WLI

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.

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

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.

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

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.

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

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.

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

“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.

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

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.

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

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.

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

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.

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.

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

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.

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

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.

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

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.

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

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.