WLI

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

Live prices last week were $2 higher in the Southern Plains at $126/cwt., $2 higher in the western Corn Belt at $126-$127 and $2-$3 higher in Nebraska at $127. Dressed trade was $4 higher at $200.

Total estimated cattle slaughter last week was 668,000 head, which was 7,000 more than the previous week and 28,000 more than the same week last year. Total estimated year-to-date cattle slaughter of 27.60 million head was 847,000 head more (+3.17%) than the same time last year. Total estimated beef production of 22.83 billion lbs. was 616.2 million lbs. more (+2.77%) than a year earlier.

Cattle futures closed lower Friday, likely mostly due to week-end and month-end position squaring, given improving fundamentals.

Live Cattle futures closed an average of 94¢ lower, except for $2.87 higher in expiring Oct and 12¢ higher at the back.

Feeder Cattle futures closed an average of 96¢ lower (35¢ to $1.45 lower).

Corn futures closed 4¢ to 5¢ higher through near Jly and then mostly 1¢ higher.

Soybean futures closed 2¢ to 3¢ higher through Jan ‘23 and then mostly  fractionally higher to 1¢ higher.

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Major U.S. financial indices closed higher Friday, despite Apple and Amazon missing quarterly earnings estimates.

The Dow Jones Industrial Average closed 89 points higher. The S&P 500 closed 8 points higher. The NASDAQ closed 50 point higher.

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“It’s a challenging time for crop producers to manage input price risk. Input prices for fertilizer, crop protection (chemicals), machinery, fuel, labor, rent, and insurance are up substantially compared to last year at this time,” says Aaron Smith, crop marketing specialist at the University of Tennessee, in his weekly market comments. “Additionally, availability and timeliness of delivery are a major concern.”

Fertilizer prices underscore the dramatic increase in the cost of crop production.

“All three major nutrients—nitrogen, phosphorus and potassium—used in the production of primary row crops in the U.S. have experienced varying degrees of upward price pressure since late 2020,” say members of the Ag CEO Council (ACC). “Since mid-2020, nitrogen prices have climbed from approximately $450 per ton to $750 per ton, phosphorus prices from $400 per ton to more than $700 per ton and potassium prices from over $300 per ton to over $600 per ton.” That’s in a recent letter from the ACC to Michael Shapiro, Deputy Assistant Secretary for Economic Policy, in response to a request for comments to President Biden’s Executive Order on America’s Supply Chains.

According to the Ag CEO Council, supply chain disruptions, higher crop prices and escalating natural gas prices are all drivers of increasing fertilizer cost.

“The primary feedstock and process fuel for ammonia production is natural gas. The recent doubling of the Henry Hub natural gas price is increasing the cost of ammonia production – the building block for all nitrogen fertilizers,” according to the ACC letter.

ACC members explain multiple trade actions continue to affect both phosphorus and potassium prices. That includes U.S. tariffs on phosphorous imports from Morocco and Russia, in response to unfair subsidization from those countries, as well as China banning phosphorous exports through June of next year.

“Most common fertilizers have more than doubled compared to last year. As such, producers are seeking strategies to reduce input costs,” Smith says. “Two recommendations, as a starting point, are soil sampling (know what you’ve got) and crop selection (know current relative cost and revenue relationships for commodities produced on your farm). Unfortunately, there is no ‘silver bullet’ to mitigate rising input costs and availability concerns. So, producers will need to be creative in their approach and con-sider numerous strategies.”

Cattle futures softened Thursday with a sense of retrenching as market fundamentals improve.

Live Cattle futures closed an average of $1.30 lower (80¢ lower to $2.72 lower in spot Oct).

Rising Corn futures prices continued to pressure Feeder Cattle futures, which closed an average of $1.50 lower (82¢ to $2.02 lower), except for 17¢ higher in expiring Oct.

Corn futures closed 5¢ higher through near Jul and then mostly 1¢ higher.

Soybean futures closed mixed, 2¢ to 5¢ lower through Sep ’22 and then mostly 2¢ to 3¢ higher.

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

So far this week, live prices are $2 higher in the Southern Plains at $126/cwt., $2 higher in the western Corn Belt at $126-$127 and $2-$3 higher in Nebraska at $127. Dressed trade is $4 higher at $200.

Choice boxed beef cutout value was $1.26 higher Thursday afternoon at $284.89/cwt. Select was 95¢ higher at $262.64.

The average dressed steer weight of 922 lbs. (week ending Oct. 16) was 1 lb. heavier than the previous week but 7 lbs. lighter than the same week last year, according to USDA’s Actual Slaughter Under Federal Inspection report. The average dressed heifer weight of 840 lbs. was 1 lb. heavier week to week but 10 lbs. lighter year over year.

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Major U.S. financial indices closed higher Thursday, bolstered by continued strong quarterly corporate earnings reports.

Initial weekly unemployment insurance claims were 281,000 the week ending Oct. 23, according to the U.S. Department of Labor. That was 10,000 fewer than the previous week, the fewest since March 14 last year and fewer than expected.

On the other hand, domestic economic growth was slower than expected in the third quarter.

Real gross domestic product (GDP) increased at an annual rate of 2.0% in the third quarter of 2021, following an increase of 6.7% in the second quarter, according to the U.S. Bureau of Economic Analysis. Slower consumer spending led the deceleration, as government assistance payments decreased. Also, the resurgence of COVID-19 cases resulted in new restrictions and delays in the reopening of establishments in some parts of the country.

The Down Jones Industrial Average closed 239 points higher. The S&P 500 closed 44 points higher. The NASDAQ was up 212 points.

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Globally, companies invested more than $30 billion in sustainability initiatives in 2020, and publicly traded companies and banks are quickly moving to capitalize, according to Kim Stackhouse-Lawson, Ph.D., during the 16th annual Feeding Quality Forum in Fort Collins, Colo.

“These investments outperformed traditional stocks. There will be an influx of dollars that enters this sustainability space quickly, and it’s going to be top-down driven,” says Stackhouse-Lawson. But, consumers also believe they can influence change with their investment choices.

“Seventy-five percent of millennials believe that their investments can influence climate change, and 84% of them believe their investments can help lift people out of poverty,” Stackhouse-Lawson explains. “The Gen Z group is coming up now, and they care too.” She points out nearly all the major food processing companies are making net zero commitments to decrease their carbon emissions and footprint in the next couple of decades.

“What I want you guys to know is that when a company commits to net zero, it 100% includes their entire value chain all the way down to the kernel of corn,” she said. “And even the fertilizer that’s going to go on that kernel of corn.”

Although cattle producers have a long track record of producing more beef with fewer resources, Stackhouse-Lawson says there is room for improvement.

“You have probably heard the industry and scientists, me included, say that we have gotten better over time,” Stackhouse-Lawson explains. “And we have, but it depends on the lens in which you look through. We are efficient, but absolute emissions are still increasing.” Ranchers have a good story to tell, but she says it must be done carefully.

“The first thing I think is important to acknowledge when you talk about sustainability is that emotion and science are on equal footing,” Stackhouse-Lawson says. “If you put them in a head-to-head race, emotion wins in the sustainability space nearly every time.”

Negotiated cash fed cattle prices finally moved beyond steady money Wednesday.

Live prices were $2 higher in the Southern Plains at $126/cwt., $2 higher in the western Corn Belt at $126-$127 and $2-$3 higher in Nebraska at $127. Dressed trade was $4 higher at $200.

Trade was slow on light demand in the Southern Plains and western Corn Belt, according to the Agricultural Marketing Service. It was slow to moderate on good demand in Nebraska.

Despite stronger cash prices, Live Cattle futures closed narrowly mixed, from an average of 28¢ higher through the front five contracts to an average of 18¢ lower.

Although turning the seasonal corner higher, wholesale beef prices were lower Wednesday afternoon. Choice was down $1.13 to $283.63/cwt. Select was 85¢ lower at $261.69.

Feeder Cattle futures softened, though, in the wake of a strong surge in Corn futures.

Feeder Cattle closed and average of $1.34 lower, except for 52¢ higher in nearly spent Oct.

Corn futures closed mostly 10¢ to 13¢ higher with support from ethanol production and lower corn production in Brazil.

Soybean futures closed mostly 2¢ to 3¢ higher.

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Major U.S. financial indices closed mixed Wednesday amid what appeared to be rally fatigue, likely profit taking and skittishness about economic growth. Crude Oil futures were also down sharply on higher weekly inventories than expected.

The Dow Jones Industrial Average closed 266 points lower. The S&P 500 closed 23 points lower. The NASDAQ was up fractionally.

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“Solid grain prices, the Federal Reserve’s record-low interest rates and growing exports have underpinned the Rural Mainstreet Economy,” says Ernie Goss, Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business. “USDA data show that 2021 year-to-date agriculture exports are more than 25.4% above that for the same period in 2020. This has been an important factor supporting the Rural Mainstreet economy.”

Creighton University’s Rural Mainstreet Index (RMI) remained above growth neutral in October for the eleventh consecutive month. It rose to 66.1 from 62.5 in September. The index is based on a monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.

The majority of bankers (82.1%) indicate farmers in their area are in solid cash position with little need for borrowing.

The region’s farmland price index slid to a very strong 81.5 from September’s record high 85.2. October’s reading represented the 14th straight month that the index was above growth neutral.

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.”