WLI

Feeder Cattle futures tumbled lower Thursday, pressured once again by surging Corn futures, tied to strong weekly U.S. export sales.

Feeder Cattle futures closed an average of $3.17 lower.

Corn futures closed 15¢ to 22¢ higher through Jly ‘23, and then mostly 6¢ to 9¢ higher.

Soybean futures closed mostly 15¢ to 22¢ higher.

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, live prices are $2 lower in the Southern Plains and Nebraska at $138/cwt. and $2-$4 lower in the western Corn Belt at $138-$140. Dressed prices are $4-$5 lower in Nebraska at $224-$225; $3-$5 lower in the western Corn Belt at the same money.

Lower cash prices pressured Live Cattle futures an average of 70¢ lower, from 2¢ lower in the back contract to $1.67 lower in spot Apr.

Choice Boxed beef cutout value was $1.24 higher Thursday afternoon at $253.94/cwt. Select was $2.58 higher at $247.37.

On another positive note, net U.S. beef export sales for the week ending March 3 of 27,500 metric tons were a marketing year high, up 16% from the previous week and 36% higher than the prior four-week average, according to USDA data. Increases were primarily for China, Japan, South Korea, Canada and Taiwan. 

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Major U.S. financial indices closed lower Thursday, with continued volatility and uncertainty stemming from Russia’s war on Ukraine. Inflation was a touch higher than expected, too. Through February, the Consumer Price Index (all items) increased 7.9% over the last 12 months, according to the U.S. Bureau of Labor Statistics. That’s the steepest increase for the date since 1982.

The Dow Jones Industrial Average closed 112 points lower. The S&P 500 closed 18 points lower. The NASDAQ was down 125 points.

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The U.S. restaurant industry’s recovery stalled in January after 10 consecutive months of traffic gains over steep pandemic-related declines, according The NPD Group (NPD).

Physical and online visits to U.S. restaurants were down 2% in January compared to an 8% decline at the same time last year. Consumer spending at restaurants was 4% higher, though, reflecting higher food and operational costs. Total restaurant traffic, online and physical, is down 10% from the pre-pandemic level in January 2020, according to NPD’s continual tracking of the U.S. foodservice industry.

Online and physical visits to quick service restaurants represent the bulk of industry traffic and historically have led the industry out of challenging times. However, they were 3% less year over year in January and 7% less than January 2020. Full service restaurant traffic increased 2% year over year but was 21% less than two years ago, before the pandemic.

Dine-in traffic increased by 40% in January, compared to a year earlier but were 46% less than the pre-pandemic level in January 2020. 

“No one ever said the road to recovery would be smooth and steady. Right now, we’re experiencing a dip in the road due to the omicron variant and stimulus money expiring,” says David Portalatin, NPD Food Industry Advisor. “Looking ahead, we should expect volatility. February restaurant numbers will be compared to a rough February last year because of extreme weather. My advice is don’t get too discouraged by January or too elated if February seems great. Just stay the course because we’re on a steady path of gradual improvement.”

Cattle futures ran out of steam Wednesday, although the latest World Agricultural Supply and Demand Estimates continue to paint a positive fundamental picture (see below).

Feeder Cattle futures closed an average of 43¢ lower, except for 2¢ higher in spot Mar.

Live Cattle futures closed an average of 90¢ lower, except for 5¢ higher in the back contract.

Cattle futures were helped by lower Grain and Soybean futures as traders apparently were satisfied with the level of risk premium.

Negotiated cash fed cattle trade and demand were moderate in Nebraska through Wednesday afternoon, according to the Agricultural Marketing Service. Live trade was steady with the previous day and $2 lower than last week at $138/cwt. Dressed trade was $4-$5 lower at $220.

Trade was limited on light demand in Kansas with live prices at $138; steady with the previous day and $2 lower than last week.

Elsewhere, trade ranged from limited on light demand to mostly inactive with very light demand and too few transactions to trend. Live prices in the Texas Panhandle so far this week are $2 lower at $138. Trade was unestablished in the western Corn Belt where live prices last week were $142 and dressed prices were $224-$225.

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Major U.S. financial indices closed sharply higher, buoyed by lower Crude Oil futures and cooling commodity prices, at least for the day.

The Dow Jones Industrial Average closed 653 points higher. The S&P 500 closed 107 points higher. The NASDAQ was up 460 points.

West Texas Intermediate Crude Oil Futures (CME) closed $12.19 to $15.00 lower in the front six contracts.

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“Fed cattle prices are raised on firm packer demand and declining inventories of fed cattle,” say analyst with USDA’s Economic Research Service (ERS), in the latest World Agricultural Supply and Demand Estimates (WASDE).

ERS projects the annual five-area direct fed steer price the year $17.10 higher than last year at $139.50/cwt. That’s $2.00 more than the previous month’s projection.

Forecast prices are $140 in the first quarter, $139 in the second, $136 in the third and $142 in the fourth quarter.

Estimated beef production this year of 27.57 billion lbs. would be 367 million lbs. less (-1.3%) than last year. “The beef production forecast is raised from the previous month on higher fed and non-fed cattle slaughter,” according to ERS.

Estimated total red meat and poultry production this year of 106.47 billion lbs. would be 324 million lbs. less (-0.3%) than the prior year.

“Russia’s recent military action in Ukraine significantly increased the uncertainty of agricultural supply and demand conditions in the region and globally,” say ERS analysts. “The March WASDE represents an initial assessment of the short-term impacts as a result of this action.”

Volatility continued Tuesday, but Cattle futures managed to extend gains amid two-sided trading, supported by an initial drop in Corn futures and eventually higher outside markets.

Feeder Cattle futures closed an average $1.07 higher (65¢ to $1.40 higher), except for 57¢ lower in spot Mar.

Live Cattle futures closed average 79¢ higher (17¢ higher at the back to $1.57 higher toward the front), except for unchanged in away Jun.

Negotiated cash fed cattle trade was slow on light demand in the Southern Plains through Tuesday afternoon, according to the Agricultural Marketing Service. Live prices were $2 lower in a light test at $138/cwt.

Trade was limited on light demand in Nebraska. Live price so far this week are $2 lower at $138. Dressed prices last week were $224-$225.

In the western Corn Belt, trade was mostly inactive on light demand. Live prices last week were $142 and dressed prices were $224-$225.

Choice Boxed beef cutout value was $2.27 lower Tuesday afternoon at $252.44/cwt. Select was $5.28 lower at $244.94.

Wheat futures tapped the brakes Tuesday, helping Corn to a narrowly mixed close.

Corn futures closed mixed, mostly 1¢ lower to 1¢ higher.

Soybean futures closed 14¢ to 30¢ higher through Jan ‘23 and then mostly 1¢ lower to 2¢ higher.

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Major U.S. financial indices closed lower Tuesday, after trading higher earlier, in another volatile session driven by Russia’s war on Ukraine, worries about the economic impact and inflation.

The Dow Jones Industrial Average closed 184 points lower. The S&P 500 closed 30 points lower. The NASDAQ was down 35 points.

West Texas Intermediate Crude Oil Futures (CME) were up another $1.91 to $4.30 through the front six contracts with spot Mar closing at 123.70.

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Lighter-weight feedlot placements in recent months, and the incentive to place more at light weights, will likely widen the Choice-Select spread this summer, according to Brenda Boetel, Extension livestock economist at the University of Wisconsin-River Falls.

In the latest issue of In the Cattle Markets (ICM) from the Livestock Information Center, she explains the Choice-Select spread is typically narrowest January to March as the demand for Choice middle meats is the least of the year, while Choice supply is usually most plentiful. The spread usually widens heading into summer as the Choice supply declines, due to harvesting lighter-weight cattle, while grilling demand for Choice middle meats increases.

Although the highest percentage of cattle placed on feed at weights lighter than 700 lbs. usually occurs in November, Elliott Dennis, Extension livestock economist at the University of Nebraska-Lincoln pointed out in the previous ICM that feedlots want to place lighter cattle currently, amid higher feed prices, due to cattle performance and ultimately total feed consumed. He ran the numbers and concluded, “…assuming Average Daily Gain and Average Feed Conversion are constant, the only way to reduce total feed costs would be to reduce harvest weights.” And cattle placed at lighter weights tend to finish at lighter weights.

“This has two broad industry implications for the quantity and quality of beef production,” Dennis explained. “First, total quantity of beef production will likely decrease, putting upward pressure on boxed beef and thus retail beef prices in deferred months. Second, smaller carcass weights are associated with more cattle grading USDA Select. As more cattle grade USDA Select, the Choice-Select

spread will widen providing incentives to feed cattle longer to heavier harvest weights.”

The Choice-Select spread was almost $4.50/cwt. wider than the 2019-2021 average when the year began, according to Boetel.

“Seasonally, the Choice-Select spread will widen until late June/early July due to the supply/demand considerations for Choice and for Select beef,” Boetel explains. “However, given the higher percentage of lightweight cattle placed on feed since November, as compared to the 2019-2021 average lightweight percentage placed on feed, the Choice-Select spread will likely widen more than average. How wide the spread becomes is dependent on corn prices when cattle are placed, the percentage of cattle grading Choice, total amount of beef production, as well as beef demand.

“If we hold all those factors affecting Choice-Select spread at a constant level and allow only the percentage of beef grading Choice to change, the impact of a 1% change in cattle grading Choice, can have almost a 9% change in the spread. This means that since the average 2016-2020 spread was as wide as $22.45 in June, a decrease of 1% in Choice graded beef could widen that spread by another $2, providing some incentives to feed cattle longer and to heavier weights.”

Cattle futures reversed direction to the upside Monday, despite sharply lower outside markets and grain market strength tied to Russia’s attack on Ukraine. Positioning and bottom-picking likely explain much of the move, while underscoring the unaltered, positive supply fundamentals.

Feeder Cattle futures closed an average $1.86 higher ($1.12 to $2.55 higher).

Live Cattle futures closed average $1.44 higher (50¢ to $2.15 higher).

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

Live prices last week were at $140/cwt. in the Southern Plains and Nebraska; $142 in the western Corn Belt. Dressed prices were at $224-$225.

Wholesale beef prices added support with Choice Boxed beef cutout value 38¢ higher Monday afternoon at $254.71/cwt. and  Select $1.81 higher at $250.22.

Wheat futures continued to lead Corn futures mostly higher Monday. Kansas City Wheat futures were mostly 39¢ to 85¢ higher Monday, as rationing continues due to the war in Eastern Europe

Corn futures closed 9¢ to 18¢ higher, except for 3¢ and 7¢ lower in the front two contracts.

Soybean futures closed mostly 10¢ to 14¢ lower.

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Major U.S. financial indices closed sharply lower Monday, pressured by Russia’s war on Ukraine and worries about the impact on domestic and global economic growth.

The Down Jones Industrial Average closed 797 points lower. The S&P 500 closed 127 points lower. The NASDAQ was down 482 points.

West Texas Intermediate Crude Oil Futures (CME) were up another $2.96 to $3.72 through the front six contracts.

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Derrell Peel, Extension livestock marketing specialist at Oklahoma State University provides perspective about the market impacts stemming from Russia’s attack on Ukraine, in his weekly market comments.

“Both Ukraine and Russia are major grain producing and exporting countries. With the reality of current disruptions of grain movement from the Black Sea region and the uncertainty of what could happen, crop prices have soared, pushing high feed prices much higher,” Peel explains. “Just a few more weeks will determine whether crop planting in the Ukraine will be possible. All crop markets are higher, but the uncertainty is focused on the near term, pushing old crop futures higher relative to new crop contracts in the fall.”

Peel also points out Russia is a major oil producing and oil exporting country. Potential disruptions to global energy markets are contributing to sharply higher energy prices.

“Russia is also a major producer and exporter of fertilizer. These will add to inflationary pressures for production costs and are a threat to beef demand as higher gas prices directly impact consumers,” he says.

Then, there’s the domestic drought.

“In just a few weeks, the drought will begin to impact forage production and producers will face rapidly worsening production conditions and additional management and marketing challenges,” Peel says. “The supply fundamentals of the industry will continue to be supportive with cattle numbers decreasing and beef production declining this year. Beef demand has been strong up to this point, but clearly, there are more concerns about demand and input prices going forward. A war situation like this has no analog in recent history and there is no way to anticipate when or even if the situation will stabilize in the foreseeable future.”

Concerns about less corn and wheat exports from Ukraine and Russia, due to the war, continued to underpin futures prices Friday. As time wears on, there is also concern about fertilizer exports from the region.

Corn futures closed 5¢ to 8¢ higher, except for 10¢ to 29¢ higher from near Jly to next Mar.

Soybean futures closed mostly 7¢ to 8¢ lower.

Cattle futures sagged beneath the weight of escalating feed prices Friday.

Feeder Cattle futures closed an average of $2.47 lower (90¢ at the back to $3.27 lower toward the front).

Live Cattle futures closed an average of $1.53 lower (80¢ to $2.62 lower).

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

For the week, live prices were $2 lower in the Southern Plains at $140/cwt., $2-$4 lower in Nebraska at $140 and $1 lower in the western Corn Belt at $143. Dressed prices were $2-$3 lower at $224-$225.

The average five-area direct fed steer price was $2.64 lower week to week on Thursday at $140.76/cwt. The average steer price in the beef was $2.40 lower at $224.62.

Choice Boxed beef cutout value was 2¢ lower Friday afternoon at $254.33/cwt. Select was 62¢ higher at $248.41.

Estimated total cattle slaughter last week of 658,000 was 11,000 head more than the previous week but 8,000 head fewer than the same week last year. Estimated year-to-date total cattle slaughter of 5.83 million head is just 17,000 head fewer than the same time last year.

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Major U.S. financial indices closed lower Friday, amid continued pressure from Russia’s war on Ukraine, and despite a more positive jobs report than expected.

Total non-farm payroll employment rose by 678,000 in February, according to the U.S. Bureau of Labor Statistics, pushing the unemployment rate down to 3.8%. Average hourly earnings for private non-farm employees was static at $31.58.

The Down Jones Industrial Average closed 179 points lower. The S&P 500 closed 34 points lower. The NASDAQ was down 224 points.

West Texas Intermediate Crude Oil Futures (CMW) were up a staggering $7.31 to $8.01 through the front six contracts.

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Fundamental changes are transforming the beef supply chain from a just-in-time delivery model toward a just-in-case approach. Managing the costs associated with these changes may result in a shift of the historical live cattle and retail beef price ratio, according to a recent RaboResearch report.

“While a cattle producer has little or no control over what happens in the beef supply chain post-harvest, it will be important for livestock producers to be aware of changes occurring throughout the supply chain,” says report author, Don Close, senior animal protein analyst with Rabo AgriFinance. “Any changes, any inventory building, any additional controls and inspections could have a direct impact on the total cost of beef to the end user, which could change historical norms for live-to-wholesale and live-to-retail price spreads.”

Meat processors, distributors and retailers are striving to build supply resiliency into the beef supply chain and reduce the risk of another round of empty grocery store shelves in the future, according the report, which explores these major drivers:

1. Automation in packing plants to increase the efficiency of their labor force
2. Packaging that extends shelf life, is more durable for grocery delivery and meets sustainability expectations
3. Government and investor-led sustainability demands, which may require more documentation and verification methods throughout the supply chain
4. The transportation system’s technology and infrastructure overhaul that reduces carbon emissions and the risk for backlogs

The area of change with the greatest potential direct impact on cattle producers is meatpacking plants’ embedding more automation into their facilities, according to Rabo AgriFinance analysts. The report notes that the initial introduction of advanced technology will not serve as a replacement for labor, but will serve to make labor more efficient. However, the transformation toward greater automation will require a workforce with different skill sets or extensive retraining.

“The challenge of finding and retaining a ready workforce has increased labor costs to the tipping point where investments into technology, robotics and software advancements become economical,” Close explains. “Anything that de-risks packers from becoming a dam that slows the flow of market-ready cattle is a win for cattle producers.”