WLI

Negotiated cash fed cattle trade was limited on light demand in Nebraska and the Western Corn Belt through Friday afternoon, according to the Agricultural Marketing Service. It was at a standstill in the Southern Plains.

For the week, live prices were steady to $2 lower in the Southern Plains at $120-$122/cwt. and unevenly steady in the North at $124-$126. Dressed prices were steady to $1 higher at $197-$198.

Stagnant cash trade and lower wholesale beef prices pressured Live Cattle futures Friday.

Live Cattle futures closed mostly lower, from 2¢ lower toward the back to $1.57 lower in spot Aug, except for unchanged to 2¢ higher in three contracts.

Softer Corn futures helped Feeder Cattle futures close an average of 70¢ higher, except for 50¢ lower at the back.

Choice boxed beef cutout value was $2.21 lower Friday afternoon at $285.44/cwt. Select was $2.52 lower at $264.41.

Estimated total cattle slaughter last week was 623,000 head, according to USDA, which was 38,000 head fewer than the previous week. Year-to-date estimated total cattle slaughter of 16.71 million head is 865,000 head more (+5.5%) than last year. Year-to-date estimated beef production of 13.85 billion lbs. is 784.7 million lbs. more (+6.0%).

Thin trade volume and positive weather pressured Corn and Soybean futures.

Corn futures closed 22¢ lower in spot Jly and then 8¢ and 9¢ lower in new crop contracts. Soybean futures closed mostly 2¢ to 5¢ higher.

For the week, though, Corn futures closed an average of 59¢ higher through the front six contracts, while Soybean futures closed an average of $1.27 higher through the front six contracts.

That had everything to do with USDA’s Acreage report issued on Wednesday. USDA estimated corn planted area for all purposes to be 1.87 million acres more than last year at 92.7 million acres, and soybean planted area 5% more at 87.6 million acres. That was significantly less than analysts expected for both crops.

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Major U.S. financial indices closed higher Friday, buoyed by the positive employment outlook. Total non-farm payroll employment increased 850,000 in June, according to the U.S. Bureau of Labor Statistics. The unemployment rate was little changed at 5.9%. Average hourly earnings for all employees on private non-farm payrolls increased 10¢ to $30.40.

The Dow Jones Industrial Average closed 153 points higher. The S&P 500 closed 32 points higher. The NASDAQ was up 117 points.

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Members of the Texas Cattle Feeders Association (TCFA) are proving their willingness and ability to increase cash trade on a voluntary basis. According to the most recent weekly TCFA newsletter, members are exceeding regional quarterly cash trade goals outlined by what’s termed the industry’s 75% plan, a voluntary framework adopted by the National Cattlemen’s Beef Association (NCBA).

“TCFA members have surpassed levels established in the NCBA plan. More specifically, our members averaged 13,681 head per week in Q2 2021; 10,893 head per week in Q1 2021 and 9,593 head per week in Q4 2020 compared to the TCFA goal of 9,750 head in the NCBA plan,” says TCFA Chairman, Scott Anderson. “By any measure, we have proven that an industry solution to increasing negotiated trade will work. We do not need a government mandate and all the unintended consequences that could result. Our members have clearly demonstrated their commitment to increasing negotiated trade and improving price discovery. We want the market to work and will continue to also focus on leverage and competition issues that are negatively impacting the market.”

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

So far this week, live prices are steady to $2 lower in the Southern Plains at $120-$122/cwt. and unevenly steady in the North at $124-$126. Dressed prices are steady to $1 higher at $197-$198.

Cattle futures rallied back Thursday, following heavy pressure from grains in the previous session.

Live Cattle futures closed an average of $1.03 higher.

Feeder Cattle futures closed an average of $1.27 higher.

Choice boxed beef cutout value was $2.17 lower Thursday afternoon at $230.23/cwt. Select was $1.52 lower at $205.35.

The average dressed steer weight the week ending June 19 was 879 lbs., according to USDA’s Actual Slaughter Under Federal Inspection report. That was 3 lbs. lighter than the previous week and 11 lbs. lighter than the same week last year. The average dressed heifer weight was 2 lbs. heavier week to week at 813 lbs., but 10 lbs. lighter than a year earlier.

Corn and Soybean futures finished Thursday a touch softer amid volatile trade, following the previous day’s limit-up and near limit-up moves in the front months.

Corn futures closed mostly 1¢ to 3¢ lower.

Soybean futures closed down between 1¢ and 3¢ lower through the front six contracts and then mostly 3¢ to 6¢ lower.

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Major U.S. financial indices closed higher Thursday on positive economic reports, including a new low in initial jobless claims since the pandemic started and news that U.S. manufacturing expanded.

For the week ending June 26, initial unemployment insurance claims tallied 364,000, which was 51,000 fewer than the previous week and the lowest level since March 14 last year.

The Dow Jones Industrial Average closed 131 points higher. The S&P closed 22 points higher. The NASDAQ was up 18 points. 

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“Currently, U.S. cattle inventories are cyclically high, but beef demand is also high both domestically and in our major export markets. The clearest solution to meeting this demand while fostering profitability throughout the supply chain is to expand beef processing capacity,” according to comments from the Texas Cattle Feeders Association (TCFA). These comments were submitted in response to the supply chain executive order (14017) issued by the Biden administration earlier this year. In part, the order seeks to develop initiatives that bolster cattle and beef supply chain resiliency.

“Meatpackers of all sizes face similar operational challenges, the most consistent and severe of which is labor recruitment and retention. The largest barrier to entry, however, is access to sufficient capital for construction,” according to the TCFA comments. “The industry average startup cost for a meat processing facility is roughly $100,000 per hook. This means that a 1,000-head-per-day plant would need to secure $100 million in financing just to build the infrastructure. As a further complication, traditional lending institutions are sometimes unable to provide adequate financing due to the capital requirements of meatpacking business models.”

Although expanding domestic beef processing capacity is a key mid-to-long term strategy to improve supply chain resiliency, TCFA also points out current infrastructure offers added opportunity.

“Most major meatpackers are not operating plants at 100% throughput capacity,” according to TCFA. “Unfortunately, due to the proprietary nature of firm-by-firm and plant-by-plant efficiency data, the exact number of hooks which are not being utilized is unknown. TCFA urges USDA to examine ways to support the industry in reaching 100% processing capacity utilization.”

Negotiated cash fed cattle prices were unevenly steady through Wednesday afternoon, according to the Agricultural Marketing Service. Live prices were steady to $1 higher in Nebraska at $125-$126/cwt., but steady to $2 lower in Kansas at $120-$122 (compare to two weeks earlier). Dressed prices in Nebraska were $1 higher at $198.

Although too few to trend, there were some live sales in the western Corn Belt steady to $1 higher at $126 and some in the beef $1 higher at $198.

So far this week, live prices in the Texas Panhandle are steady to 75¢ lower than two weeks earlier at $121.25 to $122.00.

Feeder Cattle futures sagged lower Wednesday beneath the weight of surging Corn futures, while Live Cattle received support from outside markets.

Live Cattle futures closed an average of 63¢ higher, except for 5¢ lower in expiring Jun.

Feeder Cattle futures closed an average of $2.19 lower through the front four months, then an average of 73¢ lower.

Choice boxed beef cutout value was $1.05 lower Wednesday afternoon at $291.29/cwt. Select was $1.13 lower at $269.27

USDA’s Acreage and Grain Stocks reports (see below) fueled grain futures Wednesday. Along with month-end position squaring, the wetter forecast and the coming holiday, some expect extreme price volatility in the coming days.

Corn futures closed between 25¢ and 40¢ higher through the front six contracts. That included limit-up in the front four new-crop contracts.

Soybean futures closed between 73¢ and 90¢ higher through the front six contracts

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Major U.S. financial indices closed mixed on slow trading Wednesday.

The Dow Jones Industrial Average closed 210 points higher. The S&P 500 closed 6 points higher. The NASDAQ down 24 points.

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Grain futures surged Wednesday as the latest USDA reports underscored the necessity of yield-favorable weather. Planted acre projections were significantly less than analyst expectations ahead of the report. Estimated grain stocks were less than expected, too.

Acreage

USDA estimates corn planted area for all purposes this year at 92.7million acres, according to the Acreage report released Wednesday. That would be 1.87 million acres more (+2%) than last year.

Soybean planted area for 2021 is estimated at 87.6 million acres, up 5% from last year.

All wheat planted area this year is projected to be 46.7 million acres, which would be 5% more than last year, but still the fourth lowest all wheat planted area since records began in 1919. The 2021 winter wheat planted area, projected at 33.7 million acres, would be 11% more than last year.

Estimated acres of all hay harvested this year is forecast at 51.5 million acres, which would be 701,000 fewer acres (-1.34%) than last year.

Grain Stocks

Corn stocks in all positions on June 1 were 18% less than a year earlier at 4.11 billion bu., according to USDA’s quarterly Grain Stocks report. Of the total stocks, 1.74 billion bu. are stored on farms, down 39% from a year earlier. Off-farm stocks, at 2.37 billion bu., are up 11% from a year ago.

Soybeans stored in all positions on June 1 totaled 767 million bu., down 44% from the same time last year. On-farm stocks totaled 220 million bu., down 65% from a year ago. Off-farm stocks, at 547 million bu., are down 27% from a year ago.

Old crop all wheat stored in all positions on June 1 totaled 844 million bu., down 18% from a year earlier. On-farm stocks are estimated at 142 million bu., down 38% from last year. Off-farm stocks, at 702 million bu., are down 12% percent from a year ago.

Negotiated cash fed cattle trade was at a standstill in most regions through Tuesday afternoon, according to the Agricultural Marketing Service. In the Western Corn Belt, trading was mostly inactive on very light demand. Last week in the region, live sales traded from $125-$126/cwt. and dressed at $197/cwt.

The latest reported market in the Southern Plains was two weeks ago with live sales at $122/cwt.

On Monday in Nebraska, live sales traded at $126.50/cwt. and dressed sales at $197/cwt.

Cattle futures closed narrowly mixed Tuesday, able to fade some early pressure, but remained mired in uncertainty surrounding potential contract-end volatility (Live Cattle), limited cash trade last week, coupled with next week’s holiday and how Wednesday’s USDA Grain Stocks and Acreage reports will influence feed prices.

Live Cattle futures closed mixed with an average of 33¢ higher through the front three contracts then from 15¢ lower to 25¢ higher.

Feeder Cattle futures closed mixed, up an average of 64¢ higher in the front four contracts.

Choice boxed beef cutout value was $5.09 lower Tuesday afternoon at $292.34/cwt. Select was $3.56

Grain futures closed mainly narrowly mixed as traders awaited direction from the aforementioned USDA reports due out Wednesday.

Corn futures closed mostly 2¢ lower to 1¢ higher, except 19¢ higher in spot Jly.

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Major U.S. financial indices were little changed on Tuesday.

The Dow Jones Industrial Average closed 9 points higher. The S&P 500 closed a point higher and the NASDAQ was up 28 points.

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“Before trying to “fix” something it is prudent to look back and acknowledge the benefits that flow from the system as it exists,” says Mark Dopp, senior vice president of government affairs for the North American Meat Institute (Meat Institute). “In 2019, Americans spent an average of 9.5% of their disposable personal incomes on food—divided between food at home (4.9%) and food away from home (4.6%).

“Between 1960 and 1998, the share of disposable personal income spent on total food by Americans, on average, fell from 17.0% to 10.1%, driven by a declining share of income spent on food at home. Indeed, Americans spend less of their disposable personal income on food than any other country in the world. This remarkable drop is attributable largely to systemic efficiencies that allow food processors to offer food to consumers at lower prices.”

Dopp’s perspectives come from a letter submitted in response to a request by U.S. Agriculture Secretary Tom Vilsack for comments about efforts to improve supply chains for the production of agricultural commodities and food products.

In the letter, Dopp outlines some of the myths and misconceptions surrounding current debate and proposed legislation aimed at cattle markets. Some of that focuses on strained beef packing capacity, resulting in lost producer market leverage.

In written testimony to the U.S. Senate Agriculture Committee last week, Julie Anna Potts, Meat Institute President and CEO Julie Anna Potts pointed out publicly announced plans for beef packing capacity expansion would add more than 5,200 head per day capacity.

“These new entrants or company expansions were based on decisions to build or expand based on market conditions, not because of government intervention. Government interference into the market could well undermine this industry growth,” Potts says.

“Demands for more harvest capacity also ignore another fundamental issue: a significant, perhaps the biggest, problem facing the meatpacking industry is labor, or the shortage of it, “Dopp explained in his comments. “Labor challenges were not caused by the pandemic; COVID-19 only exacerbated the issue.”

Negotiated cash fed cattle trade was at a standstill in the Texas Panhandle through Monday afternoon, according to the Agricultural Marketing Service. The latest reported market in the Southern Plains was two weeks ago with live sales at $122/cwt.

Trading was slow on light demand in Nebraska with early live sales steady to $1.50 higher at $126.50/cwt. Last week in Nebraska, dressed sales traded at $197/cwt.

Trading in the Western Corn Belt and Kansas was mostly inactive on very light demand. Last week in the Western Corn Belt, live sales traded from $125-$126/cwt. and dressed sales traded at $197/cwt.

A surge in Corn futures pressured feeder cattle futures on Monday, while live cattle futures traded narrowly mixed.

Live Cattle futures closed mixed from an average of 78¢ lower through the front four contracts to an average of 9¢ higher except for the back contract, unchanged.

Feeder Cattle futures closed down across the board an average of $1.73 lower, from $3.20 lower at the front to $1 lower at the back.

Choice boxed beef cutout value was $7.13 lower at $297.43/cwt. Select was $2.22 lower at $273.96.

Grain futures closed rallied back on Monday as weekend weather conditions deteriorated.

Corn futures closed mostly 17¢ to 39¢ higher through Dec ’22.

Soybean futures closed mostly 36¢ to 42¢ higher through Sept ’22.

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Major U.S. financial indices closed mixed to start the week, with tech companies rallying on news that Facebook won dismissal of two monopoly lawsuits. Economic news to come out this week include a jobs report on Friday.

The Dow Jones Industrial Average closed 151 points lower. The S&P 500 closed 10 points higher. The NASDAQ closed up 140 points.

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Cattle feeders have yet to turn the corner toward reduced average feedlot inventories, but Derrell Peel says it’s getting closer.

Peel, Extension livestock marketing specialist at Oklahoma State University explains in his weekly market comment that feedlot inventories declined by 3.4% from February to June of this year, the largest decrease for that period since 2012. He notes the average change in feedlot inventories from February to June in the five years from 2016-2020 was an increase of 0.3%.

At the same time, Peel points out the 12-month moving average feedlot inventory has been record large since March.

“The current fed cattle market will show improvement faster than the moving average (figure below), which takes time to reflect changing conditions, and that appears to be happening,” Peel says. “Cash fed cattle prices last week averaged $122/cwt., the highest level in eight weeks. Barring some new disruption, feedlot inventories should drop below 2020 (and 2019) levels in the next month or two and remain there going forward. However, the ongoing drought could represent such a disruption if dry conditions force feeder cattle into feedlots sooner than usual. Drought could slow down the process of tightening beef supplies in 2021 but increased cowherd liquidation would lead to even smaller supplies in the coming years.”