WLI

Negotiated cash fed cattle trade was slow on light demand in Kansas through Thursday afternoon. Live prices were steady with the previous day at $119/cwt., according to the Agricultural Marketing Service.

Elsewhere, trade was limited on light demand with too few transactions to trend.

Earlier in the week, live prices were at $117.50 to $119.00 in the Texas Panhandle, at $118 in Nebraska and at $118 to $119 in the western Corn Belt. Dressed prices were at $187 to $190. Live prices in Colorado last week were at $119-$120.

Feeder Cattle futures gave back everything gained in the previous session as corn prices surged higher yet again on Thursday. Live Cattle futures extended modest gains, supported by blooming wholesale beef values and a sizable gain in open interest the previous day.

Live Cattle futures closed an average of 66¢ higher.

Feeder Cattle futures closed an average of $2.02 lower.

Choice boxed beef cutout value was $1.59 higher Thursday afternoon  at $306.37/cwt. Select was $3.18 higher at $289.36

The average dressed steer weighing for the week ending Apr. 24 was 896 lbs., according to USDA’s Actual Slaughter Under Federal Inspection report. That was 2 lbs. lighter than the previous week. The average dressed heifer weight of 825 lbs. was 12 lbs. lighter. Beef production was 16.9 million lbs. at 547.4 million lbs.

Corn futures closed 10¢ to 20¢ higher from Jly ‘21 to Jly ‘22, mostly 6¢ to 8¢ higher in other contracts.

Soybean futures closed 20¢ to 28¢ higher through Mar ‘22, and then mostly 11¢ to 13¢ higher.

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Major U.S. financial indices closed higher Thursday, apparently buoyed by the previous day’s bullish ADP^®National Employment Report^TM, and betting on similar results in the government’s employment situation summary due out Friday.

The Dow Jones Industrial Average closed 318 points higher. The S&P 500 closed 34 points higher. The NASDAQ was up 50 points.

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U.S. beef exports surged in March, with volume up 8% year over year, the second most in the post-BSE era, according to data released by USDA and compiled by the U.S. Meat Export Federation (USMEF).

Beef exports totaled 124,808 metric tons (mt) in March. Export value for the month exceeded $800 million for the first time at $801.9 million, up 14% year-over-year. Beef muscle cut exports set new monthly records for both volume (98,986 mt, up 13% from a year ago) and value ($718.3 million, up 17%). For the first quarter, beef exports pulled even with last year’s pace at 333,348 mt, valued at $2.12 billion. For beef muscle cuts, first quarter exports increased 4% to 262,914 mt, valued at $1.9 billion (up 5%).

March highlights for U.S. beef included record exports to China, Honduras and the Philippines.

March pork exports were record-large at 294,724 mt, up 1% from last year’s strong total, setting a new value record at $794.9 million (up 4%).

“It’s very gratifying to see such an outstanding breakout month for U.S. beef and pork exports,” says Dan Halstrom, USMEF President and CEO. “Exports were off to a respectable start in 2021, considering the logistical and labor challenges the industry is facing and ongoing restrictions on the foodservice sector in many key markets. While these obstacles are not totally behind us, the March results show the situation is improving and the export totals better reflect the strong level of global demand for U.S. red meat.”

Muscle cuts drove March export growth, but Halstrom is also encouraged by a rebound in shipments of beef and pork variety meat.

“The tight labor situation at the plant level has been especially hard on variety meat volumes,” Halstrom explains. “But March variety meat exports matched last year’s performance for pork and were the largest of 2021 on the beef side. It’s important that the capture rate for variety meat continues to improve, as this is a critical component of the export product mix.”

Negotiated cash fed cattle trade ranged from a standstill to mostly limited on light demand in all major cattle feeding regions through Wednesday afternoon, according to the Agricultural Marketing Service.

So far this week, live prices in Nebraska are $1-$2 lower than last week at $118/cwt. Dressed prices are $1-$2 lower at $188-$190.

Live prices in the western Corn Belt this week are steady to $2 lower at $118-$119. Dressed prices are steady to $4 lower at $187-$190.

Last week, live prices were at $118-$119 in the Southern Plains and at $119-$120 in Colorado.

Cattle feeders offered 1,906 head (12 lots) in Central Stockyards’ weekly Fed Cattle Exchange auction. Of those, 1,091 head (6 lots) sold for mostly $118.50 to $119/cwt., steady with the previous week’s country trade.

At Sioux Falls Regional in South Dakota, fat steers and heifers sold $3-$5 lower. There were 223 Choice 2-3 steers weighing an average of 1,433 lbs., bringing an average of $115.97/cwt., which was $2-$3 lower than established country trade.

Cattle futures found some footing on Wednesday, helped along by technical support and oversold conditions.

Live Cattle futures closed an average of $1.44 higher.

Feeder Cattle futures closed an average of $1.86 higher.

Choice boxed beef cutout value was $3.56 higher Wednesday afternoon at $304.78/cwt. Select was $2.27 higher at $286.18

Corn futures closed 20¢ to 24¢ higher from near Sep to Jly ‘22, mostly 5¢ to 7¢ higher in other contracts.

Soybean futures closed mostly 15¢ to 19¢ higher, except for 4¢ to 9¢ higher in the front three contracts.

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Major U.S. financial indices closed narrowly mixed Wednesday. Support included positive quarterly corporate earnings reports from the likes of GM. Employment data suggested more optimism, as well.

Private sector employment increased by 742,000 jobs from March to April according to the April ADP® National Employment ReportTM. That was more than the trade expected.

The Dow Jones Industrial Average closed 97 points higher. The S&P 500 closed 2 points higher. The NASDAQ was down 51 points.

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Declining cattle futures reflect the market realities cash prices first followed, says Stephen Koontz, agricultural economist at Colorado State University, in the latest issue of In the Cattle Markets.

“Optimism from late winter and early spring is being replaced by realism that: it is going to take another two to three months to work through the large front-loaded fed animal inventories; fed animal slaughter is at capacity; costs of gain are now substantially higher than the past several years,” Koontz explains.

As noted recently in Cattle Current, larger than expected ready fed cattle supplies stem from lingering pandemic impacts, as well as the February winter storm that disrupted supply chains. Concurrently, packing capacity remains less than before the pandemic.

“Combined fed steer and heifer slaughter has been just short of 525,000 head per week. It is likely that this is a reasonable maximum that the packing industry can process,” Koontz says. “Packer margins are strong but there is little incentive to pay more for fed cattle when plants are operating six days per week. There is little to no possibility to process more cattle, regardless of the incentive to do so. There are a lot of historical relationships that are irrelevant when the packing industry is essentially at capacity.”

Based on the latest Cattle on Feed report, he says the number of cattle on feed more than 120 days and more than 150 days declined, suggesting some progress in reducing market-ready fed cattle supplies. But, Koontz says supplies will likely be abundant into late summer.

As for increasing feed costs, Koontz points out Corn futures increased $2/bu. from August of last year to mid-January this year and then tacked on another $1.50 since the end of March. He notes the formula cost of gain for fed cattle this summer is well beyond $1/lb.

“If live cattle have little upside and the corn market continues to ration old crop, then it is feeder cattle that have to adjust,” Koontz says.

Negotiated cash fed cattle trade was light to moderate on moderate demand in Nebraska through Tuesday afternoon. Live prices were steady to 50¢ higher than the previous day at $118/cwt., which was $1-$2 lower than last week. Dressed prices were $1-$2 lower at $188-$190.

Trade in the western Corn Belt was light to moderate on moderate demand. Live prices were steady to $3 lower than last week at $117-$119. There were a few dressed trades at $187-$190, but too few to trend; $190-$191 last week.

Elsewhere, trade was limited on light demand. Live prices in the Southern Plains last week were at $118-$119. Prices in Colorado last week were $119-$120.

Choice boxed beef cutout value was $1.92 higher at $301.22/cwt. Select was 12¢ higher at $283.91

Feeder Cattle futures and front-month Live Cattle wilted Tuesday, pressured by higher feed costs and plentiful fed cattle supplies.

Live Cattle futures closed an average of 82¢ lower across a broad range, from an average of $1.52 lower in the front four contracts to an average of 26¢ lower across the rest of the board.

Feeder Cattle futures closed an average of $3.26 lower.

Grain futures popped higher Tuesday as the market continues trying to buy more acres. That was despite what appeared to be a production-friendly planting report.

Corn futures closed mostly 13¢ to 18¢ higher.

Soybean futures closed mostly 12¢ to 18¢ higher.

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Major U.S. financial indices closed mixed to mainly lower Tuesday. Investor jitters seemed centered around inflation fears. On the one hand, pandemic supply chain disruptions, in tandem with economic reopening are driving up input costs. On the other, there’s concern the Federal Reserve will be forced to raise interest rates and slow monetary easing faster than previously suggested.

The Dow Jones Industrial Average closed 19 points higher. The S&P 500 closed 28 points lower. The NASDAQ was down 261 points.

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Agricultural producers grew more optimistic about the future last month, according to the Purdue University/CME Group Ag Economy Barometer. Month to month, the Index of Future Expectations increased 5 points to 169.

“The strength in commodity prices continues to drive improving expectations for strong financial performance, even as many are seeing rising input costs,” says James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture.

At the same time, agricultural producers lost some confidence in existing circumstances. The Index of Current Conditions dropped 7 points in April, to a reading of 195.

“The difference in producers’ short-term versus long-term expectations could be an indication they are concerned that the rapid rise in farmland values we’re seeing may not be sustainable over the long run,” Mintert says.

Even so, ranchers and farmers expect farmland values to continue rising over the next year. The Short-Run Farmland Value Expectations Index rose to a record high reading of 159, which was 11 points higher than the previous month. Further out, producers were less optimistic. The Long-Term Farmland Values Expectations Index (looking five years ahead) declined 9 points in April to a reading of 148.

Overall, the Ag Economy Barometer was virtually unchanged, up one point from March to a reading of 178. It’s calculated each month from 400 U.S. agricultural producers’ responses to a telephone survey. The current survey was conducted April 19 to 23.

Negotiated cash fed cattle trade was limited on light demand in Nebraska through Monday afternoon. There were a few live trades at $117.50 to $118.00/cwt. but too few to trend. Elsewhere, trade ranged from mostly inactive on light demand to a standstill, according to the Agricultural Marketing Service.

The average five-area direct fed steer price last week was $118.89/cwt. on a live basis, which was $2.47 less than the previous week. The average steer price in the beef was $1.67 less at $190.44.

Cattle futures managed to fade stronger pressure early to close mixed on Monday with most of the pressure in nearby contracts.

Live Cattle futures closed an average of 23¢ higher, except for $1.27 and 27¢ lower in the front two contracts.

Feeder Cattle futures closed an average of 69¢ higher (5¢ to $1.40 higher), except for an average of 27¢ lower in three contracts.

Choice boxed beef cutout value was $2.80 higher Monday afternoon at $299.30/cwt. Select was 74¢ higher at $283.

Corn futures closed mixed; mostly fractionally lower to 2¢ higher, except for 7¢ lower and 6¢ higher in the front two contracts.

Soybean futures closed 4¢ to 10¢ lower through the front three contracts, then mostly 2¢ to 5¢ higher through Aug ’22; mostly fractionally lower across the rest of the board.

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Major U.S. financial indices closed mostly higher Monday, buoyed by continued progress in COVID-19 vaccinations and easing health restrictions.

The Dow Jones Industrial Average closed 238 points higher. The S&P 500 closed 11 points higher. The NASDAQ was down 67 points.

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“Overall cattle market conditions are still expected to improve year over year in the second half of the year. However, current challenges are somewhat more severe and taking longer to clear than earlier expected. Market conditions are very dynamic now and the next few weeks may determine the tone of markets for the remainder of the year,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University.

In his weekly market comments, Peel explains ample supplies are pressuring fed cattle prices as feedlots struggle to get more current.

“On the other end, feeder cattle are being squeezed between a stagnant fed market and rising feed prices. The pressure is weighing on feeder cattle markets with both cash feeder cattle prices and feeder futures moving lower in April,” Peel says.

As well, drought continues to deepen. Peel notes the Drought Severity and Coverage Index (DSCI) is at 180 for the U.S., the highest ever for April or May. He points out hay prices are increasing, too. The national average price for other hay in March was $142/ton versus $134 a year earlier. March prices for alfalfa were $181/ton compared to $172 the previous year.

‘There are indications that beef cow liquidation is accelerating,” Peel says. “March monthly beef cow slaughter was up 10.2% year over year. Beef cow slaughter in April is increasing but is difficult to interpret compared to pandemic-disrupted levels one year ago.”

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

For the week, live prices were steady to $2 lower in the Southern Plains at $118-$119/cwt., $1-$2 lower in Nebraska at $119-$120, $2 lower in Colorado at $119 and $2-$3 lower in the western Corn Belt at $119. Dressed trade was $1-$2 lower in Nebraska and the western Corn Belt at $190-$191.

Continued increase in wholesale beef values helped Live Cattle futures mostly advance Friday, despite the week’s anemic cash trade and another surge higher in Corn futures, which upended Feeder Cattle once again.

Live Cattle futures closed an average of 87¢ higher, except for $3.47 lower in expiring Apr.

Feeder Cattle futures closed an average of $1.43 lower, from 10¢ lower at the back to $3.12 lower toward the front.

Choice boxed beef cutout value was $2.74 higher Friday afternoon at $296.50/cwt. Select was $3.26 higher at $283.05

Total estimated cattle slaughter for the week ending May 1 was 649,000 head, which was 16,000 head fewer than the previous week, according to USDA.

Corn futures closed 13¢ to 38¢ higher through Jly ‘22, and then mostly 5¢ to 9¢ higher.

Soybean futures closed 20¢ to 28¢ higher through Jan ‘22, and then mostly 12¢ to 18¢ higher.

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Major U.S. financial indices closed lower Friday, apparently pressured by profit taking more than anything.

The Dow Jones Industrial Average closed 185 points lower. The S&P 500 closed 30 points lower. The NASDAQ down 119 points.

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Frustration among cattle producers continues to mount as wholesale beef prices escalate, while fed cattle prices weaken and the run-up in feed costs pressures calf and feeder cattle prices.

“Slaughter levels have increased year over year, beef demand is strong, and packers have more cattle available to them than they want to process. This means the packer maintains leverage over cattle feeders despite the market moving into a period of stronger beef demand or at least strong anticipated demand,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments.

Although carcass weights are typically lightest at this time of year, Griffith points out they are heavier than last year and the five-year average.

“Slaughter levels are manageable, but they are expected to increase, given the quantity of cattle on feed. There will be lower prices to come in the finished cattle market,” Griffith says.

Economics explains much of what’s happening, if not the magnitude. More cattle in need of harvesting, compared to existing slaughter capacity, means packers have the leverage, period. Keep in mind, according to various reports, much of the capacity lost to the pandemic last year returned with extraordinary speed. However, measures imposed to protect workers means post-pandemic capacity is less than it was before. If drought forces lots more cows to town in bunches, the challenge will grow.

New processing facilities—more packing capacity—are currently in various stages of construction in different parts of the U.S. I don’t have the numbers to tell you how much capacity or how much it will address the current imbalance.

One Cattle Current podcast listener called me at the end of last week. I know him. His family is one of those in the business for generations. He’s a solid thinker, innovative and progressive as they come, and not given to buying into the fiction some toss around about packer conspiracies and all of that. He wonders why producers don’t create a check-off to fund construction of more producer-owned packing capacity.

Never minding the monumental raw cost and challenges of building and running a packing plant, the notion of producers taking more control of their economic fortunes at the last stage of production is hard to argue.

For my money, those producers who put up the money and took the risk to start U.S. Premium Beef (USPB) proved the possibility. If you’re unfamiliar, the vision began in 1995. By 1997, about 450 cow-calf producers and cattle feeders made a financial commitment, developed a business plan and purchased a minority interest in what was then Farmland National Beef. At one point, USPB was the majority owner of what became National Beef; they still own an interest today. In essence, these producers purchased shares, which not only gave them ownership in the company, annual dividends and whatnot, but it secured them delivery slots for cattle aimed at the value-added grid USPB created.

In some ways, from what little I know of it, that sounds like what producers and other business interests are doing with the recently announced Sustainable Beef LLC packing plant to be constructed at North Platte, NE.

Anyway, building more producer-owned packing capacity is one listener’s idea. What’s yours? If you have ideas you want to share with Cattle Current listeners, please email them to wes@cattlecurrent.com