WLI

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

Live prices last week were at $124/cwt. in the Southern Plains, $122-$124 in Nebraska and $122 in the western Corn Belt. Dressed prices were $196 in Nebraska and $193-$196 in the western Corn Belt.

Cattle futures were a mixed bag Tuesday with Live Cattle, especially the front months, pressured by increased beef production estimates in the latest World Agricultural Supply and Demand Estimates  (WASDE).

Live Cattle futures closed an average of 42¢ lower (5¢ lower at the back to 92¢ lower toward the front).

On the other hand, Feeder Cattle futures closed an average of 45¢ higher except for 75¢ lower in spot Oct. Support included higher corn production and corn price stability suggested by the latest WASDE. More on those estimates momentarily.

Choice boxed beef cutout value was 5¢ lower Tuesday afternoon at $281.07/cwt. Select was $2.29 lower at $261.35.

Wheat futures gained Tuesday but Corn and especially Soybean futures softened in the wake of the latest World Agricultural Supply and Demand Estimates (see below).

Corn futures closed mostly 5¢ to 10¢ lower.

Soybean futures closed 20¢ to 30¢ lower through Jan ’23 and then 12¢ to 17¢ lower.

K.C. Wheat futures were mostly 3¢ to 5¢ higher.

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Major U.S. financial indices coasted lower Tuesday as investors awaited the monthly Consumer Price Index and minutes from the last Federal Reserve meeting, both due to be published Wednesday.

The Dow Jones Industrial Average closed 117 points lower. The S&P 500 closed 10 points lower. The NASDAQ was down 20 points.

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USDA’s Economic research Service (ERS) lowered fed cattle price projections for 2021 on current prices and relatively large supplies, in the latest monthly World Agricultural Supply and Demand Estimates (WASDE).

The annual five-area direct fed steer price average this year was projected $1.14 lower than the previous month at $121.06/cwt. with average prices at $123.51 in the third quarter and $127.00 in the fourth quarter.

However, ERS increased the 2022 price forecast on tighter expected supplies. The annual five-area direct average fed steer price next year was forecast $1.00 higher than the previous month at $129.00 with average prices at $130.00 in the first quarter and $128.00 in the second quarter.

ERS projected beef production this year 90 million lbs. more than the previous month’s estimate at 27.83 billion lbs., which would be 658 million lbs. more than last year (+2.4%). ERS forecasts next year’s beef production at 26.99 billion lbs., which would be 837 million lbs. less than this year (-3.0%).

Total estimated red meat and poultry production this year of 106.56 billion lbs. would be just 5 million lbs. more than last year. Projected total red meat and polity production next year of 106.25 billion lbs. would be 306 million lbs. less than this year’s estimate (-0.29%).

Corn

ERS projected 2021-22 U.S. corn production 23 million bu. more than the previous month at 15.019 billion bu. with yield of 176.5 bu./acre. Corn ending stocks were projected 92 million bu. higher.

The projected season-average corn price received by farmers was unchanged at $5.45/bu.

Soybeans

ERS forecast U.S. soybean production 74 million bu. higher than the previous estimate at 4.4 billion bu. with yield of 51.5 bu./acre. Ending stocks were projected 135 million bu. more than the previous month at 320 million bu.

The season-average soybean price for 2021-22 was forecast 55¢ lower at $12.35/bu.  Soybean meal price was projected at $325/short ton, which was $35 less than the previous estimate. The soybean oil price forecast was unchanged at 65¢/lb. 

Wheat

ERS lowered forecast 2021-22 U.S. wheat supplies, domestic use and ending stocks. Projected 2021-22 ending stocks were reduced 35 million bu. to 580 million, which would be the lowest U.S. ending stocks since 2007-08.

“Significantly reduced supplies of Hard Red Spring, Durum, and White wheat for 2021-22 are expected to curtail feed and residual use for the remainder of 2021-22 along with the continued large price premium of wheat over corn,” say ERS analysts.

The projected 2021-22 season-average farm price was raised 10¢/bu. to $6.70 on reported NASS prices to date and price expectations for the remainder of 2021-22.

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

Live prices last week were at $124/cwt. in the Southern Plains, $122-$124 in Nebraska and $122 in the western Corn Belt. Dressed prices were $196 in Nebraska and $193-$196 in the western Corn Belt. Between last week’s increased slaughter level and recent futures prices hopes are growing to budge cash prices higher this week.

Estimated total cattle slaughter last week of 657,000 head was 20,000 head more than the previous week and year. Estimated total year-to-date cattle slaughter of 25.63 million head was 815,000 head more (+3.3%) than the same time last year. Estimated year-to-date total beef production of 21.8 billion lbs. was 604.7 million lbs. more (+2.9%) than a year earlier.

Cattle futures found a little more traction Monday as traders appeared more confident in recent gains.

Feeder Cattle futures closed an average of 73¢ higher, except for 15¢ lower in spot Oct.

Live Cattle futures closed an average of 37¢ higher, except for 7¢ and 10¢ lower toward either end of the board.

Choice boxed beef cutout value was $2.15 lower Monday afternoon at $281.12/cwt. Select was 90¢ higher, though, at $263.64.

Corn futures closed mostly 1¢ to 2¢ higher.

Soybean futures closed mostly 9¢ to 14¢ lower.

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Major U.S. financial indices closed closer Monday. Most of the pressure appeared to be investor worries about slowing economic growth as corporate earnings season arrives.

The Dow Jones Industrial Average closed 250 points lower Monday. The S&P 500 closed 30 points lower. The NASDAQ closed 93 points lower.

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Cattle feeding returns continue positive this year, according to data from the Livestock Marketing Information Center (LMIC).

“September is the fifth month of 2021 to post positive returns,” say LMIC analysts, in the most recent Livestock Monitor. “Since April, estimated returns have been between $30-40 per head. Expectations are for the rest of 2021 feedlots to see continued profits, but are unlikely to see ‘home-run’ returns this year.” That’s based on LMIC’s data series that tracks cash-to-cash returns.

LMIC analysts note profit continues to be limited by high input costs. For instance, they point out September closeouts were based on a feeder cattle input cost of $139.28/cwt., the highest price in Dodge City since October of 2020.

“The next three months, all except one of the closeouts will see higher feeder cattle input costs. The good news is those higher feeder prices will be partially offset by feed costs that are easing lower than they were earlier in the year. Corn, sorghum, and protein costs have all fallen more than a dollar per unit from the summer highs. Still, cattle placed over the summer were very likely fed some very high- cost rations,” explain the LMIC folks.

LMIC currently projects fourth-quarter returns to average $30 per head, which would make for an average of $15 per head for the year.

“Expectations are for the first quarter of next year to face some rather steep declines, maybe as large as $80+ per head losses,” says LMIC analysts. “However, after the first quarter of 2022, feedlot profit outlook is expected to improve substantially.”

Negotiated cash fed cattle trade ranged from a standstill to mostly inactive with light demand in all major feeding regions through Friday afternoon with too few transactions to trend, according to the Agricultural Marketing Service.

Live prices last week were steady in the Southern Plains at $122-$124/cwt. in Kansas and $124 in the Texas Panhandle. Prices were steady in the western Corn Belt at $122 but mostly steady to $2 higher in Nebraska at $122-$124. Dressed prices were $196, which was steady in Nebraska and toward the top of last week’s price range in the western Corn Belt.

Feeder Cattle futures closed an average of 39¢ lower as traders positioned for the weekend following the surge higher. Week to week on Friday, they closed an average of $5.17 higher.

Similarly, Live Cattle futures closed narrowly mixed from an average of 37¢ lower to an average of 17¢ higher. They closed an average of $3.92 week to week on Friday.

Choice boxed beef cutout value was $2.03 lower Friday afternoon at $283.27/cwt. Select was $1.74 lower at $262.74/cwt.

Corn futures closed mostly 1¢ to 3¢ lower.

Soybean futures closed mostly 4¢ to 7¢ lower.

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Major U.S. financial indices fell on Friday after jobs data came out weaker than expected for September, right as most expect the Federal Reserve to start tapering efforts. Only 194,000 workers were added last month, even though the jobless rate declined to 4.8% – partly due to folks who have quit looking for jobs. The biggest loss in jobs was seen from government entities, although a bright side came from leisure and hospitality, which nearly doubled the rate of jobs added in that sector.

The Dow Jones Industrial Average closed 9 points lower. The S&P 500 closed 9 points lower. The NASDAQ was down 74 points.

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Fundamental economics and credible research continue to suggest voluntary efforts to improve cattle price discovery offer less risk and more opportunity than government mandates.

Last week, the Texas A&M University Agricultural and Food Policy Center (AFPC) issued proceedings from an in-depth workshop on cattle markets titled The U.S. Beef Supply Chain: Issues and Challenges.

It stems from the Committee on Agriculture in the U.S. House of Representatives asking USDA to commission a study to look into the issues surrounding fed cattle pricing. Ultimately, USDA partnered with the AFPC.

Leading agricultural economists from across the nation address a number of key cattle market issues at the heart of current debate and legislative proposals. Arguably, the most complex surrounds Alternative Marketing Agreements (AMAs), which enable pricing cattle based on individual value rather than averages, reduce transaction costs and increase marketing efficiency, among other things. As more cattle trade through AMAs and outside of the spot cash market, some argue price discovery erodes. This notion is behind legislative proposals calling for mandated levels of weekly regional negotiated cash fed cattle trade.

“The beef industry’s move to AMAs (alternative marketing arrangements) represents part of the progression to value-based marketing and economic pressures to reduce transaction costs. Legislation or efforts to increase negotiated trade will increase industry costs,” according to the AFPC study. “Those increased costs are estimated to result in lower calf prices and higher beef prices. Cattle pricing and market signals have evolved over the last 40 years. Premiums that were not present prior to AMAs are now common. One of the challenges is maintaining the reward for quality if the method of pricing changes. Thinking through  the effect of the pricing mechanism on market signals is an important consideration to prevent even more negative impacts of potential changes.”

For perspective, Stephen Koontz, agricultural economist at Colorado State University conducted research more than a decade ago, estimating that participants realized $25 per head in value from formula pricing due to lower costs and increased marketing efficiency. AFPC researchers say the value is likely significantly more today. However, they used the $25 value in an equilibrium displacement model (EDM) to quantify the effect of an increase in costs at the feeder-packer level on cattle and beef prices if all cattle sold via negotiated cash trade.

“As expected, increasing transaction costs results in lower live animal prices and higher wholesale and retail beef prices. The impact on live prices ranges from -$1.75/cwt. for fed cattle to -$2.62/cwt. for calf prices,” according to the report. Beef prices at the wholesale (cutout) and retail levels increase. The impact on live prices is larger, in percentage terms, than meat prices. If the live-to-cutout spread is a concern, the end result is a widening price spread.”

In the AFPC study, Koontz examines and models the economic impact of mandating packing facilities procure 30% or 50% of their fed cattle needs via the negotiated market for delivery within 14 days.

“The bottom-line impact of any intervention into the cattle market is the fact that there are modest benefits and considerable costs due to lost efficiency and product quality from mandates,” Koontz says.  “Similarly, but context reversed, this is because AMA use has considerable benefits and modest costs due to solid economic foundations. This was the conclusion across the fed cattle and beef, hog and pork, lamb and lamb meat, and downstream meat distribution industries in the LMMS (Livestock and Meat Marketing Study conducted by GIPSA). For the cattle and beef industry, the costs are ultimately incurred by cow-calf producers and beef consumers. The short-term impact for a policy most like that being considered is a $2.5 billion negative impact in the first year and a cumulative negative impact of $16 billion over 10 years, inflated to 2021 dollars. This cost is leveled mainly on cattle producers. The 50/14 proposal would have these negative impacts and the 30/14 would have similar negative impacts albeit approximately halved.”

Feeder Cattle futures took center stage Thursday, closing sharply higher and leading Live Cattle along. Support seemed to stem mainly from increased trader confidence based on notions the seasonal low is in the books.

Feeder Cattle futures closed an average of $2.34 higher ($1.50 higher at the back to $3.55 higher in spot Oct).

Live Cattle futures closed an average of $1.29 higher (47¢ higher at the back to $1.87 higher toward the front.)

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

Soybean futures closed mostly 5¢ to 9¢ higher.

Negotiated cash fed cattle trade was mostly inactive with light demand in all major feeding regions through Thursday afternoon with too few transactions to trend, according to the Agricultural Marketing Service.

So far this week, live prices are steady in the Southern Plains at $122-$124/cwt. in Kansas and $124 in the Texas Panhandle. Prices are steady in the western Corn Belt at $122 but mostly steady to $2 higher in Nebraska at $122-$124. Dressed prices are $196, which is steady in Nebraska and toward the top of last week’s price range in the western Corn Belt.

Choice boxed beef cutout value was $1.32 lower Thursday afternoon at $285.30/cwt. Select was $1.52 higher at $264.44.

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Major U.S. financial indices extended gains Thursday, buoyed by reports Congress reached a deal to raise the nation’s debt ceiling through early December.

The Dow Jones Industrial Average closed 337 points higher. The S&P 500 closed 36 points higher. The NASDAQ was up 152 points.

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“There are lingering questions about consumer beef demand as we close out 2021 and move into 2022,” says James Mitchell, an Extension livestock economist at the University of Arkansas. “Last year, we learned that consumers were willing to buy beef at higher prices. Recovery in the restaurant sector was certainly a positive for the beef industry in 2021. As the holiday beef buying season approaches, will we observe a return to company holiday parties and large family gatherings? Will beef demand remain strong next year?”

In the most recent issue of In the Cattle Markets, Mitchell says insight to those questions can be had by monitoring boxed beef cutout values for the remainder of this year, which includes their seasonal nature.

“Seasonality in the cutout value is driven by price seasonality for individual beef cuts. Based on monthly data from 2014-2018, Choice boxed beef prices were seasonally highest in May, averaging 6.7% above the annual average price,” Mitchell says. “The seasonal high in May aligns with peak beef demand during grilling season (Memorial Day to Labor Day). Choice cutout prices decline through the summer, reaching a low in October when prices average 5.5% below the annual average Choice cutout value. Choice boxed beef prices recover, but remain below the annual average, during November and December’s holiday beef buying season.”

Although cutout values are following a similar trend so far this year this year, Mitchell notes prices were boosted further earlier by increased demand from restaurants as that sector replenished supplies amid loosening COVID-19 restrictions. More recently, wholesale prices continue to decline, in part due to seasonality.

“For the week ending Oct. 1, the Choice cutout value was $297.79/cwt., down 3.6% from the previous week but still 36.5% above this time last year,” Mitchell explains. “The rib primal, which is the highest valued beef primal, was down 4.5% last week. The loin and chuck primals were down 3.8% and 4.3% compared to the previous week. The round primal was 1.9% higher last week, while the brisket primal observed the largest weekly decline, down 11.5%.”

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

Live prices in the Texas Panhandle were steady at $124/cwt., steady to $2 higher in Kansas at $124 and steady to $2 higher in Nebraska at $122-$124. Dressed trade in Nebraska was steady at $196.

Trade was limited on light demand in the western Corn Belt. There were a few dressed sales at $196, but there were too few to trend. Prices last week were mostly $122 on a live basis and $192-$197 in the beef.

Live Cattle futures closed and average of 56¢ higher.

Feeder Cattle futures closed and average of $1.15 higher, except for 32¢ lower in the back contract.

Choice boxed beef cutout value was $1.09 lower Wednesday afternoon at $286.62/cwt. Select was $4.87 lower at $262.91.

Corn futures closed mostly 3¢ to 5¢ lower.

Soybean futures closed 3¢ to 9¢ lower.

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Major U.S. financial indices settled higher Wednesday after a volatile trading session. Support included an apparent short-term solution to suspending or raising the nation’s debt ceiling, which would enable avoiding a national default and the economic chaos that would entail.

Also, private sector employment increased by 568,000 jobs from August to September according to the latest ADP^®National Employment Report^TM. That was more than the trade expected.

The Dow Jones Industrial Average closed 102 points higher. The S&P 500 closed 17 points higher. The NASDAQ was up 68 points.

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U.S. beef exports blasted to another new value record in August, topping the $1 billion mark for the first time, according to data released by USDA and compiled by the U.S. Meat Export Federation (USMEF). Pork exports also posted another strong month in August, remaining ahead of the record pace established in 2020.

Record shipments to China and the largest exports of the year to Japan, led beef exports in August. Beef exports totaled 132,577 metric tons (mt), which was 21% more year over year and the second largest of this year. Export value climbed 55% to $1.04 billion.

For January through August, beef exports increased 18% from a year ago to 955,407 mt, with value up 34% to $6.62 billion. Exports were 6% higher in volume and up 20% in value compared to the record pace established in 2018. In addition to setting new records in China, beef exports are also on a record pace to South Korea and Central America and have rebounded significantly to Mexico.

“The August export results would be impressive under any circumstances, but achieving these totals despite all the COVID-related obstacles at home and overseas is truly remarkable,” says USMEF President and CEO Dan Halstrom. “Our transportation and labor situation is challenging, and customers continue to face an uncertain business climate due to foodservice restrictions and other economic headwinds. Yet international buyers remain committed to the quality and consistency delivered by U.S. red meat, and the U.S. industry has gone to tremendous lengths to keep shipments moving.”

August beef export value equated to a record $468.75 per head of fed slaughter, up 55% from a year ago. Through August, export value was $381.91 per head, up 28%.

Halstrom emphasized the broad-based growth achieved in 2021 bodes well for both near and long-term exports.

“Obviously breaking the $1 billion mark in a single month is a huge milestone for U.S. beef, and that’s not possible unless a wide range of markets are hitting on all cylinders,” Halstrom explains. “But the trendlines for U.S. pork are also very encouraging. Just a few years ago, it was an achievement to reach $6 billion in pork export value in a full year. In 2021, exports will exceed that total with an entire quarter to spare.”