WLI

Negotiated cash fed cattle trade was limited on light demand in Nebraska through Monday afternoon. Although too few transactions to trend, there were some live trades in the region at $135/cwt. Elsewhere, trade was at a standstill, according to the Agricultural Marketing Service.

Last week, live prices were $2-$4 lower in Kansas and Nebraska at $136-$138/cwt. They were $4 lower in the Texas Panhandle at $136 ad steady to $2 lower in the western Corn Belt at $138. Dressed prices were $2 lower in Nebraska at $218 and steady to $3 lower in the western Corn Belt at $217-$218.

Cattle futures trended lower Monday with softer cash prices, holiday-limited harvest schedules on the books and no support from outside markets.

Live Cattle futures closed an average of 34¢ lower, except for 10¢ higher in away Feb.

Feeder Cattle futures closed an average of 75¢ lower (2¢ lower at the back to $1.20 lower toward the front), except for 5¢ higher in Oct.

Choice boxed beef cutout value was 63¢ lower Monday afternoon at $262.38/cwt. Select was $2.39 higher at $250.67.

Corn futures closed mostly 1¢ to 2¢ lower.

Soybean futures closed mostly 2¢ to 6¢ higher.

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Major U.S. financial indices extended losses Monday, closing sharply lower amid growing uncertainty related to surging Covid-omicron infections.

The Dow Jones Industrial Average closed 433 points lower. The S&P 500 closed 52 points lower. The NASDAQ was down 188 points.

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“Rapidly expanding drought conditions are threatening winter wheat grazing in the Southern Plains. Dwindling forage supplies may already be causing some wheat pasture removals and could be contributing to the strong December feeder cattle auction volumes,” says Derrell Peel, Extension livestock making specialist at Oklahoma State University, in his weekly market comments.

According to the Dec. 16 U.S. Drought Monitor, 74% of the nation was abnormally dry or in some degree of drought compared to 67% a year earlier. Moreover, 55% was experiencing some degree of drought (D1-D4) compared to 49% last year.

“Without additional moisture very soon, more wheat pastures will have to be de-stocked. Current forecasts show little chances for precipitation in the region into January,” Peel says. “La Niña conditions are expected to persist through the winter, shifting the drought focus back to the Southwest and Southern Plains and potentially improving drought conditions in California and the Pacific Northwest.” 

In the meantime, Peel notes the recent, heady price run.

“Optimism building in feeder cattle markets in the second half of the year has been enhanced and consolidated with the fed cattle market breaking out and moving sharply higher in the last two months of the year,” Peel explains. “Fed cattle prices have increased roughly 12% since late October and are about 29% higher compared to one year ago in December.”

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

Last week, live prices were $2 lower in Kansas at $138/cwt. and $4 lower in the Texas Panhandle at $136. Dressed prices were $2 lower in Nebraska at $218.

Estimated total cattle slaughter last week was 657,000 head, which was 11,000 head fewer than the prior week. Year-to-date estimated total cattle slaughter of 32.17 million head was 886,000 head more (+2.8%) than the same period last year. Estimated year-to-date before production of 26.64 billion lbs. is 628 million lbs. more (+2.4%) than last year.

Cattle futures limped lower Friday, pressured by softer cash prices and pre-holiday positioning. Increasing carcass weights amid declining wholesale beef prices added weight.

The average dressed steer weight the week ending Dec. 4 was 928 lbs., according to USDA’s Actual Slaughter Under Federal Inspection report. That was 2 lbs. heavier than the previous week, 6 lbs. heavier than two weeks earlier and the same week a year earlier. The average dressed heifer weight was 4 lbs. heavier than the previous week at 851 lbs. and 1 lb. heavier than the same week last year.

Feeder Cattle futures closed an average of $1.78 lower (95¢ lower at the back to $2.62 lower toward the front).

Live Cattle futures closed an average of 61¢ lower.

Choice boxed beef cutout value was 4¢ higher Friday afternoon at $263.01/cwt. Select was 14¢ higher at $248.28.

Corn futures closed 1¢ to 2¢ higher in the front three contracts and then mostly fractionally lower.

Soybean futures closed 6¢ to 10¢ higher in the front five contracts and then mostly unchanged to fractionally lower.

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Major U.S. financial indices closed lower again Friday with pressure from escalating Covid infections and the outlook for tighter monetary policy.

The Dow Jones Industrial Average closed 532 points lower. The S&P 500 closed 48 points lower. The NASDAQ was down 10 points.

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The U.S. economy is poised to slow next year relative to 2021, but economic growth will continue at a pace that is well above average, according to analysts with CoBank’s Knowledge Exchange (CKE). They explain consumers have powered the economic recovery since mid-2020 and that will continue in the coming year. Consumer spending is expected to rise another 4% to 5% in 2022 and GDP is expected to grow by roughly 4.5%, according to CKE’s comprehensive year-ahead outlook report from.

The CoBank 2022 outlook report examines several key factors that will shape agriculture and market sectors that serve rural communities throughout the U.S.

“The COVID-19 omicron variant is shaping up to be the wild card of early 2022 and it could delay the rebalancing of the U.S. economy,” says Dan Kowalski, vice president of CoBank’s Knowledge Exchange. “If omicron disrupts the services industry, the majority of consumer spending will again revert to goods, compounding supply chain and inflation problems. However, at this early stage, we expect omicron to have only a modest impact on the economy.”

Among report highlights:

If the global economy is to perform well in 2022, it will do so despite three significant headwinds: a persistent pandemic, monetary tightening in the U.S. and slowing growth in China.

The pandemic has significantly altered how our economy functions, with the greatest impact coming from what we consume. Through October, in 2021 Americans spent 18% more on goods and about 1% less on services than they did in 2019. Compounded by a labor shortage, it is easy to see why supply chains have become one of the biggest economic challenges of the pandemic—demand has significantly exceeded the capacity of our existing system. Fortunately, we have likely experienced the worst of the bottlenecks, which should diminish in the coming year.

The Fed will want to extend the economic recovery as long as possible before raising interest rates. But it will also be cognizant that the longer inflation remains elevated the higher the likelihood that it leads to a perpetuating cycle of higher prices and higher wages.

The U.S. farm economy will continue to struggle with the ongoing supply chain dysfunction and cost inflation issues that emerged in the summer of 2021. Historically strong prices will be more than offset by increases in cost structure for nearly all crop production including row crops, fruits and vegetables, and hay. CoBank economists do not anticipate any significant pullback in farm-level costs until Q3, at the earliest.

The Bureau of Labor and Statistics’ Consumer Price Index for all meats, poultry, fish, and eggs hit an all-time high in October, up 12% year over year. As restaurant and grocery prices adjust, consumer-level meat inflation is likely to continue well into the new year. While higher retail prices could limit consumption growth, tighter cattle supplies, ongoing broiler breeder issues and sow herd reductions should support favorable processor margins through at least the first half of 2022. Although beef exports have been robust during the second half of 2021, the collective U.S. protein opportunity to China may have already peaked.

Negotiated cash fed cattle trade was limited on light demand in all major cattle feeding regions through Thursday afternoon, according to the Agricultural Marketing Service.

So far this week, live prices are $2 lower in Kansas at $138/cwt. and $4 lower in the Texas Panhandle at $136. Dressed prices are $2 lower in Nebraska at $218.

Last week, live prices were at $140 in Colorado and $138-$140 in Nebraska and the western Corn Belt. Dressed prices in the western Corn Belt were $218-$220.

Cattle futures were narrowly mixed Thursday with lackluster trade.

Live Cattle futures closed an average of 28¢ higher, except for 5¢ lower in Jun.

Feeder Cattle futures closed mixed, from an average of 35¢ lower in five contracts to and average of 31¢ higher.

Choice boxed beef cutout value was $2.71 higher Thursday afternoon at $262.97/cwt. Select was 69¢ higher at $248.14.

Corn futures closed mostly 3¢ to 6¢ higher, boosted by positive weekly U.S. export sales.

Soybean futures closed 10¢ to 14¢ higher through the front four contracts and then mostly 5¢ higher.

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Major U.S. financial indices closed lower Thursday with hard pressure on tech stocks.

The Dow Jones Industrial Average closed 29 points lower. The S&P 500 closed 41 points lower. The NASDAQ was down 385 points.

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Domestic beef demand is the strongest it has been in three decades. Beef gained about 8% market share over the last two decades and U.S. beef exports through November 2021 were on a record pace in terms of volume and value.

Kevin Good, CattleFax analyst and vice president of industry relations, says this is all a result of listening to the consumer.

Good was speaking to members of the American Hereford Association (AHA), guests and allied industry partners during an educational forum at the organization’s recent Annual Membership Meeting and Conference.

“Think about grade, think about consistency. They are the driving points,” Good said. He explained, “Today, we have a much better product than we had in the past and our customers are rewarding us with more dollars.”

For perspective, 72.7% of all beef cattle graded Choice in 2020 and 10.2% graded Prime, according to USDA’s Estimated National Grading Summary. Just 10 years earlier, 60.1% were Choice and 3.4% were Prime. Through October this year, 72.6% were Choice and 10.1% were Prime.

Whether regarded as the proverbial chicken or egg, Good pointed out carcass quality increased as the industry applied premiums and discounts in order to get what consumers wanted.

“There will be a time when we produce 20-30% prime in the national herd, and it’s not that far away,” Good predicted. “As we think about what our customer is demanding, let’s remember that last year, with COVID, we couldn’t sell Prime through restaurants, it went through retail. Every major retail chain in the U.S. now has a premium product offering. Consumers want it, so we’re going to have to provide it.”

Good also shared price expectations for 2022, as cow numbers and fed cattle supplies decline and more leverage returns to producers. Currently, CattleFax projects calves to average $205/cwt., compared to $170 in 2021; yearlings to average $168, compared to $140 in 2021; fed steers to average $140, compared to $121 in 2021.

Negotiated cash fed cattle prices lost some ground Wednesday. Live prices in the Texas Panhandle were $4 lower at $136/cwt., on slow trade and light demand, according to the Agricultural Marketing Service. Although too few to trend, there some early dressed sales in Nebraska $2 lower at $218.

Cattle futures sagged lower, pressured by softer cash prices and reports of reduced production at some plants due to weather.

Live Cattle futures closed an average of $1.05 lower (60¢ to $1.78 lower).

Feeder Cattle futures closed an average of $1.41 lower (83¢ to $1.93 lower).

Choice boxed beef cutout value was 46¢ lower Wednesday afternoon at $260.26/cwt. Select was  $1.35 lower at $247.45.

Corn futures closed 4¢ to 5¢ lower through Jly ’22, then down 1¢ to 2¢.

Soybean futures closed fractionally higher to 3¢ higher through Jly ’22, and then mostly 2¢ to 4¢ lower.

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Major U.S. financial indices closed higher Wednesday with a late-session surge.

The increase came amid news confirming the Fed will maintain its current lending rate but accelerate tapering of its bond buying program in light of higher inflation that appears to be more than transitory.

The Dow Jones Industrial Average closed 383 points higher. The S&P 500 closed 75 points higher. The NASDAQ was up 327 points.

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USDA’s Economic Research Service (ERS) increased the price outlook for next year in the latest Livestock, Dairy and Poultry Outlook.

ERS forecast next year’s annual average feeder steer price (basis 750-800 lbs. Oklahoma City) $3.50 higher than the previous month’s estimate at $159.00/cwt. The 2021 estimated annual average increased $1.25 to $146.80. So, next year’s annual average price is projected to be $12.20 more than in 2021.

The 2021 fourth-quarter forecast was revised $5 higher to $159 based on current price strength and improved prospects for winter grazing.

As for fed cattle, the average five-area direct fed steer price in November was $133.39/cwt., which was $9.06 higher than the previous month; $24.54 higher year over year.

ERS projected the average fourth-quarter fed steer price $5 higher at $133, based on continued demand strength and tighter supplies. The 2022 annual forecast also increased $5.00 to $135.00.

The forecast for 2021 beef production was raised on higher expected slaughter of fed cattle and slightly heavier carcass weights. December’s beef production forecast was 10 million lbs. more than the previous month at 27.895 billion lbs. Beef production for next year is forecast to be 27 billion lbs.

As the week wears on, cash fed cattle price prospects appear steady to softer, given reduced packer production the next two holiday weeks, along with declining wholesale beef prices.

Negotiated cash fed cattle trade ranged from limited on light demand to mostly inactive on light demand through Tuesday afternoon, according to the Agricultural Marketing Service. There were a few live trades in Kansas at $138/cwt., but too few to trend.

Live prices last week were at $138-$140/cwt. in the Southern Plains and Colorado; $138-$140 in Nebraska and the western Corn Belt. Dressed prices were $220 in Nebraska and $218-$220 in the western Corn Belt.

At the same time, wholesale beef prices continue to decline with Choice boxed beef cutout value $2.50 lower Tuesday afternoon at $260.72/cwt. Select was  $4.84 lower at $248.80.

All of that was enough for Live Cattle futures to drift an average of 32¢ lower.

Feeder Cattle futures closed an average of 41¢ lower Tuesday, also pressured by Corn futures closing 2¢ to 5¢ higher, while Soybean futures closed 11¢ to 13¢ higher through Sep ’23 and then mostly 9¢ higher — both rebounding from the previous day’s losses.

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Major U.S. financial indices closed lower Tuesday, pressured in part by a higher Producer Price Index (PPI) than anticipated. The final demand PPI was 0.8% higher month to month in November. It was 9.6% higher during the previous 12 months ending in November — the steepest increase since 12-month data were first calculated in November 2010, according to the U.S. Bureau of Labor Statistics (BLS).

“The Producer Price Index is a family of indexes that measures the average change over time in the selling prices received by domestic producers of goods and services,” according to BLS. “PPIs measure price change from the perspective of the seller. This contrasts with other measures, such as the Consumer Price Index (CPI), which measure price change from the purchaser’s perspective.”

The Dow Jones Industrial Average closed 106 points lower. The S&P 500 closed 34 points lower. The NASDAQ was down 175 points.

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The latest monthly Meat Demand Monitor (MDM) points toward continued domestic beef demand strength. 

“Responses in November again suggest consumer expectations of price increases (beef and pork). These consumer expectations and realized prices continue to align with broader discussions around food (and non-food) inflation,” according to the MDM report. “It should be carefully noted these higher expected prices reflect both supply-side factors (e.g. higher production costs) and demand strength…It should further be noted the majority (83%) indicate having either the same, or

more than normal amounts of meat on hand, indicating both ongoing demand strength and supply availability.”

The MDM — funded in part by the National Beef Checkoff and the National Pork Checkoff — tracks U.S. consumer preferences, views, and demand for meat with separate analysis for retail and food service channels. More than 2,000 respondents are surveyed, reflecting the national population.

Beef market share at the grocery store was 32% in November, according to the MDM. It was 21% for pork. For restaurants, market share was 41% for beef and 15% for pork.

“Taste, Freshness, Safety, and Price remain most important when purchasing protein. Price decreased most in importance from last month following its increase in October,” according to the report.

The MDM also asks consumers various ad hoc questions each month. In November, 75% of respondents self-declared as regular consumers of products derived from animal products — the highest percentage since the data series began in 2020. As for other categories, 11% of respondents indicated they are Flexitarian/Semi-Vegetarian; 9% indicated they are either Vegan Vegetarian or Vegetarian.

The MDM is coordinated and published by Kansas State University.