and then mostly 1¢ lower.

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Major U.S. financial indices drifted lower Thursday, as investors pondered a tighter-fisted Fed and despite stronger quarterly economic growth than expected.

“Real gross domestic product (GDP) increased at an annual rate of 6.9% in the fourth quarter of 2021, following an increase of 2.3% in the third quarter,” according to the U.S. Commerce Department. “The acceleration in the fourth quarter was led by an upturn in exports as well as accelerations in inventory investment and consumer spending.”

The Dow Jones Industrial Average closed 7 points lower. The S&P 500 closed 23 points lower. The NASDAQ was down 189 points.

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A Congressional bill intended to increase transparency in the beef supply chain may hinder pricing innovations that have contributed to beef demand growth over the last 20 years and translate into lower prices for cattle producers, according to a recent analysis by the Fryar Price Risk Management Center of Excellence at the University of Arkansas (UA).

Specifically, researchers analyzed the Cattle Price Discovery and Transparency Act (CPDTA), which was introduced in March last year and then subsequently re-introduced in the U.S. House and Senate last fall.

The bill includes elements widely supported by cattle producers, such as increasing the level of price reporting and creating a publicly available library of marketing contracts between packers and producers. However, the bill also mandates minimum levels of negotiated cash fed cattle trade, an element that continues to divide the industry.

Cash cattle trade lessened over time as cattle feeders and packers increased the use of Alternative Marketing Agreements (AMAs), which enable further differentiation and value segregation of beef carcasses. AMAs enable paying more for cattle that produce beef of higher value to the consumer — clearer pricing signals. At the same time, AMA participants reduce transaction costs and price risk.

For comparison, the analysis explains negotiated cash fed cattle trade usually revolves around a single price paid for all cattle in a pen. That means the average price discounts cattle of higher value and rewards cattle below the pen average.

“By privileging an average pricing system in the sector, the legislation makes it less likely that innovations such as AMAs will be pursued. Innovations that might further reduce transactions costs and/or support further production changes to more closely align the beef end product with consumer tastes and preferences could be beneficial to maintaining and even growing beef demand in the future,”

says John Anderson, director of the Fryar Price Risk Management Center of Excellence. He coauthored the analysis report.

“If AMA use in the Southern Plains is restricted, the most likely immediate outcome is that transaction costs … between feeders and packers will likely go up,” Anderson says. “The lion’s share of this increase will most likely be borne by cow/calf and stocker producers in the form of lower feeder cattle prices.”

On a related note, the American Farm Bureau Federation (AFBF) recently revised policy, no longer supporting mandated levels of cash fed cattle trade.

“We support the majority of this legislation (CPDTA), but we cannot support mandatory cash sales,” says AFBF President Zippy Duvall. “We are committed to working with the sponsors of the bill to make revisions to ensure it aligns with the priorities outlined by our membership.”

Cattle futures closed higher Wednesday on apparent technical support and the notion that packer production is gaining.

Live Cattle futures closed an average of $1.11 higher.

Feeder Cattle futures closed an average of 95¢ higher (17¢ higher in waning spot Jan to $1.30 higher toward the back).

Negotiated cash fed cattle trade was slow on light demand in the Texas Panhandle through Wednesday afternoon, according to the Agricultural Marketing Service. Live sales were steady at $137/cwt.

Trade was slow on moderate demand in Kansas at $136-$137, mostly $1 lower at $136.

In Nebraska and the western Corn Belt, trade was limited on light demand. So far this week, in both regions, live sales are steady to $2 lower at $137 and dressed trade is steady at $218.

Wholesale beef prices continued to falter, suggesting the seasonal top may have been breeched. Choice Boxed beef cutout value was $2.92 lower Wednesday afternoon at $289.46/cwt. Select was $3.60 lower at $279.72.

Soybean futures surged on South American weather and dragged Corn futures along.

Soybean futures closed 21¢ to 32¢ higher through the front five contracts and then mostly 5¢ to 15¢ higher.

Corn futures closed 3¢ to 7¢ higher through the front six contracts  and then mostly 1¢ lower.

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Major U.S. financial indices closed narrowly mixed Wednesday, continuing the volatile seesaw of late, but in reverse order this time: gaining early and losing late in the session.

Part of the give and take likely had to do with the statement from the Federal Reserve.

“With inflation well above 2% and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate,” said Federal Reserve Chair, Jerome Powell, in a statement. The timing and degree remain uncertain.

The Dow Jones Industrial Average closed 129 points lower. The S&P 500 closed 6 points lower. The NASDAQ was up 2 points.

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“Currently, levels indicate that 2022 will see continued herd contraction and the USDA Cattle report Jan. 31 will likely see the inventory of cows that have calved and beef heifers held as replacements decrease from 36.97 million head to approximately 36.75 million head,” says Brenda Boetel, Extension livestock economist at the University of Wisconsin-River Falls, in the latest issue of In the Cattle Markets.

Boetel is referring to the percentage of heifers on feed currently (38.8%) and the average on-feed percentage (38%) for 2019-2021.

“In January 2014, at the most recent cattle cycle inventory low, the percentage of heifers on-feed inventory was 35.5%. This percentage will decrease during the initial phases of herd rebuilding as heifers will be held back as replacements, and the percentage will increase during herd contraction.”

Boetel adds that deferred live cattle prices will likely receive most of the pressure from increased feedlot placements revealed in the latest Cattle on Feed report, which were led by light weights.

Negotiated cash fed cattle trade was slow on light demand through Tuesday afternoon, according to the Agricultural Marketing Service. Although too few transactions to trend in any region, there were some live sales in the Southern plains and Nebraska at $137/cwt. Early dressed trades were $218.

Last week, live prices were at $137/cwt. in the Southern Plains, $137-$138 in Nebraska and at $137-$139 in the western Corn Belt. Dressed prices were $218.

Cattle futures continued to lose ground Tuesday, unable to escape the uncertain packing pace and volatile outside markets.

Lower wholesale beef prices on the day, perhaps signaling a near seasonal top, added to Live Cattle angst. Live Cattle futures closed an average of 22¢ lower, except for an average of 29¢ higher in three contracts at either end of the board.

Choice Boxed beef cutout value was $1.12 lower Tuesday afternoon at $292.38/cwt. Select was $1.47 lower at $283.32.

Nearby Corn futures prices beyond the $6.00 mark added pressure to Feeder Cattle futures, which closed an average of $1.14 lower, except for 7¢ higher in spot Jan.

Corn futures closed mostly 2¢ to 8¢ higher.

Soybean futures closed mostly 11¢ to 13¢ higher after 4¢ to 9¢ higher in the front four contracts.

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Major U.S. financial indices closed lower Tuesday but a canyon away from session lows for the second consecutive day of a massive sell-off followed by a frantic comeback. Underlying forces appeared the same — inflation, rising interest rates and the standoff between Russia and Ukraine.

The Dow Jones Industrial Average closed 66 points lower. The S&P 500 closed 53 points lower. The NASDAQ was down 315 points.

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Creighton University’s Rural Mainstreet Index (RMI) declined in January, but remained above growth neutral the for the 14th consecutive month, according to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.

The region’s overall reading for January fell 5.6 points from the previous month to 61.1. The index ranges between 0 and 100 with a reading of 50.0 representing growth neutral.

“Solid 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, the Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business.

Bankers overwhelmingly named rising farm input prices, such as fertilizer, as the top threat this year to agricultural producers in their respective areas. Disruption of farm input deliveries and rising interest rates ranked second and third.

“Inflation is a serious problem here. Gasoline prices have nearly doubled since November 2020,” says Jim Eckert, president of the Anchor State Bank in Anchor, Illinois. “Food prices are up well above what’s claimed by the government. Poor fiscal policy in D.C. is sinking all ships!”

“Increased input costs have raised our average farmer break even points, but current commodity prices still produce moderate gains in all areas of financial statements,” according to Jim Brown, CEO of Hardin County Savings Bank, Eldora, Iowa.

On average, bank CEOs expect the Federal Reserve to raise short-term interest rates by 0.70% (70 basis points) this year. Approximately 18.5% of bankers expect four or more one-quarter percentage point rate hikes in 2022.

Still, Brown says, “Our loan reviews show an increase in working capital, net worth and lower leverage in almost every case.”

The region’s farmland price index decreased to 88.5 from December’s record high of 90.0. January’s reading was the 16th straight month the index was above growth neutral.

As expected, significantly higher feedlot placements revealed in Friday’s monthly Cattle on Feed report cast a pall over Cattle futures Monday, darkened by wildly volatile outside markets. However, they recovered some lost ground by the end of the session.

Feeder Cattle futures closed an average of $1.46 lower (92¢ to $2.05 lower).

Live Cattle futures closed an average of $1.03 lower (25¢ to $2.02 lower).

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

Last week, live prices were at $137/cwt. in the Southern Plains, $137-$138 in Nebraska and at $137-$139 in the western Corn Belt. Dressed prices were $218.

The five-area direct average steer price last week was 89¢ higher on a live basis at $137.50/cwt. The average steer price in the beef was 7¢ lower at $217.92.

Choice Boxed beef cutout value was $1.09 higher Monday afternoon at $293.50/cwt. Select was $2.46 higher at $284.79.

Corn futures closed mostly 2¢ higher, riding the coattails of Wheat futures, which remain bolstered by the geopolitical tension in eastern Europe.

Soybean futures closed mostly 7¢ to 13¢ lower on rains in South America.

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Major U.S. financial indices started out Monday rampaging lower as investors continued to flee risk amid uncertainty surrounding how quickly the fed will raise interest rates and by how much, as well as the tensions brewing between Russia and Ukraine. By the end of the session, however, they reversed course, presumably on perceived bargain buying.

The Dow Jones Industrial Average closed 99 points higher. The S&P 500 closed 12 points higher. The NASDAQ was up 86 points.

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“Although cattle numbers are generally declining, feedlots will try to maintain inventories as long as possible,” says Derrell Peel Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. In part, he was explaining the 6.5% (+119,000 head) year-over-year increase in December feedlot placements revealed in the monthly Cattle on Feed report.

“Producers may have helped feedlots with large December placements as rising feeder prices encouraged later and larger auction totals…at least in some regions,” Peel says. “In Oklahoma, for example, feeder cattle auction totals for the three weeks of December sales were up 22.4% year over year.”

Peel points out lighter cattle made up the lion’s share of increased placements with those weighing less than 700 lbs. up 9.5% compared to the previous year, while cattle going on feed weighing more than 800 lbs. were just 1.8% more.

“Feeder cattle supplies are expected to tighten considerably in 2022,” Peel says. “Declining cattle numbers are projected to reduce cattle slaughter by 2.5-3.0% in 2022 and lead to a 2.5% decrease in beef production for the year. However, drought could change the timing by forcing more liquidation and slaughter sooner and delaying the decrease in production until later.”

For annual perspective, Peel says total fed steer and heifer slaughter (federally inspected) was 25.97 million head last year with heifer slaughter of 9.83 million head comprising 37.8% of fed slaughter, the largest percentage since 2004. 

“Total cow slaughter was 6.67 million head and accounted for 20.1% of total slaughter, the highest percentage since 2011,” Peel says. “Beef cow slaughter totaled 3.562 million head, up 9.0% year over year.”

Despite sharply lower outside markets, a bounce higher in grain prices and the ongoing slower beef packing pace, cash cattle and futures prices held their own last week.

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

For the week, live prices were steady to $1 higher in the Texas Panhandle at $137, $1-$2 higher in Kansas at $137. Prices were steady to $1 higher in Nebraska at $137-$138 and $1 lower in the western Corn Belt at $137. Dressed prices were steady at $218.

Cattle futures leaked lower Friday amid stagnant cash prices and bearish outside markets.

Live Cattle futures closed an average of 63¢ lower (25¢ to $1.07 lower), except for unchanged and 5¢ higher in the back two contracts. Week to week, they closed mixed, from an average of 19¢ lower in the front four contracts to an average of 52¢ higher.

Choice Boxed beef cutout value was 57¢ lower Friday afternoon at $292.41/cwt. Select was 15¢ higher at $282.33. Week to week, though, Choice was $8.10 higher and Select was $8.36 higher.

Estimated total cattle slaughter last week was 636,000 head, which was 18,000 head more than the previous week, but 26,000 head fewer than the same week last year. Estimated year-to-date total cattle slaughter of 1.87 million head is 161,000 head fewer (-7.9%) than last year. Estimated year-to-date beef production is 147.5 million lbs. less (-8.6%) at 1.57 billion lbs.

Net U.S. beef export sales were 12,800 metric tons for the week ending Jan. 13, according to the weekly U.S. Export Sales report. Sales were primarily for China, Japan, South Korea, Mexico, and Taiwan.

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Based on weekly auctions monitored by Cattle Current, calf and feeder cattle prices trended widely mixed last week. Impaired travel conditions due to winter weather and wobbly futures prices applied pressure, while the optimistic outlook ahead provided lift, especially for grass-suited cattle.

Feeder Cattle futures closed an average of 90¢ lower (52¢ to $1.65 lower). Week to week, they closed an average of $1.82 lower through the front five contracts and then unchanged to $1 higher.

Although soybean futures closed lower Friday, on likely profit taking, South American weather and geopolitical tensions continue to provide lift.

Soybean futures closed mostly 6¢ to 11¢ lower except for fractionally higher in a few contracts. Week to week on Friday, however, they closed an average of 35.4¢ higher.

Corn futures closed 2¢ to 5¢ higher through Jly ’23 and then fractionally higher. They closed an average of 12.5¢ higher through the front six contracts week to week on Friday.

Exports continued to add lift to grain prices, according to the weekly U.S. Export Sales report. For the week ending Jan. 13.

Net U.S. wheat export sales 44% more than the previous week and 62% more than the prior four-week average. Net U.S. corn export sales were up noticeably from the previous week and up 48% from the prior four-week average. And, Net U.S. export soybean sales were 9% less than the previous week, but 12% more than the prior four-week average.

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Major U.S. financial indices closed sharply lower Friday, led by tech stocks, with continued pressure from treasury bond yields, inflation and pending monetary tightening.

The Dow Jones Industrial Average closed 450 points lower. The S&P 500 closed 84 points lower. The NASDAQ was down 385 points.

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Markets will likely view the latest monthly Cattle on Feed report negatively, with placements significantly higher than average expectations.

Feedlots with 1,000 head or more capacity placed 1.96 million head in December, which was 110,000 head more (+6.0%) than a year earlier. Average expectations were for an increase of 2.5%. Placements were the highest for the month since the series began in 1996.

In terms of placement weights, 50% went on feed weighing less than 700 lbs. (26% less than 600 lbs.), 40% weighing 700-899 lbs. and 10% weighing 900 lbs. or more.

Marketings in December of 1.86 million head were 4,000 head more (+0.21%) than the previous year, which was in line with pre-report expectations.

Cattle on feed Jan. 1 of 12.04 million head were 70,000 head more (+0.58%) more than a year earlier and the second highest for the date since the series began in 1996. Heifers and heifer calves on feed (4.68 million head) were 2% more year over year.