WLI

Negotiated cash fed cattle trade was at a standstill in all feeding regions through Tuesday afternoon, according to the Agricultural Marketing Service. Last week, live sales were at $124/cwt. in the Texas Panhandle $123-$124 in Kansas, $125-$126 in Nebraska and $125 in the western Corn Belt. Dressed trade was at $200-$203.

Although seemingly plumb oversold, Cattle futures continued to melt down Tuesday. Many other commodity and equity markets suffered, too, as growing cases of the cover delta variant sap risk appetite. For Cattle, that’s on top of everything from cash market leverage woes to post-Labor Day demand uncertainty to the weekend announcement about atypical BSE confirmed in Brazil (see below).

Feeder Cattle futures closed an average of $2.20 lower.

Live Cattle futures closed an average of $1.29 lower, amid active trade.

Choice boxed beef cutout value was $1.23 lower Tuesday afternoon at $335.19/cwt. Select was $2.23 lower at $301.90.

Corn futures closed 10¢ to 13¢ lower through new-crop contracts and then mostly 2¢ to 6¢ lower.

Soybean futures closed mostly 10¢ to 14¢ lower.

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Major U.S. financial indices closed lower Tuesday on follow-through pressure and worries about the impact of the covid variant on global economic growth.

The Dow Jones Industrial Average closed 269 points lower. The S&P 500 closed 15 points lower. The NASDAQ closed 11 points higher.

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“Over the weekend, the Brazilian Ministry of Agriculture, Livestock, and Food Supply confirmed two atypical cases of BSE (bovine spongiform encephalopathy). Atypical cases are very rare and are believed to occur spontaneously. These cases occurred outside the United States and do not pose a risk to American consumers—U.S. beef is safe,” according to Colin Woodall, CEO of the National Cattlemen’s Beef Association (NCBA).

You might recall that USDA prohibited importing fresh Brazilian beef into the U.S. in 2017, based on persistent food safety concerns. The ban was lifted in 2020 after Brazilian exporters demonstrated the ability and willingness to meet U.S. protocols.

“Given Brazil’s history of failing to report BSE cases in a timely manner, we must remain vigilant in enforcing our safeguards and holding them accountable,” Woodall says. “The U.S. has the highest animal health and food safety standards in the world. We must make sure that all countries wishing to export beef to the U.S. continue to meet our standards—even a country with a small footprint like Brazil. We have full faith and confidence in the abilities of the U.S. Department of Agriculture (USDA) and Office of the U.S. Trade Representative (USTR) to enforce our safety standards and trade rules to protect America’s cattle producers and consumers.”

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U.S. beef exports set another new value record in July, according to data released by USDA and compiled by the U.S. Meat Export Federation (USMEF). July beef exports were 45% more than the previous year at $939.1 million. Beef export volume was the third largest of the post-BSE era at 122,743 metric tons (mt), up 14% year-over-year.

“Beef exports were really outstanding in July, especially with COVID-related challenges still impacting global foodservice as well as persistent obstacles in shipping and logistics,” says USMEF President and CEO Dan Halstrom. “Retail demand continues to be tremendous, as evidenced by the new beef value record.”

July beef exports to the mainstay Asian markets of Japan, South Korea and Taiwan were relatively steady with last year, but at significantly higher value. Record-large shipments to China and a strong year-over-year rebound in Western Hemisphere markets drove export volume growth.

For January through July, U.S. beef exports increased 18% from a year ago to 822,830 mt, with value up 30% to $5.58 billion. Compared to the pace established in 2018, the record year for U.S. beef exports, shipments were up 6% in volume and 17% in value.

July beef export value equated to $425.68 per head of fed slaughter, up 52% from a year ago. Through July, export value was $369.15 per head, up 24%.

Pork exports in July were steady with last year at 221,809 mt, but export value jumped 20% to $657.3 million. Pork variety meat exports were especially strong at 49,092 mt, up 54% from the low total posted a year ago and 16% above July 2019. Variety meat export value was the second highest on record at $116.7 million, up 69% from a year ago and 39% above 2019.

Cattle futures took it on the chin Friday as traders seemed to grow more concerned about post-Labor Day beef demand and the continued apparent inability of cattle feeders to gain currentness, given the anemic packing pace.

Feeder Cattle futures closed an average of $2.04 lower Friday ($1.00 to $2.57 lower).

Live Cattle futures closed an average of $1.02 lower (45¢ to $1.27 lower) amid expanding open interest.

Negotiated cash fed cattle trade has was mostly inactive on very light demand in all major feeding regions through Friday afternoon, with too few transactions to trend, according to the Agricultural Marketing Service (AMS).

For the week, AMS reported live prices $2 lower in Nebraska at $126/cwt. and $2-$3 lower in the western Corn Belt at $125-$126. Dressed trade was $2-$5 lower in Nebraska at $200-$203.

The Texas Cattle Feeders Association reported its members trading steers at an average of $123.94/cwt., which was $1.57 more than the previous week. They traded heifers for $1.67 more at $123.80.

Corn futures closed 8¢ lower in spot Sep, then fractionally lower to 2¢ lower through Dec ’22, and then fractionally higher to 1¢ higher.

Soybean futures closed mostly 8¢ to 10¢ higher through new-crop contracts and then mostly 2¢ to 4¢ higher.

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Wholesale beef values continued to erode.

Choice boxed beef cutout value was $1.50 lower Friday afternoon at $336.42/cwt. Select was 84¢ lower at $304.13.

Total estimated cattle slaughter last week of 624,000 head was 27,000 head fewer than the previous week and 11,000 fewer than the same week last year. Year-to-date total cattle slaughter of 22.46 million head is 836,000 head more (+3.86%) than last year. Total estimated year-to-date beef production of 18.56 billion lbs. is 659.9 million lbs. more (+3.69%) than the same time last year.

The average dressed steer weight the week ending Aug. 21 was 903 lbs., according to USDA’s Actual Slaughter Under Federal Inspection report. That was 5 lbs. heavier than the previous week but 7 lbs. lighter than the previous year. The average dressed heifer weight of 820 lbs. was 3 lbs. heavier than the previous week but 13 lbs. lighter than the prior year.

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Major U.S. financial indices closed mixed Friday on a disappointing jobs report – only 235,000 new non-farm jobs were added in August, the smallest gain in the last seven months. Some analysts say this news may slow down the Federal Reserve’s tapering timeline.

Average hourly earnings for all employees on private non-farm payrolls rose by 17¢ to $30.73 in August, following increases in the prior four months.

The Dow Jones Industrial Average closed 74 points lower. The S&P 500 closed 1 point lower. The NASDAQ closed 32 points higher.

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The United States farm real estate value, a measurement of the value of all land and buildings on farms, averaged $3,380 per acre for 2021, up $220 per acre (+7.0%) from 2020, according to USDA’s Land Values 2021 Summary.

The United States cropland value averaged $4,420 per acre, an increase of $320 per acre (+7.8%) from the previous year.

The United States pasture value averaged $1,480 per acre, an increase of $80 per acre (+5.7%) from 2020. For broader perspective, average pasture value increased $150 per acre (+11.3%) since 2017.

There were too few negotiated cash fed cattle transactions to trend in any major cattle feeding region through Thursday afternoon, according to the Agricultural Marketing Service. So far this week, amid anemic trade, live prices are $2 lower in Nebraska at $126/cwt. and $2-$3 lower in the western Corn Belt at $125-$126. Dressed trade in Nebraska is $2-$5 lower at $200-$203.

Choice boxed beef cutout value was 53¢ lower Thursday afternoon at $337.92/cwt. Select was $2.60 lower at $304.97.

Cattle futures continued to sag lower Thursday amid sluggish interest ahead of the long holiday weekend, declining wholesale beef values and the lackluster packing pace. Feeder Cattle led the charge lower.

Feeder Cattle futures closed an average of $2.42 lower ($1.65 to $3.00).

Live Cattle futures closed an average of $1.38 lower ($1.05 to $1.60).

Corn futures closed mostly 2¢ higher through new-crop contracts, then mostly 1¢ to 2¢ lower.

Soybean futures closed 1¢ to 5¢ higher through new-crop contracts, then mostly unchanged to fractionally higher

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Major U.S. financial indices closed higher on Thursday with the S&P 500 hitting another record. Weekly initial unemployment insurance claims the week ending Aug. 28 were 340,000, a decrease of 14,000 from the previous week’s revised level. That’s the lowest level since March 14, 2020. The number was also more positive than the trade expected.

The Dow Jones Industrial Average closed 131 points higher. The S&P 500 closed 13 points higher. The NASDAQ was up 22 points.

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USDA’s Food Safety and Inspection Service (FSIS) published an advance notice of proposed rulemaking on Thursday to solicit comments and information regarding the labeling of meat and poultry products made using cultured cells derived from animals under FSIS jurisdiction. FSIS will use these comments to inform future regulatory requirements for the labeling of such food products.

In 2019, USDA and FDA announced a formal agreement to jointly oversee the production of human food products made using animal cell culture technology and derived from the cells of livestock and poultry to ensure that such products brought to market are safe, unadulterated and truthfully labeled. Under the agreement, FDA will oversee cell collection, growth, and differentiation of cells. FDA will transfer oversight at the cell harvest stage to FSIS. FSIS will then oversee the cell harvest, processing, packaging, and labeling of products. FDA and FSIS also agreed to develop joint principles for the labeling of products made using cell culture technology under their respective labeling jurisdictions. Seafood, other than Siluriformes fish, falls under FDA’s jurisdiction, whereas meat, including Siluriformes fish, and poultry are under FSIS’ jurisdiction.

Other than new labeling regulations concerning this product, FSIS does not intend to issue any other new food safety regulations for the cell-cultured food products under its jurisdiction. According to FSIS, “Current FSIS regulations requiring sanitation and Hazard Analysis and Critical Control Point systems are immediately applicable and sufficient to ensure the safety of products cultured from the cells of livestock and poultry.”

Negotiated cash fed cattle trade was slow on light demand in all major regions through Tuesday afternoon, according to the Agricultural Marketing Service. A few dressed sales in Nebraska traded at $203/cwt.

Last week, live prices were at $122-$123/cwt. in the Southern Plains at $123/cwt. Live and dressed sales were at $128 and $202-$208, respectively, in Nebraska and the western Corn Belt.

The Choice boxed beef cutout value was $3.66 lower Wednesday afternoon at $338.45/cwt. Select was $4.46 lower at $307.57.

Likely short covering helped Cattle futures regain some recently lost ground Wednesday. Further erosion in grain futures, tied to Hurricane Ida impacts, also helped Feeder Cattle futures.

Feeder Cattle futures closed an average of $1.11 higher (30¢ to $1.53), except for 7¢ lower in spot Sep.

Live Cattle futures closed an average of 43¢ higher, except for an average of 43¢ lower in the back two contracts.

Grain futures continued to fall Wednesday beneath the weight of export shipping disruptions wrought by Hurricane Ida.

Corn futures closed 10¢ to 18¢ lower through new-crop contracts and then mostly 2¢ to 4¢ lower.

Soybean futures closed 9¢ to 21¢ lower through new-crop contracts and then mostly 6¢ to 9¢ lower.

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Major U.S. financial indices closed mixed on Tuesday after an ADP Research Institute report showed companies added fewer jobs than anticipated in August. However, manufacturing grew at a faster pace than forecast even as global supply chains continue to be bottlenecked.

Private sector employment increased by 374,000 jobs from July to August, according to the August ADP National Employment Report.

“Our data, which represents all workers on a company’s payroll, has highlighted a downshift in the labor market recovery. We have seen a decline in new hires, following significant job growth from the first half of the year,” says Nela Richardson, ADP chief economist. “Despite the slowdown, job gains are approaching 4 million this year, yet still 7 million jobs short of pre-COVID-19 levels.”

The Dow Jones Industrial Average closed 48 points lower. The S&P 500 closed 1 point higher. The NASDAQ was up 50 points. 

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As mentioned previously in Cattle Current, USDA’s Agricultural Marketing Service (AMS) began publishing two new reports in August, based on Livestock Mandatory Reporting and aimed at bolstering market transparency.

The National Weekly Direct Slaughter Cattle-Formulated Base and Forward Contract Base Purchases report provides more detail about foundational prices used in cattle market formulas, grids and contracts. The base prices are published in the morning and afternoon each day, as is an overall summary. Those prices are then aggregated into a weekly report.

Matthew Diersen, a risk and business management specialist at South Dakota State University weighs in with some of his initial observations, in the latest issue of In the Cattle Markets.

“The weekly formulated base shows the formula base price across gender, general quality level, and delivery type. For example, there is now a head count and price range for the base price for formula priced steers, delivered dressed, grading 65-80% Choice,” Diersen explains. “The average net price is there too, thus any major skew in the data would be easier to infer than in the past. The main averages are also broken out by state or region. It is all informative and overwhelming. However, knowing the base you are dealing with as a buyer and as a seller should mean better signals about the value of quality.”

The other new report, the National Weekly Cattle Net Price Distribution report shows at what price and volume levels trade occurred across the weekly weighted average price for each purchase type.

Diersen points out average net prices were available previously and were most useful for monitoring forward net prices over time relative to the negotiated and formula prices. If many cattle were forward contracted during a period of higher expected prices, and prices subsequently fell, then the forward net would be much higher than the negotiated. The opposite could also happen.

The new report provides volumes in $2 increments from the average price levels.

“The more transparent base prices and more complete net prices seem to fill in more of the gap between the average value of average quality cattle and fair values for higher quality cattle being traded today,” Diersen says.

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

Last week, live prices were at $122-$123/cwt. in the Southern Plains at $123/cwt. Live and dressed sales were at $128 and $202-$208, respectively, in Nebraska and the western Corn Belt.

Cattle futures declined Tuesday with follow-through pressure tied to concerns about recently slower packer production, post Labor Day demand and declining wholesale beef prices. Month-end position squaring was also a factor.

Feeder Cattle futures closed an average of 72¢ lower (7¢ to $1.20), except for 7¢ higher in May.

Live Cattle futures closed an average of 76¢ lower (10¢ to $1.43 lower). 

Through midday today, though, Cattle futures were rebounding some, helped along by further declines in Grain futures.

Choice boxed beef cutout value was 67¢ lower Tuesday afternoon at $342.11/cwt. Select was 52¢ lower at $312.03/cwt.

Corn and Soybean futures closed lower with continued pressure from uncertainty surrounding the impact of Hurricane Ida.

Corn futures closed down mostly 5¢ to 8¢.

Soybean futures closed mostly 4¢ to 10¢ lower through new-crop contracts, and then mostly 2¢ to 3¢ higher.

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Major U.S. financial indices softened Tuesday, pressured in part by weaker consumer confidence. The Conference Board Consumer Confidence Index® declined to 113.8 in August from 125.1 in July.

“Consumer confidence retreated in August to its lowest level since February 2021 (95.2),” says Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “Concerns about the Delta variant—and, to a lesser degree, rising gas and food prices—resulted in a less favorable view of current economic conditions and short-term growth prospects. Spending intentions for homes, autos, and major appliances all cooled somewhat; however, the percentage of consumers intending to take a vacation in the next six months continued to climb. While the resurgence of COVID-19 and inflation concerns have dampened confidence, it is too soon to conclude this decline will result in consumers significantly curtailing their spending in the months ahead.”

The Dow Jones Industrial Average closed 39 points lower. The S&P 500 closed 6 points lower. The NASDAQ was down 7 points.

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How many beef cows are going to town due to drought is a popular current wonderment, one with no easy answer, says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments.

“We do know is that beef cow slaughter is up 8.7% year over year through mid-August. If we assume the current level of year-over-year increase continues for the remainder of the year, it implies an annual beef cow slaughter of 3.55 million head. That would be a net culling rate of 11.4%, the highest beef herd culling rate since 2011,” Peel says. “The average culling rate the past two years, since the cyclical peak in 2019, has been 10.25%. Over the past 35 years, across cycles of expansion and liquidation, the average herd culling rate has been 9.65% annually.

“However, because the drought started so early in the year (carried over from last year), it is likely that beef cow slaughter was shifted earlier in the year. Producers likely have already culled cows that would have been culled later in the year anyway. I doubt that the 8.7% year-over-year beef cow slaughter rate will persist for the remainder of the year. Nevertheless, the drought continues unabated and cow slaughter rates will likely remain strong.”

Further, Peel says heifer retention levels remain unclear.

 “The January Cattle report showed that beef replacement heifers were 18.7% of the cow herd, a level that would support stable herd inventories,” Peel explains. “The total number of beef replacement heifers (which includes heifer calves and coming first calf heifers) and the subset of heifers calving in 2021 were both fractionally higher year over year in the January numbers. No doubt, producers in drought areas have had to adjust replacement heifer numbers along with cows. Some heifer calves that were indicated as replacements in January likely were shifted into feedlots. It is not clear how many.”

Heifer slaughter is 1.4% higher so far this year, but Peel points out last year’s slaughter levels were skewed by Covid disruptions.

“Finally, there is the question of how producers not in drought areas have responded in 2021,” Peel says. “Forage conditions have been good in some regions and it is not clear if producers may be holding more cows and heifers to offset some of the drought region impacts. In short, we don’t know what would have happened in the absence of the drought and we don’t know for sure how the remainder of the year will finish. After playing with lots of numbers and assumptions, my best guess at this point is that the drought has added one-half to one percent of additional beef herd liquidation this year.”