WLI

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 steady to $1 higher in the Texas Panhandle at $137and $1-$2 higher in Kansas at $137. Prices are steady to $1 higher in Nebraska at $137-$138. Although too few to trend, there were a few live trades in the western Corn Belt at $137, which was $1 lower. Dressed prices are steady at $218.

Cattle futures softened Thursday after follow-through support early in the session.

Live Cattle futures closed narrowly mixed, from an average of 17¢ lower in the front five contracts; unchanged to an average of 14¢ higher the rest of the way.

Feeder Cattle futures closed an average of 37¢ lower, except for unchanged to 75¢ higher in the back three contracts.

Choice Boxed beef cutout value was $1.38 higher Thursday afternoon at $292.98/cwt. Select was $1.75 higher at $282.18.

The average dressed steer weight the week ending Jan. 8 was 928 lbs., according to USDA’s Actual Slaughter Under Federal Inspection Report. That was the same as a week earlier but 5 lbs. heavier than the previous year. The average dressed heifer weight was 851 lbs., which was 4 lbs. lighter than the previous week and the same as a year earlier.

Weather in South America and tension between Russia and Ukraine continued to dominate grain market commentary Thursday.

Soybean futures closed 27¢ to 34¢ higher through the front four contracts and then mostly 9¢ to 15¢ higher.

Corn futures closed mostly 2¢ to 4¢ lower.

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Major U.S. financial indices rallied early in Thursday’s session but gave up the gains and more by the end of the day as investors come to grips with inflation and monetary tightening.

Seasonally adjusted initial unemployment insurance claims were 286,000 for the week ending January 15, according to the U.S. Department of Labor. That was 55,000 more than the previous week’s revised level. The four-week moving average was 231,000, an increase of 20,000 from the previous week’s revised average.

The Dow Jones Industrial Average closed 313 points lower. The S&P 500 closed 50 points lower. The NASDAQ was down 186 points.

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Retail beef prices moderated the last couple of months but continue at inflationary levels.

“December beef prices, all fresh and Choice, both declined for the second month in a row from record levels set in October. In December, the all fresh beef price was $7.35/lb., down 2.7% from the record price but 18.0% higher than a year ago,” say analysts with the Livestock Marketing Information Center (LMIC). “The December Choice beef price was $7.66/lb., down 3.0% from the October record price but 21.8% above a year ago. The round and sirloin in December were $7.34 and $11.05/lb., respectively, which was the third highest price for both cuts. Ground beef prices moved slightly lower from the prior month to $4.60/lb., which was the fourth highest on record and 16.5% above the prior year.”

In the latest Livestock Monitor, LMIC analysts explain the Food Consumer Price Index (CPI) in December was 6.3% higher year over year, the steepest annual increase since October 2008. The overall CPI was 7.0% higher, the most in about four decades.

“The Meat CPI rose 14.8% from a year ago, which slowed slightly from the prior month’s rate but is still at levels only seen during the pandemic and the late 1970’s,” LMIC analysts say.

The LMIC folks add that December pork prices were $4.74/lb., which was 15.0% more than a year earlier. The broiler composite retail price was record high at $2.22/lb., which was 10.4% more than the prior year.

Improving packer production — 117,000 head Tuesday — helped boost Live Cattle futures an average of $1.11 higher on Wednesday.

The uptick in Live Cattle, helped boost Feeder Cattle futures an average of 73¢ higher, except for 50¢ lower in spot Jan, despite surging Corn futures prices.

Grain futures surged on Wednesday, led by soybeans on weather concerns in South American and wheat based on mounting tension between Russia and Ukraine.

Soybean futures closed mostly 18¢ to 30¢ higher. 

Corn futures closed mostly 7¢ to 11¢ higher. 

Negotiated cash fed cattle trade was slow on light to moderate demand in the Southern Plains and Nebraska through Wednesday afternoon, according to the Agricultural Marketing Service.

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

Choice Boxed beef cutout value was $2.11 higher Wednesday afternoon at $291.60/cwt. Select was $2.04 higher at $280.43.

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Major U.S. financial indices continued to step lower Wednesday amid worries about inflation, higher input costs and higher interest rates.

The Dow Jones Industrial Average closed 339 points lower. The S&P 500 closed 44 points lower. The NASDAQ was down 166 points.

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USDA’s Economic Research Service (ERS) increased the projected annual feeder steer price (750-800 lbs., Oklahoma City) for this year to $160/cwt., in the latest monthly Livestock, Dairy and Poultry Outlook. That’s $1 higher than the previous month’s estimate and would be $13.05 more than last year’s annual estimate. ERS analysts note the feeder steer price for the week ending Jan. 10 was $156.65/cwt., up 14.2%, or $19.13.

Feeder steer prices are projected at $159 in the first quarter, $156 in the second quarter, $160 in the third quarter and $165 in the fourth quarter.

On the other end of the scale, the five-area direct average fed steer price in December was $30.31 more (+27.8%) than a year earlier at $139.36/cwt. From August through December the average price was $14.91 (+12.0%) more than the same period a year earlier, according to ERS. The trend continued into the new year with the average price the week ending Jan. 9 up $27.14 (+24.4%) from a year earlier at $138.41.

As mentioned in Cattle Current recently, based on expected continued packer demand strength, ERS increased the forecast annual five-area direct average fed steer price for this year to $136.75/cwt.

The average fed steer price was forecast at $139 in the first quarter, $136 in the second quarter, $134 in the third quarter and $138 in the fourth quarter.

Keep in mind the more optimistic price projections come with slightly higher expectations of beef production.

“Given the anticipated rise in fourth-quarter net placements, fed cattle marketings and fed cattle slaughter expectations are raised in the second quarter, and coupled with a stronger expected pace of marketings in the second half of the year, the beef production forecast is raised for 2022. The forecast for 2022 beef production was raised to 27.165 billion lbs., up 165 million lbs. from last month,” say ERS analysts.

Uncertainty about the pace of packer production continued to weigh on Live Cattle futures Tuesday, as wholesale beef prices continue to climb for the same reason. Sharply lower outside markets added to bearish sentiment.

Live Cattle futures closed an average 37¢ lower.

Choice Boxed beef cutout value was $1.63 higher Tuesday afternoon at $289.49/cwt. Select was $1.34 higher at $278.39.

Feeder Cattle futures drifted lower with the lack of support from the Live side. They closed an average 62¢ lower (20¢ lower at the back to $1.25 lower at the front).

Negotiated cash fed cattle trade was slow on light to moderate demand in Nebraska through Tuesday afternoon, according to the Agricultural Marketing Service. Although too few transactions to trend, early trade was steady at $137/cwt. on a live basis and $128 in the beef.

Elsewhere, trade ranged from mostly inactive on light demand to a standstill.

Last week, live prices were at $136-$137 in the Texas Panhandle, $135-$136 in Kansas and $138 in the western Corn Belt, where dressed trade was at $218.

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Major U.S. financial indices closed sharply lower Tuesday as investors fretted over anemic bank earnings and higher treasury bond yield rates.

The Dow Jones Industrial Average closed 543 points lower. The S&P 500 closed 85 points lower. The NASDAQ was down 386 points.

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Hay production and stocks continue lower, according to the most recent USDA Crop Production  report.

All hay stocks Dec. 1 of 79.0 million tons was 5.0 million tons less (-6.0%) than the same time a year earlier.

“Drought stricken Western states saw the most notable declines in hay stocks,” say analysts with the Livestock Marketing Information Center, in the latest Livestock Monitor (LMIC). “Oregon, Montana, North Dakota, South Dakota, and Arizona all posted declines in hay stocks over 40% from the prior year. Minnesota was down 35% while Wyoming, Utah, and California reported declines between 20%-27%. Nevada, Colorado, New Mexico, Texas, Oklahoma, and Nebraska all posted 4%-28% increases from a year ago.”

In terms of production, LMIC analysts explain, all hay acres in 2021 declined 2.9% to nearly 50.7 million acres, which was the lowest since 1974.

“Alfalfa hay prices have been over $200 per ton for the last five months while other hay prices have averaged in the upper $140-per-ton range for the last several months,” say LMIC analysts. “Although recent alfalfa and other hay prices are not at record levels, they are still near some of the highest on record. Hay supplies will continue to be lower, especially in the Western U.S., and hay prices are expected to remain elevated which will likely limit livestock producer profitability in the near term.”

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

Last week, live prices were at $136-$137/cwt. in the Texas Panhandle, $135-$136 in Kansas, $137 in Nebraska and $138 in the western Corn Belt. Dressed trade was at $218.

Choice Boxed beef cutout value was $3.55 higher Monday afternoon at $287.86/cwt. Select was $3.08 higher at $277.05.

Futures and equity markets were closed Monday in observance of Martin Luther King Day.

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When Jan. 1 cattle inventory numbers are released by USDA at the end of this month, odds are they will show continued contraction of the U.S. beef cow herd; the degree is up in the air, though.

“The general feeling among analysts seems to be that the herd likely decreased 1.5-2.0% in 2021, with some possibility that the decrease was over 2%,” said Derrell Peel, Extension livestock marketing specialist at Oklahoma State University in his mid-January market comments, “The level of beef cow slaughter in 2021 was up 9.1% year over year, leading to a culling rate of 11.44% for the year, the highest since 2011. In 2011, the beef cow herd decreased 2.04%. However, the net change in the beef cow herd in 2021 also depends on what happened with beef replacement heifers.”

At the beginning of last year, beef replacement heifers represented 18.7% of the beef cow herd, according to Peel. 

“This level of replacement heifers indicates neither significant herd liquidation nor does it suggest aggressive expansion,” Peel says. “In the last two decades, the beef replacement heifer percentage has varied from a low of 16.6% in 2011 (liquidation) to a high of 21.0% in 2016 (expansion) and has averaged 18.2%.”

Last year, Peel explains the inventory of replacement heifers was higher than in 2011, as was the inventory of heifers calving.

“This likely means that some of the additional cow culling in 2021 was offset by more bred heifers entering the herd,” Peel explains. “The heifer calves portion of the replacement heifers from one year ago may well have been diverted to feeder markets but many of the sizable inventory of bred heifers likely entered the herd somewhere. All of this discussion is complicated by the drought conditions in 2021, which impacted what producers had to do as opposed to what they would like to do.”

Most likely, Peel says the inventory of beef replacement heifers will be significantly lower.

Negotiated cash fed cattle trade ranged from very limited on light demand to a standstill through Friday afternoon, according to the Agricultural Marketing Service. There were too few transactions to trend.

For the week, live prices were $1-$2 lower in the Texas Panhandle at $136-$137/cwt. and $135-$136 in Kansas. They were $1-$3 lower in Nebraska at $137 and steady to $3 lower in the western Corn Belt at $137-$138. Dressed trade was $2 lower at $218.

Week to week through Thursday, the five-area direct average steer price was $2.00 lower on a live basis at $136.58/cwt. The average price in the beef was $2.00 lower at $217.99.

Estimated total cattle slaughter last week was 621,000 head, just 1,000 head more than the previous week and 31,000 head fewer than the same week last year.

Live Cattle futures closed an average of 59¢ higher, except for unchanged and 37¢ lower in the back two contracts, supported by climbing wholesale beef prices.

Choice Boxed beef cutout value was $1.84 higher Friday afternoon at $284.31/cwt. Select was $1.21 higher at $273.97.

Feeder Cattle futures closed narrowly mixed, from an average of 23¢ lower to an average of 5¢ higher with pressure from front-month Corn futures.

Corn futures closed fractionally higher to 8¢ higher in the front six contracts, and then mostly 5¢ to 6¢ lower. 

Soybean futures closed 8¢ to 13¢ lower. 

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Major U.S. financial indices closed mixed Friday with primary pressure apparently from lower than expected earnings for bank stocks and less retail growth last month. 

Advance estimates of U.S. retail and food services sales for December 2021, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $626.8 billion, a decrease of 1.9% from the previous month, according to the U.S. Census Bureau.

The Dow Jones Industrial Average closed 200 points lower. The S&P 500 closed 3 points higher. The NASDAQ was up 86 points.

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“Average returns to cattle feeding in the Southern Plains, as calculated by LMIC (Livestock Marketing Information Center) jumped to $200 per steer in December, capping off the year with two months of returns well over $100. This boosted the 2021 average for the year solidly in positive territory, about $40 per head for the year,” say LMIC analysts in the latest Livestock Monitor.

Positive returns stemmed from the significant rally in fed cattle prices, given the increased input costs.

“LMIC assumes a six-month feeding window for a 750-lb. steer. Feeder cattle averaged $143.35/cwt. in June. LMIC estimated total production costs for feeding those animals increased 32% from last year (excluding cost of the feeder), from just under $500 in December 2020 to over $600 in December of 2021. Over that same time period the value of that fed steer rose 26%.”

Heading into 2022, LMIC analysts note that increasing feeder cattle prices will challenge cattle feeding returns, but they expect returns to be mostly positive.

For recent perspective, LMIC estimates a fed steer breakeven price of $133.03/cwt. for steers placed in December weighing 700-800 lbs. and costing $161.42 (Dodge City).

“Currently, LMIC forecasts for the Apr-May-Jun quarter are above that level at $135-139/cwt., but the summer quarter is below that level at $126-$131. It seems likely that cattle feeding returns will likely be positive for most of 2022, but that there may be some negative months in the third quarter that will keep the annual average in check,” LMIC analysts say.