WLI

Negotiated cash fed cattle trade was mostly inactive on very light demand in the western Corn Belt through Monday afternoon. Elsewhere, it was at a standstill, according to the Agricultural Marketing Service.

Last week, live trade was generally steady: $120/cwt. in the Southern Plains; $123-$125 in Nebraska; $125 in the western Corn Belt. Dressed trade was steady in Nebraska at $196-$202 and steady to $5 lower in the western Corn Belt at $196-$197.

Cattle futures faded early pressure from outside markets to close mostly higher.

Feeder Cattle futures closed an average of 52¢ higher, except for 5¢ lower in Apr. 

Live Cattle futures closed narrowly mixed, from and average of 46¢ lower to an average of 16¢ higher.

Choice boxed beef cutout value was $1.45 lower Monday afternoon at $266.49/cwt. Select was $2.30 lower at $249.49/cwt.

Grain futures closed mixed Monday with traders eyeing sharply lower outside markets and weather.

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

Soybean futures closed 14¢ to 26¢ lower through Sep. ’22 and then mostly 9¢ lower.

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Equity markets tumbled Monday with investors fretting the potential economic slowdown from resurgent COVID-19 cases among the unvaccinated.

The Dow Jones Industrial Average closed 725 points lower. The S&P 500 closed 68 points lower. The NASDAQ was down 152 points.

CME WTI Crude Oil futures closed $4.77 to $5.39 lower through the front six contracts.

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“High feed prices mostly impact how cattle are produced. In an environment of high feed prices, the industry incentives are to make cattle bigger before feedlot placement and to slow down the rate of cattle production somewhat. For cow-calf and stocker producers, this means more opportunities for retained stockers and stocker production to heavier weights in response to those market signals,” says Derrell Peel, Extension livestock marketing specialist, in his weekly market comments.

More specifically, Peel explains feeder cattle markets respond to increased feed costs by reducing the price premium of lightweight feeders.

“This represents a reduction in the price rollback or price slide for feeder cattle as weight increases,” Peel says. “The result is to increase the value of gain for stocker production and thereby encourage cattle to achieve more weight prior to placement in the feedlot. More emphasis on stocker production also slows down the movement of cattle into the feedlot and reduces feed demand by spreading out feeder cattle over more time.”

Another way of looking at it, Peel says is that the price of lightweight feeder cattle would be significantly higher relative to heavy feeders with lower feed costs and the market line would be steeper and would be close to the green line.

Negotiated cash fed cattle trade was at a standstill in the Southern Plains through Friday afternoon, according to the Agricultural Marketing Service. Elsewhere, it was limited on light to moderate demand with too few transactions to trend.

For the week, live trade was generally steady in the Southern Plains at $120/cwt. and at $123 in Nebraska. It was unevenly steady in the western Corn Belt at $125.00-$125.50. There was no established dressed trade.

Choice boxed beef cutout value was $1.93 lower Friday afternoon at $267.94/cwt. Select was 69¢ lower at $251.79/cwt.

Total estimated cattle slaughter last week was 653,000 head, which was 78,000 head more than the previous holiday-shortened week.

Year-to-date estimated total cattle slaughter of 17.94 million head is 802,000 head more (+4.68%) than the same period last year.

Year-to-date estimated total beef production of 14.85 billion lbs. is 706.5 million lbs. more (+4.99%) than last year.

Cattle futures lost some ground Friday amid generally steady cash prices, lower outside markets and stronger Wheat futures.

That was despite front-month Lean Hog futures surging higher in response to news that African Swine Fever (ASF) was confirmed in Germany’s domestic swine population for the first time, by the National Reference Laboratory for African Swine Fever at the nation’s Friedrich-Loeffler Institute (FLI). The disease was confirmed in one sow at an organic farm and two pigs at a smallholdings farm, in districts near the border between Germany and Poland. The disease was confirmed in a wild boar in the same region last September.

Feeder Cattle futures closed an average of $1.14 lower (72¢ to $1.75 lower).

Live Cattle futures closed an average of 68¢ lower (12¢ to 95¢ lower).

Grain futures closed mixed Friday.

Corn futures closed 3¢ to 8¢ lower through new-crop contracts and then fractionally higher to 3¢ higher.

Soybean futures closed 7¢ to 11¢ higher through Aug. ’22 and then mostly 2¢ to 3¢ higher.

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Even though U.S. retail and food service sales increased 0.6% month to month in June — more than analysts expected — according to the U.S. Census Bureau, major U.S. financial indices faltered Friday, amid inflation worries and some likely profit taking.

The Dow Jones Industrial Average closed 299 points lower. The S&P 500 closed 32 points lower. The NASDAQ was down 115 points. 

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USDA boosted expected average feeder steer prices by $5/cwt. for upcoming quarter, based on current price strength.

Specifically, in the latest Livestock, Dairy and Poultry Outlook, USDA projects the average price of feeder steers (750-800 lbs., Oklahoma City) at $146/cwt. in the third quarter and $148 in the fourth quarter for an annual average of $142.13. Next year, prices are forecast to be $144 in the first quarter and $142 in the second quarter with an annual average price of $146.50 in 2022.

Earlier in the week, analysts with USDA’s Economic Research Service (ERS) raised expectations for fed steer prices, too. In the July World Agricultural Supply and Demand Estimates, ERS forecast the average five-area fed steer price at $120/cwt. in the third quarter, $123 in the fourth quarter and $127 in the first quarter of next year.

“Based on Agricultural Marketing Service data — actual and estimated daily cattle slaughter — the percentage of heifer slaughter compared to that of steers for June 2021 was estimated 2.5% higher than a year ago. The estimated percentage of federally inspected cow slaughter to total slaughter for June 2021 was 0.5% higher than June 2020,” say ERS analysts.

Based on the U.S. Drought Monitor, ERS estimates approximately 34% of the nation’s cattle are in regions experiencing some level of drought.

“Pasture and range in much of the western and northern United States continue to be in very poor to poor conditions, which is likely affecting cow slaughter in regions where forage availability has become critical,” say ERS analysts. “However, to the extent that the increase in aggregate slaughter numbers is driven by higher expected cow numbers and that heifers have recently been a higher proportion of steer and heifer slaughter, average carcass weights are expected to be lower.”

Negotiated cash fed cattle trade was at a standstill in the Texas Panhandle through Thursday afternoon. Elsewhere, it was limited on light to moderate demand with too few transactions to trend.

On Wednesday, live sales in Nebraska were steady with the previous week at $123/cwt. and unevenly steady in the western Corn Belt at $125.00-$125.50. Last week, dressed trade in both regions was at $196-$202.

A day earlier, live trade in the Southern Plains was generally steady at $120.

Cattle futures closed narrowly mixed Thursday with pressure from sluggish cash fed cattle sales and continued erosion of wholesale beef values. Weekly U.S. beef export sales also took a breather.

Net U.S. beef export sales for the week ending July 8 were 9,300 metric tons (2021), which was 61% less than the previous week and 44% less than the prior four-week average, according to the Weekly U.S. Export Sales report. Increases were primarily for Japan, Mexico, China, Taiwan), and South Korea. 

Feeder Cattle futures closed mixed, from 25¢ lower to 43¢ higher.

Live Cattle futures closed mixed, from an average of 17¢ lower to an average of 9¢ higher, except for unchanged in the back contract.

Choice boxed beef cutout value was $3.01 lower Thursday afternoon at $269.87/cwt. Select was $1.27 lower at $252.48/cwt.

The average dressed steer weight the week ending July 3 was 884 lbs., according to USDA’s Actual Slaughter Under Federal Inspection report. That was 1 lb. heavier than the previous week but 12 lbs. lighter than the same week a year earlier. The average dressed heifer weight of 811 lbs. was 1 lbs. lighter than the previous week and 15 lbs. lighter than the previous year.

Corn futures closed 2¢ to 4¢ lower through Jul ’22 and then 2¢ to 3¢ higher.

Soybean futures closed 3¢ to 6¢ lower across the board.

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Major U.S. financial indices closed mixed Thursday, despite positive quarterly corporate earnings reports and jobless progress.

Initial unemployment insurance claims the week ending July 10 were 360,000. That was 26,000 fewer than the previous week and the fewest since March 14 last year.

The Dow Jones Industrial Average closed 54 points higher. The S&P 500 closed 14 points lower. The NASDAQ was down 102 points.

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“With record U.S. beef production forecast this year, U.S. beef exports are forecast to strengthen their position in the global marketplace,” according to a special report from USDA’s Foreign Agricultural Service (FAS). “Meanwhile, lower production in Australia and tighter exportable supplies from Argentina are expected to limit the global availability of beef. For 2021, U.S. beef exports are forecast to reach a record 1.5 million metric tons (mt) carcass weight equivalent (cwe), up 16% compared to last year and 8% above the 2018 high.”

Through the first five months this year, exports to South Korea accounted for 25% of all U.S. beef export in terms of both volume and value, according to the report.

FAS analysts note that exports to China continue to grow, although they still represent a sliver of that nation’s imports.

“U.S. beef has benefited from the Economic and Trade Agreement between the United States and the People’s Republic of China (also known as the Phase One Agreement), which expanded market access for U.S. beef by eliminating several long-standing non-tariff barriers,” according to the report. Through May 2021, China ranks as the third-largest U.S. market by both volume and value, surpassing both Mexico and Canada which have historically been ranked as top U.S. markets.”

Negotiated cash fed cattle trade in Nebraska was slow on light demand through Wednesday afternoon, according to the Agricultural Marketing Service. Compared to the last reported market on Monday, live sales traded $2 lower at $123/cwt. Last week, dressed sales were at $196-$202/cwt.

In the Southern Plains and Western Corn Belt, trade was mostly inactive on light demand. On Tuesday in the Southern Plains, live sales traded mostly at $120/cwt. In the Western Corn Belt, last week live sales traded from $124-$126/cwt. and dressed at $196-$202/cwt.

Cattle futures tried to extend gains early Wednesday but apparently ran out of technical steam.

Feeder Cattle were also pressured by strong gains in Corn futures.

Feeder Cattle futures closed an average of $2 lower (from $1.55 to $2.42).

Live Cattle futures closed an average of 41¢ lower, except for 12¢ higher in the back contract.

Choice boxed beef cutout value was 46¢ lower Wednesday afternoon at $272.88/cwt. Select was $2.99 lower at $253.75/cwt.

Front-month grain futures continued higher with a hotter, drier forecast and reports of storm-damaged beans in some areas of the Corn Belt.

Corn futures closed 15¢ to 18¢ higher through new-crop contracts and then mostly unchanged to fractionally higher.

Soybean futures closed 29¢ to 38¢ higher through the front six contracts and then mostly 20¢ to 25¢ higher.

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Major U.S. financial indices closed narrowly mixed on Wednesday.

Support included testimony from Federal Reserve Chair Jerome Powell to the U.S. House Committee on Financial Services. He stressed the Fed remained committed to maintaining the federal funds rate near zero and the current level of asset purchases until the Fed’s long-term goal of inflation exceeding 2% for some time.

“Inflation has increased notably and will likely remain elevated in coming months before moderating. Inflation is being temporarily boosted by base effects, as the sharp pandemic-related price declines from last spring drop out of the 12-month calculation,” Powell explained. “In addition, strong demand in sectors where production bottlenecks or other supply constraints have limited production has led to especially rapid price increases for some goods and services, which should partially reverse as the effects of the bottlenecks unwind. Prices for services that were hard hit by the pandemic have also jumped in recent months as demand for these services has surged with the reopening of the economy.”

The Dow Jones Industrial Average closed 44 points higher. The S&P 500 closed 5 points higher. The NASDAQ closed 33 points lower.

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Despite increased beef cow slaughter this year, less dairy cow slaughter and beef imports are helping maintain cull cow prices at higher levels, according to James Mitchell, Extension livestock economist with the University of Arkansas.

“Southern Plains slaughter cow prices have averaged 8.1% above 2020 and 14.7% above 2019 prices,” Mitchell says, in the most recent issue of In the Cattle Markets. “In 2021, dairy cow slaughter has averaged 0.9% below 2020 slaughter and 3.7% lower than 2019 slaughter. USDA forecasts beef imports to be down 10% this year.”

“Cull beef cows contribute to ground beef production as a source of 90% lean trimmings, blended with 50% lean trimmings to make the majority of our ground beef and hamburger,” Mitchell explains. “The other two sources of lean trimmings are dairy cows and lean beef imports. For context, in 2019 and 2020, cull beef and dairy cows represented 28.4% and 27.6% of total U.S. beef trim supplies, respectively. Fed cattle trimmings are the main source of 50% lean trim. In 2020, fed trim accounted for 41.3% of total U.S. supplies.”

Lean trim and ground beef prices are also underpinning cull cow prices, Mitchell says.

“Fresh 90% lean trimmings have averaged 4% below 2020 prices but 11% higher than 2019 prices, Mitchell explains. “BLS data through May 2021 shows that ground beef prices have averaged $4.04/lb.  or 0.5% higher than 2020. Lean ground beef prices have averaged 1.6% and 9.9% above 2020 and 2019 prices, respectively. The only way to have higher prices with larger supplies of cull cows and lean trimmings is with strong ground beef demand.”

Negotiated cash fed cattle trade was limited on light demand in the Texas Panhandle through Tuesday afternoon, according to the Agricultural Marketing Service. Compared to last week, early live sales traded steady at $120/cwt. In Kansas, trading was slow on moderate demand. Compared to last week, early live sales traded steady to $1 higher, mostly at $120/cwt.

In Nebraska and the Western Corn Belt, cash trading was mostly inactive on light demand. In Nebraska on Monday, live sales traded at $125/cwt.; dressed sales last week traded from $196-$202/cwt. In the Western Corn Belt, last week live sales traded from $124-$126/cwt. and dressed at $196-$202/cwt.

Whether it was hedging for inflation (see below) or simply considering the fundamentals and optimistic prices ahead, Live Cattle futures closed higher Tuesday, dragging Feeder Cattle along.

Live Cattle futures closed an average of $1 higher (45¢ to $1.92 higher).

Feeder Cattle futures closed an average of 82¢ higher (62¢ to $1.17 higher).

Choice boxed beef cutout value was $1.66 lower Tuesday afternoon at $273.34/cwt. Select was $2.03 lower at $256.74/cwt.

Net U.S. beef export sales were 23,700 metric tons (for 2021) the week ending July 1, according to USDA’s Weekly Export Sales report. That was 96% more than the previous week and 64% more than the prior four-week average.

Increases were primarily for South Korea, Japan, China, Mexico, and Canada. 

Grain futures edged higher with follow-through support from the previous day’s, WASDE.

Corn futures closed 7¢ to 8¢ higher through Jly ‘22, and then mostly 3 higher

Soybean futures closed mostly 1¢ to 3¢ higher.

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Major U.S. financial indices closed lower on Tuesday after reports the consumer price index rose 0.9% last month and 5.4% compared to June 2020 – higher than expected and the biggest jump since 2008.

The index for all items less food and energy rose 0.9% in June after increasing 0.7% percent in May, according to the U.S. Bureau of Labor Statistics.

The food index increased 0.8% in June. The beef index rose 4.5% in June, its steepest one-month increase since June of last year.

The Dow Jones Industrial Average closed 107 points lower. The  S&P 500 closed 15 points lower. The NASDAQ was down 56 points.

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Despite elevated feed costs, prospects for higher fed cattle prices are pushing projected feedlot returns higher, according to the latest monthly Focus on Feedlots Survey (FFS) from Kansas State University.

Currently, net returns projected for closeouts in June are -$11.22/head for steers and -$47.34/head for heifers. Estimated returns in May were +$3.71 for steers and -$39.91 for heifers.

After projected returns for steers of -$19.30/head in July, the FFS forecasts positive returns for the remainder of the year ranging from $3.34 (Sept.) to +$76.33 (Dec.). Feedlot cost of gain for September through December ranges from $126/cwt. (Sept.) to $137.08 (Dec.).

Projected returns follow a similar path for fed heifers.

Keep in mind that estimates exclude any price risk management.