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. There were too few transactions to trend.

Live prices last week were steady in the Southern Plains on a live basis at $124/cwt. and steady to $2 higher at $124 in Nebraska and the western Corn Belt. Dressed prices were at $196, which was steady in Nebraska but steady to $3 higher in the western Corn Belt.

Estimated total cattle slaughter last week of 646,000 head was 11,000 head fewer than the previous week. Year-to-date estimated total cattle slaughter of 26.3 million head is 806,000 head more than last year (3.2%). Year-to-date estimated total beef production of 21.72 billion lbs. is 588.9 million lbs. more than a year earlier (+2.8%).

Live Cattle futures closed an average of 50¢ higher with follow-through support from the previous session tied to firmer cash prices and higher outside markets.

Feeder Cattle futures closed an average of 71¢ lower, pressured by a surge in Corn futures and week-end positioning.

Corn futures closed mostly 7¢ to 9¢ higher.

Soybean futures closed mostly 9¢ to 11¢ higher.

Choice boxed beef cutout value was 8¢ lower Friday afternoon at $280.24/cwt. Select was 6¢ lower at $260.62.

The average dressed steer weight for the week ending Oct. 2 was 916 lbs., according to USDA’s Actual Slaughter Under Federal Inspection report. That was 2 lbs. heavier than the previous week but 8 lbs. lighter than a year earlier. The average dressed heifer weight of 836 lbs. was 3 lbs. heavier than the previous week but 7 lbs. lighter than the same week last year.

*******************************

Major U.S. financial indices closed higher again Friday, boosted by follow-through support and another day of strong corporate quarterly earnings reports. U.S. food service and retail sales also grew more than expected in September — up 0.7%, according to the U.S. Census Bureau.

The Dow Jones Industrial Average closed 382 points higher. The S&P 500 closed 33 points higher. The NASDAQ was up 73 points.

*******************************

Due to increasing natural gas prices, nitrogen fertilizer prices are relatively high compared to recent years and are expected to remain high and possibly increase through next spring, says Dave Franzen, Extension soil science specialist at North Dakota State University.

“China has supplied about a third of the world’s phosphate, and it has essentially banned exports through 2022,” Franzen explains. “That puts the burden of supply on other countries, including the United States.”

According to Franzen, the U.S. is not in a great position for mine and production expansion due to serious environmental concerns. This means that phosphate prices, which are already high, will continue to increase at least through 2022.

As for the Nitrogen side of the equation, the price for taking winter delivery of natural gas is now trading at a seven-year high as global scarcity concerns and a more measured return to domestic production growth have fueled early buying, according to the latest quarterly report from CoBank’s Knowledge Exchange Division (CKE).

“The market appears to be concerned that the demand for U.S. natural gas exports is so strong that there may be little flexibility in meeting domestic demand, should another cold winter unfold. Exports have risen significantly, with the U.S. now exporting about 10% of its dry gas production, a 30% increase compared to year ago levels,” say CoBank analysts.

As mentioned in Cattle Current last week, the CKE report explains rapidly rising input costs and product shortages are hitting agriculture particularly hard, as agricultural commodity prices have flattened and inflation compresses margins. In part, input shortages and increasing input costs stem from ongoing supply chain disruptions spun by the pandemic.

“Supply chain snarls are likely to persist well into 2022, and so will elevated inflation,” says Dan Kowalski, CKE vice president. “The latest producer price index data for August was up 20% year-over-year, while the consumer price index increased just 5.2%. So it’s clear that many businesses are passing only a small portion of those cost increases on to the final consumer. We expect that will change in the months ahead and many businesses will raise prices.”

Noting recent volatility in grain markets, Andrew P. Griffith, agricultural economist at the University says,  “At the end of the day, most of this volatility stems from a broader uncertainty in the U.S. economy and abroad as fertilizer prices continue to skyrocket and as energy prices do the same.”

“This means cattle producers need to put an increased focus on managing input prices,” Griffith says, in his weekly market comments. “Producers do not control the price of an input, but a producer does control how much of each input they utilize. High input prices will likely mean cattle producers will be forced to pick and choose the most important inputs for their operation and look for alternative solutions for the other inputs.”

Negotiated cash fed cattle trade was limited on moderate demand in Nebraska and the western Corn Belt through Thursday afternoon, according to the Agricultural Marketing Service. Live sales were steady to $2 higher in the western Corn Belt at $124/cwt., while dressed prices were steady at $196. There were too few to trend in Nebraska, where prices the previous day were steady to $2 higher at $124; steady in the beef at $196.

Trade in the Southern Plains was mostly inactive on light demand with too few transactions to trend. On Wednesday, live prices were steady at $124.

Higher outside markets and the slight increase in some regional cash prices helped draw more buying interest to Cattle futures Thursday.

Live Cattle futures closed an average of 78¢ higher (35¢ higher toward the back to $1.30 higher toward the front).

Feeder Cattle futures closed an average of 84¢ higher.

Choice boxed beef cutout value was 30¢ higher Thursday afternoon at $280.32/cwt. Select was $1.98 higher at $260.68.

Corn futures closed mostly 1¢ to 3¢ higher.

Soybean futures closed 5¢ to 11¢ higher through Sep ’22 and then mainly 1¢ lower.

*******************************

Major U.S. financial indices closed sharply higher Thursday, fueled by blue-chip quarterly earnings reports beating expectations. The continued rally in oil added spark, as did fewer weekly initial jobless claims than expected.

Weekly unemployment insurance claims for the week ending Oct. 9 numbered 293,000, according to the U.S. Department of Labor. That was 36,000 less than the previous week and the lowest level since March 14 of last year when they tallied 256,000.

The Dow Jones Industrial Average closed 534 points higher. The S&P 500 closed 74 points higher. The NASDAQ was up 251 points.

*******************************

Open interest in Cattle futures continues to dwindle.

For recent perspective, Live Cattle open interest declined from a high of 314,114 contracts toward the beginning of September to a low of 289,222 Sept. 21 and then bounced as high as 292,326 before the end of the month. So far in October, Live Cattle open interest ranges from a high of 292,386 contracts Oct. 4 to a low of 281,581 Oct. 13.

Matthew Diersen, risk and business management specialist in the Ness School of Management and Economics at South Dakota State University provides some insight in the latest issue of In the Cattle Markets, published by the Livestock Marketing Information Center. He uses Live Cattle futures settlement Oct. 5 and the Commitment of Traders (COT) report from Oct. 8.

“In Live Cattle, the open interest held by producers (very large feedlots and processors) has been declining by those with short positions and increasing by those with long positions. The opposite has been happening with managed money; with more shorts and fewer longs,” Diersen says. “In Feeder Cattle, the largest share of open interest is held by managed money. In recent weeks they have reduced long positions and added short positions.”

Diersen explains many commodity indexes include Live Cattle and some include Feeder Cattle.

“The COT includes a supplement with a breakdown of index traders that includes futures and options. For Live Cattle, about one-third of open interest is long positions of index traders. Generally, these would be fund managers that buy and hold futures, then repeatedly roll to new contracts, always maintaining some exposure to cattle. Their net exposure is about opposite that of commercial traders at this time,” he says. “For Feeder Cattle, the contracts held by index traders is much smaller compared to Live Cattle contracts and the balance is more evenly split between long and short positions, though they are still net long.”

Negotiated cash fed cattle trade was steady with the previous week in the Southern Plains at $124/cwt. through Wednesday afternoon, according to the Agricultural Marketing Service. Trade was limited on light demand in the Texas Panhandle; slow on moderate demand in Kansas.

Trade in other regions was slow on light demand.

Live sales in Nebraska were steady to $2 higher at $124; steady in the beef at $196. Although too few to trend, there were some early live sales in the western Corn Belt at $123-$124, and a few in the beef at $196. Price there last were $122 and $193-$196, respectively.

Cattle futures closed lower Wednesday. Along with lower outside markets early in the day, most pressure seemed tied to WASDE increasing expected beef production for this year, as wholesale beef prices decline and cash fed cattle prices remain tough to budge.

Feeder Cattle futures closed an average of 85¢ lower (22¢ to $1.32 lower).

Live Cattle futures closed an average of 71¢ lower (25¢ lower at the front to $1.15 lower.

Choice boxed beef cutout value was $1.05 lower Wednesday afternoon at $280.02/cwt. Select was $2.65 lower at $258.70.

Corn futures closed mostly 6¢ to 10¢ lower.

Soybean futures closed mostly 4¢ to 7¢ lower.

*******************************

Major U.S. financial indices closed mixed Wednesday. News was mixed, too

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.4% in

September on a seasonally adjusted basis after rising 0.3% in August, according to the U.S. Bureau of Labor Statistics. Leave food and energy out, and the month-to-month increase was 0.2%. The all-items index increased 5.4% over the last 12 months, before seasonal adjustment.

Minutes from the Federal Reserve meeting in September suggest stimulus tapering as soon as next month, which was expected.

The Dow Jones Industrial Average closed fractionally lower. The S&P 500 closed 13 points higher. The NASDAQ was up 105 points.

*******************************

Pent-up demand provided a tailwind for the meat industry in recent months, but the full effect of inflation is expected to test consumers’ appetite for meat during the fourth quarter, according to analysts with CoBank’s Knowledge Exchange Division (CKE).

Pandemic-disrupted supply chains have plenty to do with recent inflationary price pressure.

According to a new CKE Quarterly report, supply chains are arguably in the most dire condition since the start of the pandemic, as lead times for manufacturing inputs recently reached record highs. Persistent supply chain disruptions and labor shortages are adding significant costs to business operations, and consumers will feel these effects through higher prices for months to come.

“Supply chain snarls are likely to persist well into 2022, and so will elevated inflation,” says Dan Kowalski, CKE vice president. “The latest producer price index data for August was up 20% year-over-year, while the consumer price index increased just 5.2%. So it’s clear that many businesses are passing only a small portion of those cost increases on to the final consumer. We expect that will change in the months ahead and many businesses will raise prices.”

Rapidly rising input costs and product shortages are hitting agriculture particularly hard, as agricultural commodity prices have flattened and inflation compresses margins, according to the CKE report. However, CKE analysts say robust exports have kept much of agriculture in the black.

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.

*****************************

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.

*****************************

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.

*******************************

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.

*******************************

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.”