WLI

Higher outside markets and lower Corn futures, both due in part to less geopolitical tension in Eastern Europe, helped fuel gains in Cattle futures Tuesday.

Live Cattle futures closed an average of 52¢ higher.

Feeder Cattle futures closed an average $1.47 higher.

Corn futures closed 10¢ to 17¢ lower through the front four contracts and then mostly 5¢ to 8¢ lower.

Soybean futures closed mostly 9¢ to 18¢ lower through Jan ’23 and then 3¢ lower to 3¢ higher.

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

Last week, live prices were at $140/cwt. in the Southern Plains and Nebraska; $140-$142 in the western Corn Belt. Dressed trade was at $224.

Choice Boxed beef cutout value was $3.59 lower Tuesday afternoon at $270.37/cwt. Select was 93¢ lower at $267.82.

******************************

Easing tensions between Russia and Ukraine, at least for the day, seemed to be the primary driver behind sharply higher major U.S. financial indices Tuesday.

The Dow Jones Industrial Average closed 422 points higher. The S&P 500 closed 69 points higher. The NASDAQ was up 348 points.

Crude Oil futures (WTI-CME) were $3.10 to $3.39 lower through the front six contracts.

******************************

USDA’s Economic Research Service (ERS) increased expectations for feeder cattle prices this year, in the latest Livestock Dairy and Poultry Outlook.

Although projected prices were reduced $1 to $158/cwt. in the first quarter, they were increased $2 for the remainder of the year to $158 in the second quarter, $162 in the third quarter and $167 in the fourth quarter. The estimated annual price for feeder steers (750-800 lbs., Oklahoma City) increased $1.25 to $161.25.

ERS analysts note, prices at Oklahoma National Stockyards in January were $23.84 more (+17.8%) than a year earlier at $157.78.

As noted in Cattle Current recently, ERS also increased the projected five-area direct average fed steer prices for this year to $137.50.

“Compared to last year, beef cattle producers are indicating their intentions to retain 3% fewer heifers for beef cow replacement, with the largest reductions in Texas (-110,000 head) and Montana (-50,000 head),” say ERS analysts, referring to the Jan. 1 inventory. “The number of heifers expected to calve during the year is also down 3%. The lower number of heifers retained implies that the national herd is unlikely to expand. A similar pattern is reflected on the dairy side, with milk cow numbers down 1% and heifers for milk-cow replacement down 3%.” 

There were 719,000 fewer beef cows at the beginning of this year than the previous year, according to the Cattle report. Deepest liquidation occurred in South Dakota (-189,000), Texas (-160,000), Missouri (-94,000), and Montana (-90,000 head).

“Poor pasture and range conditions were the primary causes of this contraction in the West and Plains regions,” ERS analysts say. “Hay stocks Dec. 1, 2021, were also down 6% from a year ago, and tight supplies in parts of the country may have influenced producers’ ability to maintain cow herds.”

Last week’s stouter packing pace and higher cash prices helped Cattle futures edge higher Monday.

Feeder Cattle futures closed an average 57¢ higher except for unchanged in the back contract.

Live Cattle futures closed an average of 28¢ higher except for unchanged in Dec.

Negotiated cash fed cattle trade was at a standstill in all major feeding regions through Monday afternoon, according to the Agricultural Marketing Service.

Last week, live prices were at $140/cwt. in the Southern Plains and Nebraska; $140-$142 in the western Corn Belt. Dressed trade was at $224.

The five-area direct weighted average steer price last week was 72¢ higher than the previous week at $140.48/cwt. on a live basis. The average steer price in the beef was $2.25 higher at $224.04.

Choice Boxed beef cutout value was 56¢ lower Monday afternoon at $273.96/cwt. Select was 92¢ higher at $268.75.

Corn futures closed mostly 3¢ to 5¢ higher.

Soybean futures closed mostly 1¢ to 13¢ lower through near Nov and then mostly 2¢ to 4¢ higher.

******************************

Major U.S. financial indices continued lower Monday amid continued jitters about steeper inflation and tensions between Russia and Ukraine.

The Dow Jones Industrial Average closed 171 points lower. The S&P 500 closed 16 points lower. The NASDAQ was fractionally lower.

Crude Oil futures (WTI-CME) were $1.08 to $2.36 higher through the front six contracts.

******************************

“Significant drought in 2022 will have more noticeable impacts on cow markets, will change the timing of feeder cattle and ultimately feedlot production, and will have more implications for the industry in subsequent years,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University. “There is potential for the drought to push cattle inventories significantly lower than planned and set up a market reaction similar to 2014-15 in the next couple of years.”

In his weekly market comments, Peel explains the Climate Prediction Center’s drought outlook suggests drought may persist in regions of the west and northern plains that have been in drought, although there has been some improvement in the Northwest. As well, developing drought in the Southern Plains could expand to the Central Plains.

“Widespread drought in 2022 could result in much more pronounced cow herd liquidation and relocation than previously and the scenario will be all about what we have to do,” Peel says. “There will be little flexibility in regions that were in drought in 2020 and 2021. For example, Dec. 1 hay stocks in the four-state region of Montana, Wyoming, North and South Dakota were down 40.2% year over year. By April or May this predominantly spring-born calving region could be faced with significant additional liquidation of cows or cow-calf pairs on top of the 8.0% herd liquidation in this region since 2020. This region represents 15.1% of the national beef cow herd.”

Drought has gripped the four-state region of Colorado, New Mexico, Arizona and Utah since 2020, as well with 11.6% beef cow herd liquidation in the past two years, according to Peel. He adds the region represents 5.3% of the nation’s beef cow herd and could see additional liquidation if drought persists this year.

“Drought has expanded sharply in Texas and Oklahoma over the winter; a region that has seen just 1.1% herd liquidation since 2020,” Peel says. “Much of that was general cyclical liquidation rather than drought induced. Dec. 1 hay stocks in these two states were up 18.7% year over year. The Southern Plains region should emerge from winter with a bit more flexibility, and with more fall calving, might not face critical herd liquidation and de-stocking decisions as quickly as some other regions.  Nevertheless, cow culling could accelerate sharply in the region by mid-summer. These two states represent 21.9% of the total beef cow herd.”

Finally, Peel says beef cow numbers declined 3.3% the past two years in Kansas and Nebraska, where 10.8% of the beef cow herd exists and where drought impacts have been marginal so far. Although Dec. hay stocks were 4.9% higher in the region year over year, should drought develop significantly, he says it would likely prompt significant herd liquidation in the Central Plains by the summer.

“Drought in all of the above regions could impact over 53% of the total beef cow herd…roughly 16 million cows,” Peel says.

Cattle futures continued to soften Friday, perhaps with some follow-through profit taking and with surging Corn futures and sharply lower outside markets.

Feeder Cattle futures closed an average 60¢ lower.

Live Cattle futures closed mixed from an average of 49¢ lower to an average of 35¢ higher.

Negotiated cash fed cattle trade ranged from limited on light demand to a standstill through Friday afternoon, according to the Agricultural Marketing Service.

For the week, live prices were steady to $1 higher in the Southern Plains at $140/cwt., steady to $2 higher in Nebraska at $140 and $1-$2 higher in the western Corn Belt at $141-$142. Dressed trade was $2-$4 higher at $224.

Choice Boxed beef cutout value was 37¢ lower Friday afternoon at $274.52/cwt. Select was $1.12 lower at $267.83.

Total estimated cattle slaughter last week of 659,000 head was 20,000 head more than the previous week and 53,000 head more than the previous year. Year-to-date estimated total cattle slaughter of 3.83 million head is 120,000 head fewer (-3.0%) than the same period last year.

Corn futures closed 9¢ to 10¢ higher through Jly ‘23 and then most 4¢ higher.

Soybean futures closed mostly 9¢ to 11¢ higher.

******************************

Major U.S. financial indices continued to scale lower Friday with follow-through pressure from the previous day’s report of steeper inflation, as well as growing fears about Russia invading Ukraine, which fueled a surge in crude oil prices.

The Dow Jones Industrial Average closed 503 points lower. The S&P 500 closed 85 points lower. The NASDAQ was down 394 points.

Crude Oil futures (WTI-CME) were $1.75 to $3.22 higher through the front six contracts.

******************************

“Cattle producers and traders appear to be extremely optimistic as it relates to cattle prices,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. He notes input prices are the key concern currently.

“The question to answer is how expensive it is going to be to feed cattle in 2022. Animals can either be fed with purchased feed or with pasture and hay, which is dependent on fertilizer. It is clear purchased feed remains elevated near $270 per ton while a unit of nitrogen is likely to cost $1,” Griffith says. “The failure to apply fertilizer will likely result in reduced hay and pasture yields. The decision becomes to purchase feed, purchase fertilizer, reduce the stocking rate, or overgraze pastures.”

For cow/calf producers, Griffith says current cull cow prices may provide some of the solution.

“Slaughter cow prices are strong and continue to increase, which means this may be a good year for producers to market older cows, poor temperament cows, and low producing cows,” Griffith explains. “The salvage value and reduced pressure on pasture from marketing these animals may prove to be extremely valuable. Looking into the next few months, calf and slaughter cow prices are expected to continue increasing as will feeder cattle prices. There is no way to know if prices will reach or exceed levels being predicted by the futures market, but the futures market is offering some hedging opportunities for those interested.”

Cattle futures started the session with optimism but eroded as the day wore on with likely pressure from profit taking and lower outside markets.

Live Cattle futures closed an average of 77¢ lower.

Feeder Cattle futures closed an average of $1.23 lower (82¢ to $1.87 lower).

Negotiated cash fed cattle trade was light to moderate on moderate demand in Nebraska through Thursday afternoon, according to the Agricultural Marketing Service. Dressed trade was $2 higher at $224/cwt. Live prices a day earlier were steady to $2 higher at $140.

Trade in the western Corn Belt was limited on light demand. There were a few live sales at $141-$142, but too few to trend. Prices last week were $140 on a live basis and $220-$222 in the beef.

In the Southern Plains, trade was limited on light demand. Live prices a day earlier were at $140.

Choice Boxed beef cutout value was 97¢ lower Thursday afternoon at $274.82/cwt. Select was $3.10 lower at $268.95.

Corn futures closed mostly 3¢ to 5¢ lower.

Soybean futures closed 10¢ to 20¢ lower in the front five contracts and then 5¢ to 15¢ lower.

******************************

Major U.S. financial indices caved Thursday beneath the weight of steeper inflation than expected and fears of more aggressive rate increases by the Fed.

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.6% in January on a seasonally adjusted basis, according to the U.S. Bureau of Labor Statistics. Over the last 12 months, the all items index increased 7.5% before seasonal adjustment. That’s the stoutest 12-month increase since the period ending February 1982.

The Dow Jones Industrial Average closed 526 points lower. The S&P 500 closed 83 points lower. The NASDAQ was down 304 points.

******************************

U.S. beef exports shattered previous volume and value records in 2021, surpassing $10 billion for the first time, according to year-end data released by USDA and compiled by the U.S. Meat Export Federation (USMEF).

December beef exports totaled 121,429 metric tons (mt), up 1% from a year earlier, while value climbed 33% to $991.8 million – the third largest month on record. These results pushed 2021 volume to 1.44 million mt, up 15% from a year ago and 7% above the previous record set in 2018. Export value soared to $10.58 billion, up 38% from 2020 and shattering the previous record (2018) by 27%.

“The beef export results are truly remarkable, especially considering the COVID-related obstacles in the global foodservice sector and all the supply-side and logistical challenges faced by the U.S. industry,” says Dan Halstrom, USMEF President. “Obviously, our large Asian markets accounted for much of the growth, but it really takes broad-based global demand to reach these impressive levels. So this success story is not just about Korea, Japan and China – but also a strong performance in Taiwan, excellent growth in Central and South America and a rebound in Mexico and Southeast Asia.”

Beef export value per head of fed slaughter equated to a record $407.22 in 2021, up 35% from the previous year. Exports accounted for 15% of total beef production and 12.8% for muscle cuts only, up significantly from the respective 2020 ratios of 13.5% and 11.3%.

Japan was once again the leading volume destination for U.S. beef exports in 2021 at 320,737 mt, up 5% from 2020 and the second largest of the post-BSE era. Export value climbed 22% to a record $2.376 billion, but finished a close second to South Korea.

Beef exports to Korea, Japan and China/Hong Kong each exceeded $2 billion, setting new volume and value records in Korea and China/Hong Kong and the value record in Japan. Exports also set a new value record in Taiwan and reached new heights in Central America, Colombia and Indonesia. Global exports of U.S. beef variety meat also set a new value record of $1.09 billion, up 24% year-over-year.

Cattle futures extended gains Wednesday, supported by firmer cash prices and the beef supply and price outlook provided by the World Agricultural Supply and Demand Estimates (see below).

Live Cattle futures closed an average of $1.04 higher (30¢ higher at the back to $1.65 higher toward the front).

Feeder Cattle futures closed an average of 71¢ higher.

Negotiated cash fed cattle trade was slow on light demand in the Southern Plains through Wednesday afternoon, according to the Agricultural Marketing Service. Live prices were steady in the Texas Panhandle at $140/cwt. and steady to $1 higher in Kansas at $140.

Elsewhere, trade was limited on light demand with too few transactions to trend. Last week, live prices were $140 on a live basis in Nebraska and the western Corn Belt. Dressed prices were $222 in Nebraska and $220-$222 in the western Corn Belt.

Choice Boxed beef cutout value was $1.67 lower Wednesday afternoon at $275.79/cwt. Select was $1.79 lower at $272.05.

Corn futures closed 10¢ to 14¢ higher in old-crop contracts and then mostly 6¢ to 9¢ higher.

Soybean futures closed 20¢ to 25¢ higher in the front eight contracts and then mostly 14¢ higher.

******************************

Major U.S. financial indices closed sharply higher Wednesday, led by tech stocks and on positive quarterly corporate earnings reports.

The Dow Jones Industrial Average closed 305 points higher. The S&P 500 closed 65 points higher. The NASDAQ was up 295 points.

******************************

USDA’s Economic Research Service (ERS) left corn prices unchanged and raised expectations for fed cattle prices in the monthly World Agricultural Supply and Demand Estimates (WASDE).

ERS increased the expected annual average five-area direct fed steer price 50¢ from the previous month to $137.50/cwt., on firm packer demand.

Prices are projected at $139 in the first quarter, $136 in the second quarter, $135 in the third quarter and $140 in the fourth quarter.

Beef production this year is projected to be 27.4 billion lbs., slightly higher than the previous month. The total would be 562 million lbs. less (-2.0.%) than last year.

“The beef production forecast is raised from the previous month as larger expected placements during first-half 2022 are marketed in the latter half of the year,” explain ERS analysts. “However, the increase in fed cattle slaughter is partly offset by lower non-fed cattle slaughter.”

Total red meat and poultry production this year is forecast to be 106.6 billion lbs., which would be 183 million lbs. less than last year (-0.2%).

Corn

U.S. corn supply and use (2021-22) was unchanged from the previous month.

The season-average farm price was unchanged at $5.45/bu.

Soybeans

The 2021-22 U.S. soybean outlook is for increased soybean crush and lower ending stocks.

The U.S. season-average soybean price was forecast at $13.00/bu., up 40¢ from last month, partly reflecting the impact of drought in South America. The soybean meal price was forecast at $410.00/short ton, up $35. The soybean oil price forecast was raised 1¢ to 66.0¢/lb.

Wheat

The outlook for 2021-22 U.S. wheat was for stable supplies, lower domestic use, reduced exports, and higher ending stocks.

Projected 2021-22 ending stocks were raised 20 million bu. to 648 million but they still would be 23% lower than last year. The projected season-average farm (SASP) price for wheat was raised 15¢/bu. to $7.30 on NASS prices reported to date and expectations for cash and futures prices for the remainder of 2021-22. This would be the highest SAFP since 2012-13.