WLI

Negotiated cash fed cattle trade was $2 higher on a dressed basis in Nebraska Thursday at $182.00/cwt., according to the Agricultural Marketing Service. That was on slow trade and light demand, but might suggest front-end inventory is current enough for prices to finally move beyond the rut of the last seven weeks. Live trade in Nebraska was at $114 on Wednesday.

Trade was limited on light demand in most other regions with too few transactions to trend.

On Wednesday, live prices were $2 higher in the western Corn Belt at $114-$115. Dressed trade in the region last week was at $178-$180.

Cattle futures closed sharply lower amid likely technical correction and positioning ahead of Friday’s Cattle on Feed report, despite wholesale beef values gathering some seasonal steam, sharply lower Corn futures and the likelihood that cash fed cattle prices are on the cusp of moving higher.

Pressure also included sharply lower Lean Hog futures, tied to chatter out of China that it’s close to rebuilding its hog herd to pre-ASF levels. That diverges widely from private sector reports citing further ASF challenges.

Net U.S. beef export sales were 25,900 metric tons (mt) the week ending Mar. 11, according to the weekly U.S. Export Sales report from USDA’s Foreign Agricultural Service. That was 24% more than the previous week and 39% more than the prior four-week average. Increases were primarily for Japan, South Korea, China, Taiwan, and Hong Kong.

Live Cattle futures closed an average of $1.92 lower.

Feeder Cattle futures closed an average of $1.78 lower (20¢ lower at the back to $3.55 lower).

Choice boxed beef cutout value was 14¢ higher Thursday afternoon at $228.61/cwt. Select was 52¢ higher at $218.11.

The average dressed steer weight the week ending Mar. 6 was 900 lbs. according to USDA’s weekly Actual Slaughter Under Federal Inspection report. That was 1 lb. heavier than the previous week but 3 lbs. lighter than the previous year. The average dressed heifer weight of 833 lbs. was 1 lb. lighter than the previous week but 3 lbs. heavier than the prior year.

Corn and soybean futures closed sharply lower Thursday. The most plausible explanations include rainier forecasts for South America and worries about how many acres might show up in USDA’s Prospective Plantings report due out at the end of the month. There’s also likely some queasiness about U.S. and Chinese officials meeting in Alaska this week.

Net U.S. corn export sales for 2020-21 were 985,900 mt the week ending Mar. 11, which was up noticeably from the previous week and from the prior four-week average.

Corn futures closed 10¢ to 12¢ lower through the front three contracts, and then mostly 3¢ to 7¢ lower.

Net U.S. soybean export sales of 202,400 mt for 2020-21 were down 42% from the previous week and 31% from the prior four-week average.

Soybean futures closed 20¢ to 29¢ lower.

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Major U.S. financial indices closed lower Thursday, pressured by surging bond yield rates, just a day after Federal Reserve Chair Jerome Powell expressed little concern that inflation would get out of hand.

The Dow Jones Industrial Average closed 153 points lower. The S&P 500 closed 58 points lower. The NASDAQ was down 409 points.

West Texas Intermediate on the CME closed $4.10 to $4.60 lower through the front six contracts. Reasons ranged from increasing inventory to the stronger dollar to the simple fact traders may have leaned too far over the skis of reality.

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Lower government payments and higher farm production costs could outweigh the projected increase in livestock and crop sales in 2021, leading to lower year-over-year farm income, according to the latest analysis of national and global agricultural trends from the University of Missouri (MU).

Even so, analysts at the MU Food and Agricultural Policy Research Institute (FAPRI) project net farm income this year at $112 billion, which would be significantly higher than in 2015-2019. Net farm income increased to $121 billion in 2020, the highest level since 2013, primarily because of $46 billion in government payments.

“The COVID-19 pandemic upended agricultural markets, contributing to a dismal outlook for the farm economy in the spring and summer of 2020,” says Patrick Westhoff, FAPRI director and Howard Cowden Professor of Agricultural and Applied Economics in the MU College of Agriculture, Food and Natural Resources (CAFNR). “A series of emergency support programs provided record government payments to farmers, and prices for many commodities rebounded in the final months of the year, resulting in a large increase in 2020 net farm income. Looking ahead, the outlook is uncertain, but certainly more optimistic than it was a few months ago.”

Economists with FAPRI and the MU Agricultural Markets and Policy (AMAP) team release the annual U.S. Agricultural Market Outlook report each spring. The baseline projections for agricultural and biofuel markets through 2030 were prepared using market information available in January, but do not reflect any subsequent policy changes.

FAPRI projects cattle prices higher, especially after 2021, as beef cow numbers decline from 30.8 million head Jan. 1 this year to a low for the time series of 29.6 million in 2026 and 2027.

FAPRI projects the five-area direct annual fed steer price at $116.61/cwt. this year, $122.48 in 2022 and $127.28 in 2023. From there, price projections peak at $136.55 in 2027.

Projected steer calf prices (basis 600-650 lbs., Oklahoma City) follow a similar path: $149.08/cwt. this year, $162.88 in 2022, $170.63 in 2023; peaking at $184.36 in 2027.

That’s with corn prices projected to be highest this marketing year (2020-21) at $4.20/bu.; $4.06 in 2021-22; $3.99 in 2022-23; $3.93 in 2023-24; and then declining to $3.78 to $3.79 from 2025-26 through 2030-31.

FAPRI projects utility cow prices (basis Sioux Falls) at $60.56/cwt. this year, $64.73 in 2022, $66.34 in 2023; peaking at $71.80 in 2027.

Among other highlights from the latest report:

Consumer food price inflation increased to 3.4% in 2020, in part because of a wider gap between producer prices for livestock and consumer prices for meat. FAPRI projects food inflation at 2.1% this year and then similar to overall inflation in subsequent years.

Margins between farm and wholesale prices remain higher than historical averages, but declined from last spring’s record high levels caused by pandemic disruptions. “The extent to which retailers and processors continue to endure higher pandemic-related costs will affect the producer share of consumer meat expenditures,” say FAPRI analysts.

The outlook for U.S. beef exports to China and other markets remains positive, due to strong demand coupled with limited supplies among other major exporters.

Negotiated cash fed cattle trade was slow on light demand in Kansas and Nebraska through Wednesday afternoon. Live trade was steady in Kansas at $114/cwt. and steady to $1 higher in Nebraska at $114.

Elsewhere, trade ranged from limited on light demand, to mostly inactive on very light demand, with too few transactions to trend, according to the Agricultural Marketing Service.

Last week, live prices were at $114/cwt. in the Southern Plains and Colorado and $112-$113 in the western Corn Belt. Dressed prices were at $180 in Nebraska and at $178-$180 in the western Corn Belt.

Cattle feeders sold near 1,000 head in Central Stockyards’ weekly Fed Cattle Exchange auction. Those selling—all from Texas except one lot from Nebraska—traded on a live weight basis at $114.50/cwt.

Cattle futures mostly edged higher Wednesday, supported by softer Corn futures after the front two contracts, as well as resurgent Choice wholesale beef values. Perhaps there was also some early positioning against the monthly Cattle on Feed report (see below).

Live Cattle futures closed an average of 52¢ higher, from 5¢ higher at the back to $1.22 higher in spot Apr. 

Feeder Cattle futures closed an average of 39¢ higher (7¢ to $1.32 higher), except for 10¢ and 47¢ lower in the back two contracts.

Choice boxed beef cutout value was $1.54 higher Wednesday afternoon at $228.47/cwt. Select was $1.18 lower at $217.59.

Corn futures closed fractionally lower to 2¢ lower, except for 3¢ higher and fractionally higher in the front two contracts.

Soybean futures closed mostly 5¢ to 10¢ lower.

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Major U.S. financial indices closed higher Wednesday, buoyed by reiteration from the Federal Reserve that it intends to maintain the dovish, accommodative stance toward interest rates.

“The Committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run. With inflation running persistently below this longer-run goal, the Committee will aim to achieve inflation moderately above 2% for some time so that inflation averages 2% over time and longer-term inflation expectations remain well anchored at 2%,” according to an FOMC statement. “The Committee expects to maintain an accommodative stance of monetary policy until these outcomes are achieved. The Committee decided to keep the target range for the federal funds rate at 0 to 0.25% and expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment and inflation has risen to 2% and is on track to moderately exceed 2% for some time.”

The Dow Jones Industrial Average closed 189 points higher. The S&P 500 closed 11 points higher. The NASDAQ was up 53 points.

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Last month’s severe winter weather likely shifted some feedlot marketings.

“Because of the weather disruption, there is a temporal shift of expected steer and heifer marketings out of the first quarter to be marketed in the second quarter,” say analysts with USDA’s Economic Research Service (ERS), in the monthly Livestock, Dairy and Poultry Outlook.

Derrell Peel, Extension livestock marketing specialist at Oklahoma State University provides some perspective on how the widespread storm affected feedlot performance.

“Steer and heifer slaughter dropped 7.1% year over year in the middle two weeks of February before bouncing back. Steer carcass weights dropped sharply in February, declining by 20 lbs. from 919 lbs. to 899 lbs. in the last two weeks of the month,” Peel says, in is weekly market comments. “The last week of February marks the first time in 71 weeks (since October 2019) that weekly steer carcass weights were lower than the previous year. Heifer carcass weights dropped from 850 to 834 lbs. in the same period.”

That same storm closed sale barns, which may have limited feedlot placements for the month. On the other hand, current and expected wheat prices may elevate feedlot placements in March, as more producers with a dual-purpose winter wheat crop look to put it in the bin.

“…the expectation that relatively high wheat prices may discourage the grazing-out of small grains pastures and move more cattle into feedlots sooner than previously expected is anticipated to shift placements from the second quarter to the first quarter,” ERS analysts say. “As a result, some fed cattle marketings are expected to shift from the fourth quarter to the third quarter.”

USDA’s monthly Cattle on Feed report comes out Friday afternoon. Analysts surveyed by Urner Barry and reported by the Daily Livestock Report expect, on average, February feedlot placements to be 1.7% less than a year earlier, February marketings to be 2.6% less and the Mar. 1 inventory to be 1.5% more.

Negotiated cash fed cattle trade was mostly inactive on light demand in the western Corn Belt through Tuesday afternoon, with too few transactions to trend. Elsewhere, trade was at a standstill, according to the Agricultural Marketing Service.

Last week, live prices were at $114/cwt. in the Southern Plains and Colorado, $113-$114 in Nebraska and $112-$113 in the western Corn Belt. Dressed prices were at $178-$180.

Cattle futures closed mixed Tuesday. There was no cash direction, but Lean Hog futures continue to offer support, as does expanding open interest.

Live Cattle futures closed an average of 22¢ higher, except for an average of 62¢ lower in the front two contracts.

Feeder Cattle futures closed narrowly mixed, from an average of 39¢ lower to an average of 9¢ higher.

Choice boxed beef cutout value was $2.16 higher Tuesday afternoon at $226.93/cwt. Select was 72¢ higher at $218.77.

Corn futures closed 1¢ to 4¢ higher through the front three contracts and then mostly fractionally lower.

Soybean futures closed 3¢ higher through the front three contracts and then fractionally higher to 1¢ higher.

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Major U.S. financial indices closed mainly narrowly mixed Tuesday as investors awaited further direction from the Federal Reserve’s policy meeting statement Wednesday.

The Dow Jones Industrial Average closed 127 points lower. The S&P 500 closed 6 points lower. The NASDAQ was up 11 points.

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Beef imports to the United States in January were 8.1% less than the previous year, driven by the least volume from Australia since 2005.

“Exportable beef supplies in Australia have become limited as more heifers and cows are held back for breeding and expanding the herd,” explain analysts with USDA’s Economic Research Service (ERS), in the latest monthly Livestock, Dairy and Poultry Outlook. “Australia shipped 31 million lbs. less beef year over year…The second-largest reduction of 8.9 million lbs. came from Mexico; imports were at the lowest volume shipped to the United States in January since 2016.”

Overall, ERS reduced its forecast for U.S. beef imports for this year, by 70 million lbs. to 2.94 billion lbs., due to less expected volume from Australia and New Zealand, as well as increased beef demand competition from Asia.

On the other side of the trade ledger, ERS projects U.S. beef exports for this year to be 3.145 billion lbs., just less than the record level in 2018.

Negotiated cash fed cattle trade was at a standstill in all major cattle feeding regions through Monday afternoon, according to the Agricultural Marketing Service.

Last week, live prices were at $114/cwt. in the Southern Plains and Colorado, $113-$114 in Nebraska and $112-$113 in the western Corn Belt. Dressed prices were at $180 in Nebraska and at $178-$180 in the western Corn Belt.

Cattle futures closed higher Monday with Live Cattle supported by growing open interest in the previous session, as well as decent cash trade volume last week.

Live Cattle futures closed an average of 76¢ higher (12¢ to $1.35 higher).

Feeder Cattle futures closed an average of 83¢ higher (32¢ to $1.35 higher).

Choice boxed beef cutout value was $1.10 lower Monday afternoon at $224.77/cwt. Select was $2.22 lower at $218.05.

Corn futures closed 2¢ to 10¢ higher through the front three contracts and then mostly 1¢ lower.

Soybean futures closed 3¢ to 7¢ higher through the front four contracts, then mostly unchanged to fractionally lower.  

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Major U.S. financial indices closed higher Monday, buoyed by optimism about the pace of COVID-19 vaccines as it relates to fully reopening the economy.

The Dow Jones Industrial Average closed 174 points higher. The S&P 500 closed 25 points higher. The NASDAQ was up 139 points.

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“Live steer prices in the five-area marketing region are nearly flat since the first week of February, hovering around $114/cwt., despite a strong rally in the comprehensive cutout to near-record levels for the month of February,” explain analysts with USDA’s Economic Research Service (ERS), in the latest monthly Livestock, Dairy and Poultry Outlook. “An abundant supply of fed cattle on feed over 150 days Feb. 1 that is greater than the same time last year, along with the inability to process a portion of those cattle due to the winter storm system in February, likely did not support higher prices in line with typical seasonal patterns.”

Although fed cattle prices languish, Derrell Peel, Extension livestock marketing specialist at Oklahoma State University notes the premium for June Live Cattle, compared to April, suggests optimism ahead.

“After the fed cattle market works through ample cattle supplies in the first half of the year, beef production is expected to decrease year over year in the second half of the year. Live Cattle futures for the fall suggest higher fed cattle prices in the last half of the year,” Peel says, in his weekly market comments.

Similarly, Peel points to the premium for fall Feeder Cattle futures, compared to nearby contracts, explaining that summer stocker prospects are promising at this point in time.

“Feeder steer prices for February 2021 averaged $131.82/cwt. for steers weighing 750-800 lbs., sold at Oklahoma National Stockyards, just over $6 above a year ago,” say ERS analysts. “However, prices for the first two weeks of March are almost $8 above the same month last year.”

ERS increased the expected first-quarter average for feeder steers by $1 to $133/cwt. Price projections were unchanged for the remainder of the year: $134 in the second quarter; $139 in the third quarter; $140 in the fourth quarter; $136.50 for the 2021 average.

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

For the week, live prices were steady at $114/cwt. in the Southern Plains, steady to $1 higher at $114 in Colorado, steady in Nebraska at $113-$114 and steady to $1 lower in the western Corn Belt at $112-$113. Dressed trade was steady in Nebraska at $180 and steady to $2 lower in the western Corn Belt at $178-$180.

Lower grain futures helped lift Cattle futures on Friday. Perhaps some traders also are returning to the Live Cattle Market, positioning ahead of what appears to be a solid trend higher after first-quarter supplies are whittled and as the U.S. economy expands.

Live Cattle futures closed an average of 83¢ higher.

Feeder Cattle futures closed an average of $1.52 higher.

Choice boxed beef cutout value was 80¢ lower Friday afternoon at $225.87/cwt. Select was 20¢ higher at $220.27.

Total estimated cattle slaughter for the week ending Mar. 13 was 647,000 head, which was 18,000 head fewer than the prior week. Year-to-date estimated total cattle slaughter of 6.47 million head is 209,000 head fewer (-3.12%). Estimated beef production so far this year is 5.46 billion lbs., which is 74.8 million lbs. less (-1.35%) than the same time last year.

Corn futures closed mostly 4¢ lower.

Soybean futures closed 1¢ to 5¢ higher, after mostly fractionally mixed through Jan ’22. 

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Major U.S. financial indices closed mixed but mostly higher Friday. Primary pressure was rising bond yield rates on big tech stocks.

The Dow Jones Industrial Average closed 293 points higher. The S&P 500 closed 4 points higher. The NASDAQ was down 78 points.

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Gradual deployment of effective COVID-19 vaccines is boosting prospects for sustained global economic recovery, according to the Organization for Economic Cooperation and Development (OECD).

OECD increased its expectations for global GDP this year by more than 1%—compared to December projections—to 5.6%, in that organization’s Interim Economic Outlook.

World output is expected to reach pre-pandemic levels by the middle of this year but the pace and duration of the recovery will depend on the race between vaccines and emerging variants of the virus, according to OECD analysts.

“Widespread vaccination of the adult population is the best economic policy available today to get our economies and employment growing again,” says OECD Chief Economist Laurence Boone. “…If we don’t get enough people vaccinated quickly enough to allow restrictions to be lifted, the recovery will be slower and we will undermine the benefits of fiscal stimulus.”

In the OECD’s central scenario, U.S. GDP is projected to be 6.5% this year, which is more than 3% higher than the December projection, partly reflecting the large-scale fiscal stimulus with a sustained pace of vaccination.

Vaccine deployment remains uneven globally, OECD analysts say, noting the pandemic is widening gaps in economic performance between countries and between sectors, increasing social inequalities, particularly affecting vulnerable groups, and risking long-term damage to job prospects and living standards for many people.

Among other highlights from the OECD report summary:

Cost pressures have begun to emerge in commodity markets due to the resurgence of demand and temporary supply disruptions, but underlying inflation remains mild, held back by spare capacity around the world.

The current very accommodative monetary policy stance should be maintained, and allow temporary overshooting of headline inflation provided underlying price pressures remain well contained, with macro-prudential policies deployed where necessary to ensure financial stability.

Continued income support for households and companies is warranted until vaccination allows a significant easing of restraints on face-to-face activities, but should be refocused to support people and help companies with grants and equity rather than debt.