WLI

Cattle futures stepped higher Tuesday, helped along by follow-through support from the friendly Cattle on Feed report, as well as early indications of cash prices pushing past steady this week and wholesale beef prices turn seasonally higher.

Feeder Cattle futures closed an average of $1.33 higher (35¢ to $2.05 higher).

Those gains came despite Corn futures closing mostly 3¢ to 5¢ higher.

Soybean futures closed mostly fractionally higher to 2¢ higher.

Live Cattle futures closed an average of $1.48 higher.

Negotiated cash fed cattle trade was slow on light demand in the Texas Panhandle through Tuesday afternoon, according to the Agricultural Marketing Service. Prices were mainly steady with last week at $124/cwt., but a few traded $1 higher at $125.

Elsewhere, trade ranged from mostly inactive on light demand to a standstill with too few transactions to trend.

Last week, live prices were $124 in Kansas and $124-$125 in Nebraska and the western Corn Belt. Dressed prices were $196.

Choice boxed beef cutout value was $1.72 higher at $284.76/cwt. Select was 65¢ lower at $262.54.

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Major U.S. financial indices edged higher Tuesday, fueled once again by strong corporate quarterly earnings reports. Consumer confidence added luster.

The Conference Board Consumer Confidence Index® increased to 113.8 in October from 109.8 in September.

“Consumer confidence improved in October, reversing a three-month downward trend as concerns about the spread of the Delta variant eased,” says Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “While short-term inflation concerns rose to a 13-year high, the impact on confidence was muted. The proportion of consumers planning to purchase homes, automobiles, and major appliances all increased in October—a sign that consumer spending will continue to support economic growth through the final months of 2021. Likewise, nearly half of respondents (47.6%) said they intend to take a vacation within the next six months—the highest level since February 2020, a reflection of the ongoing resurgence in consumers’ willingness to travel and spend on in-person services.”

The Dow Jones Industrial Average closed 15 points higher. The S&P 500 closed 8 points higher. The NASDAQ was up 9 points.

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“While the incentives to retain cattle and put on additional weight appear to be present this year in some locations, producers must calculate their operations’ value and cost of gain to determine if it is a correct decision,” says Elliott Dennis, Extension livestock economist at the University of Nebraska-Lincoln. “Using some form of risk management could be appropriate given the assumptions about volatility and price certainty.”

In the latest issue of In the Cattle Markets from the Livestock Marketing Information Center, Dennis explains feed costs and beef demand are two factors that could take the shine of what currently appear to be price trends conducive for cow-calf producers to retain cattle for longer this fall.

Although projected corn production is more than expected just a couple of months ago, the forecast season-average price of $5.45/bu. is significantly higher than last year, as are other feeds. Drought raised the price floor beneath forage and hay prices. Odds favor La Nina conditions through the winter, which point to similar temperature and moisture conditions as last year.

“If this weather forecast materializes, then the price for grass and hay will continue to rise, pasture rental rates adjust higher and likely continue the cow herd liquidation this has persisted over the last three years,” Dennis says. “…Some feeding regions are coming off two years of drought conditions and many producers have already sold off both feeder cattle and parts of the cow herd.”

 As for beef demand, Dennis says there are early indications that higher beef prices are creating consumer reluctance to continue buying at the same pace.

“Beef exports have started to slow from their record-setting pace and as of yet, there are few advanced purchases for beef into 2022. This is one indication that the export markets have started to potentially move away from higher-priced U.S. beef,” Dennis explains. “In the domestic market, advanced purchases of wholesale beef from retail stores have also started to slow, indicating that perhaps domestic retailers are more willing to live in the cash market and then adjust featured products in the short run. This is perhaps one of the first signs that the price of beef is just too high for retailers to take any longer.”

Cattle futures found traction Monday from the friendly Cattle on Feed report.

Feeder Cattle futures closed an average of $1.25 higher, except for 20¢ higher in waning spot Oct.

Live Cattle futures closed an average of 92¢ higher.

Corn futures closed mostly marginally higher.

Soybean futures closed 9¢ to 16¢ higher.

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.

Last week, trade was at $124.00/cwt. on a live basis in the Southern Plains and mainly $124-$125  in Nebraska and the western Corn Belt. Dressed trade was at $196.

Choice boxed beef cutout value was $1.22 higher Monday afternoon at $283.04/cwt. Select was 8¢ higher at $263.19.

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Major U.S. financial indices closed higher Monday, propelled by strong quarterly corporate earnings reports from tech heavyweights. The S&P 500 reached an all-time high, buoyed by consumer discretionary, energy and materials sectors. Crude oil reached $85/barrel for the first time since 2014.

The Dow Jones Industrial Average closed 64 points higher. The S&P 500 closed 22 points higher. The NASDAQ was up 137 points. 

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“Following the ripple effects of last year’s pandemic volatility, it appears that feedlot production has moved past the cyclically peak numbers and will decrease consistently going forward,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. He was talking about the most recent Cattle on Feed report published Friday.

“These numbers indicate that feedlots are front-loaded with heavy cattle and will remain so for a few more weeks, likely into December. This explains much of the inability of the fed cattle market to move into the tighter numbers needed to break out of current levels. However, the September placements show a very different picture ahead,” Peel explains.

Although cattle on feed Oct. 1 of 11.55 million head was 1.4% less than the previous year at 11.55 million head, the number was the second largest for the date since the data series began in 1996.

On the other hand, September placements were 2.9% less year over year and about 4% less than expected.

“Placements under 600 lbs. were down 1.2% year over year and placements over 800 lbs. were down 5.3%, including a 7.4% year-over-year decrease in placements over 900 lbs. The implication is that, while it is taking longer than expected to turn the corner on tighter feedlot numbers, the change may be relatively sudden and dramatic when it does arrive,” Peel explains. “Feedlots have responded to higher costs of gain by focusing more on heavy placements as long as possible. However, the overall decline in cattle numbers and the seasonal dynamics of fall placement weights should result in a rapidly changing feedlot situation by December and into 2022.”

Cash cattle price were generally mixed to steady last week as more calves make their way to town and as fed cattle keep slugging for extra traction.

“Seasonal weakness in the calf market is evident as producers have been setting wheels under calves the past several weeks at a rapid pace,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “…As more calves make their way to the market, stocker producers become more selective in the cattle they will pay a premium for. Freshly-weaned calves tend to have an increased incidence of sickness this time of year as weaning stress is compounded by large temperature swings. From the stocker perspective, there is an opportunity to profit on calves being purchased and sold in truckload lots. The value of gain for an October purchase of a 525-pound steer and the sale of an 825-pound steer in March is $1.42 per pound with a 5% death loss. That is favorable math.”

Feeder Cattle futures closed an average of $1.99 lower on Friday (83¢ to $2.68 lower). Week to week, they were an average of $2.54 lower, amid profit taking from recent gains, slack interest, stagnant cash prices and skittishness about the monthly Cattle on Feed report. They received added pressure from resurgent Corn futures, which closed an average of 11¢ higher through the front six contracts week to week on Friday, with strong export demand.

However, Feeder Cattle perked up on Monday in response to the Cattle on Feed report. More on those numbers momentarily.

As mentioned in Cattle Current last week, in the monthly Livestock, Dairy and Poultry Outlook, ERS increased the projected annual average feeder steer price for next year by 50¢ to $155.50, based on expectations of tighter feeder cattle supplies in the second half of the year. Prices are forecast to average $153.00 in the first quarter, $151 in the second and $156.00 in the third quarter.

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Although there was some uptick on live prices in the North, negotiated cash fed cattle prices last week were mainly steady.

Regionally, trade last week, trade was at $124.00/cwt. on a live basis in the Southern Plains, $124.00-$126.50 in Nebraska and $124-$125 in the western Corn Belt. Dressed trade was at $196.

The five-area average direct fed steer price was 55¢ higher at $124.39/cwt. The average five-area price in the beef was 29¢ higher at $195.99.

“Cattle feeders and the industry have to be expecting prices to break one way or the other,” Griffith explains. “They will certainly do it, but the timing of such a price movement is becoming more difficult to decipher with week-after-week of steady prices.”

Live Cattle futures closed an average of $1.41 lower week to week on Friday, except for 5¢ higher in the back contract.

ERS projected the annual average fed steer price for next year at $128.75, compared to this year’s expected average of $121.06. Average prices are forecast at $130.00 in the first quarter, $128 in the second and $126.00 in the third quarter.

In the meantime, wholesale beef prices continue to show signs of turning the seasonal corner. Choice boxed beef cutout value was $1.58 higher week to week on Friday at $281.82/cwt. Select was $2.49 higher at $263.11.

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Major U.S. financial indices closed mixed on Friday. Tech stocks were pressured by Snap Inc. issuing a warning on ad spending, which took more than $100 billion in market value from various social media companies.

Also pressuring stocks was Fed a warning from Federal Reserve Chair Powell  that U.S. inflation is likely to last into next year and that it was, “time to taper.”  Overt the weekend, Treasury Secretary Janet Yellen echoed Powell, saying she expected inflation to remain through mid-year 2022.

The Dow Jones Industrial Average closed 74 points higher. The S&P 500 closed 5 points lower. The NASDAQ was down 126 points.

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For feedlots with 1,000 head or more capacity, according to the latest Cattle on Feed report, there were 2.16 million head placed in September, which was 64,000 fewer year over year (-2.9%). That was 4.1% fewer than the average of analyst estimates ahead of the report.

Marketing’s in September of 1.79 million head were 3.1% less than a year earlier, which was 0.4% less than average estimates.

Cattle on feed Oct. 1 of 11.55 million head was 167,000 head fewer than the previous year. That was 1.43% less. Average estimates ahead of the report saw a decline of 0.5%. The total was the second largest for the date since the data series began in 1996.

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

So far this week, live prices are steady in the Southern Plains at $124/cwt., steady to $2.50 higher in Nebraska at $124.00-$126.50 and steady to $1 higher in the western Corn Belt at $124-$125. Dressed prices are steady at $196.

Cattle futures closed mixed Thursday.

Live cattle were down an average of 63¢ lower on likely profit taking, pressure from Lean Hogs and positioning ahead of Friday’s Cattle on Feed report. Feeder Cattle managed to close narrowly mixed.

Feeder Cattle futures closed narrowly mixed, from an average of 36¢ lower to an average of 19¢ higher.

Choice boxed beef cutout value was 63¢ higher at $280.66/cwt. Select was 8¢ lower at $262.72/cwt.

As for grains, Corn and soybean futures closed lower Thursday beneath the weight of profit taking and lower crude oil prices.

Corn futures closed mostly 4¢ to 7¢ lower.

Soybean futures closed mostly 18¢ to 21¢ lower.

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Major U.S. financial indices closed mainly higher Thursday. Support included fewer weekly jobless claims than the trade expected. Initial weekly unemployment claims for the week ending Oct. 16 was 290,000, according to the U.S. Department of Labor. That was 6,000 fewer than the previous week and the lowest level since March 14 last year.

The Dow Jones Industrial Average closed 6 points lower. The S&P 500 closed 13 points higher. The NASDAQ was up 94 points.

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Slaughter data continues to suggest beef cow herd liquidation.

“The cow herd is in contraction mode this year as the drought and tough economical factors have made ranchers think of ways to keep the cow herd together,” according to analysts with the Agricultural Marketing Service. “Preliminary data from NASS puts the beef cow slaughter rate at around 9% more than a year ago and near 20% more than the previous five-year average. Heifer slaughter is 4.3% more than last year and 10.7% more than the previous five-year average. Producers will be looking at pregnancy checking females even more serious this year as production costs continue to rise.”

August beef and dairy cow slaughter was 6% higher year over year, according to USDA’s Economic Research Service (ERS), in the latest monthly Livestock, Dairy and Poultry Outlook. Combined cow slaughter was 7% more through the first four weeks of September, compared to the previous year.

“The increase in cow slaughter is likely the result of weaker margins in the dairy sector, which is affecting herd decisions and concerns about forage availability, and continued drought in parts of the country. These conditions are expected to result in increased cow slaughter in the fourth quarter.” say ERS analysts.

ERS increased forecast beef production for next year by 120 million lbs. to 26.99 billion lbs. on higher anticipated overall cattle slaughter.

“Dry conditions are expected to support relatively large placements in the second half of 2021, supporting a higher forecast of fed cattle slaughter in 2022,” ERS analysts explain. “However, production in the second half of the year will reflect lower placements as a result of expected tighter supplies of cattle outside feedlots in 2022.”

Negotiated cash fed cattle trade was slow with moderate demand in all major cattle feeding regions through Wednesday afternoon, according to the Agricultural Marketing Service.

Trade in the Southern Plains was mostly steady at $124/cwt.

Although too few to trend, there were some early live sales in Nebraska at $124.00-$126.50, and some in the western Corn Belt at $124-$125, compared to $124 in both regions last week. Early dressed sales were steady at $196.00.

Cattle futures closed higher Wednesday, bolstered by higher outside markets, leveling wholesale beef values, slightly higher cash prices and positioning ahead of Friday’s Cattle on Feed report. Trade volume remained on the low side.

Live Cattle futures closed an average of 74¢ higher (50¢ to 95¢ higher).

Choice boxed beef cutout value was 85¢ lower Wednesday afternoon at $280.03/cwt. Select was $1.27 higher at $262.80/cwt.

Feeder Cattle futures closed an average of $1.05 higher (50¢ to $1.32 higher).

Higher outside markets and energy prices helped boost Corn Futures Wednesday, while exports and more non-commercial interest boosted the entire grain complex.

Corn futures closed 7¢ to 9¢ higher — mostly 8¢ higher — across most of the board.

Soybean futures closed mostly 18¢ to 20¢ higher through Jan ‘23.

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Major U.S. financial indices closed mainly higher on the back of quarterly corporate earnings reports that continue to beat estimates.

The Dow Jones Industrial Average closed 152 points higher. The S&P 500 closed 16 points higher. The NASDAQ was up 7 points.

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Projected cattle feeding returns are expected to improve for most of the next eight months, reflecting higher fed cattle prices and lower cost of gain compared to recent months, according to the latest Historical and Projected Kansas Feedlot Net Returns from Kansas State University. 

After a projected -$4.24 per head for fed steers in October, forecast returns between November and June of next year range from -$9.26 in January to +$94.49 in March.

Losses are projected in only three of those months: -$1.24/head in November, -$9.26 in January and -$3.25 in June.

Feedlot Cost of Gain for steers was projected to be $115.22/cwt. in October. It declines steadily from there: $112.81 in November to $100.83 in June.

Keep in mind that these projections are cash-based and reflect no price risk management.