WLI

Negotiated cash fed cattle trade was at a standstill in the Texas Panhandle through Thursday afternoon, according to the Agricultural Marketing Service. Elsewhere, it was limited on light to moderate demand.

So far this week, live sales are steady to $4 higher in the Texas Panhandle at $120/cwt., steady in Kansas at $119 to $120 and steady at $120 in Nebraska and the western Corn Belt. Dressed trade is steady with the upper end of last week’s range at $190-$191.

Cattle futures, especially Feeder Cattle faded early pressure to close mainly higher Thursday with continued support from higher wholesale beef values.

Feeder Cattle futures closed an average of $1.54 higher (62¢ higher in spot Aug to $2.92 higher at the back).

Live Cattle futures closed an average of 60¢ higher (12¢ to $1.02 higher), except for an average of 44¢ lower in the front three contracts.

Choice boxed beef cutout value was 39¢ higher Thursday afternoon at $340.55/cwt. Select was $1.28 higher at $313.16.

Grain markets were mainly lower on Thursday with weather forecasts continuing to cast a shadow.

Corn futures closed 6¢ to 13¢ lower through Jly ’22 and then mostly unchanged to fractionally higher.

Soybean futures closed 9¢ to 13¢ lower through Jan ‘22 and then mostly 5¢ higher, except for fractionally lower to 4¢ lower in a few middle contracts.

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Major U.S. financial indices fell on Thursday with uncertainties about the strength of the economy and anticipation over when the Federal Reserve may slow or stop support. Friday’s jobs report is expected to give a strong indication of where the economy stands.

The Dow Jones Industrial Average closed 23 points lower. The S&P 500 closed 15 points lower. The NASDAQ was down 142 points.

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Agricultural producer sentiment declined significantly last month, according to the Purdue University/CME Group Ag Economy Barometer. Month to month, the index dropped 20 points to 158, the lowest level since September last year.

“The potential for changing tax rules and rising input costs appeared to be on producers minds this month and were the primary drivers for the Ag Barometer’s decline,” says James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture.

More specifically, producers’ expectations for good versus bad times in U.S. agriculture shifted dramatically. In May, just 27% of respondents said they expect good times in U.S. agriculture during the next five years, the lowest reading in the survey’s history and down 12 points from a month earlier. One driver appears to be the dichotomy between expectations for the crops versus livestock sectors. More than half (54%) of respondents said they expect widespread good times for the crops sector in the next five years, but just one-fourth (26%) of producers said they expect the same for the livestock sector.

“The difference in expectations for these two principal sectors of the agricultural economy could help explain why producers appear to be very bullish about farmland values and cash rental rates while at the same time expressing less optimism about both current conditions and future expectations for the agricultural economy overall,” Mintert says.

Negotiated cash fed cattle trade was limited on light demand in the Southern Plains. A few live sales in the Texas Panhandle traded from $119 to $120/cwt. through Wednesday afternoon, according to the Agricultural Marketing Service. In Kansas, a few live purchases traded at $120. In Nebraska and the Western Corn Belt, negotiated cash trading was slow with moderate demand. There were a few dressed trades in Nebraska at $190 to $191. In the western Corn Belt, there were a few live sales at $120 and few in the beef at $190-$191.

Feeder Cattle futures rallied higher with news JBS was resuming operations following the cyber-attack on its IT systems.

Feeder Cattle futures closed an average of $2.08 higher, from $3.18 to $2.40 higher in the front three months and $1.90 to $1.40 higher across the rest of the board.

Live Cattle futures closed an average of $1.61 higher, with the most gain ion the front two contracts. Only Apr ’22 and Jun ’22 gained less than $1 at 75¢ and 88¢ respectively.

Choice boxed beef cutout value was was $5.60 higher Wednesday afternoon at $340.16/cwt. Select was $5.43 higher at $311.88.

Grain markets were mixed on Wednesday with weather weighing on the corn market.

Corn futures closed down across the board an average of 6¢ lower through Jly ‘22.

Soybean futures closed up up an average of 16¢ through Mar ’22.

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Major U.S. financial indices closed narrowly higher on Wednesday, remaining near all-time highs.

The Dow Jones Industrial Average closed 25 points higher at 34,600. The S&P 500 closed 6 points higher at 4,208. The NASDAQ closed 20 points higher at 13,756.

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“Cattle producers are frustrated, and with good reason. In sale barns and state meetings across the country, we’re hearing the same story of sky-high input costs and intense market volatility. Across the industry, there’s a consensus that market dynamics which consistently squash producer profitability are not sustainable for live cattle or beef producers,” says NCBA President Jerry Bohn, president of the National Cattlemen’s Beef Association (NCBA). “As members of Congress create policy that directly impacts business conditions for our producers, it is critical that they consider the grassroots input and firsthand experiences of folks on the ground. Our letter provides that perspective and reinforces how urgently we need something to shift here to strengthen the security of the beef supply chain. NCBA has strong working relationships with members on both sides of the aisle, we have grassroots policy to back the actions we outlined today, and we hope the conversation in Washington around these critical policy areas will progress quickly.”

The letter Bohn refers to is one NCBA sent—with the support of 37 affiliate state cattle organizations— urging the leadership of the U.S. Senate and House Agriculture Committees to address critical areas of concern in the cattle and beef industry.

Specifically, NCBA pushed Sen. Debbie Stabenow (D-MI), Sen. John Boozman (R-AR), Rep. David Scott (D-GA-13), and Rep. Glenn “GT” Thompson (R-PA-15) to consider swift Congressional action to:

• Expand beef processing capacity
• Broaden labor policies to strengthen the beef processing workforce
• Increase transparency in cattle markets by reauthorizing Livestock Mandatory Reporting (LMR)
• Support industry efforts to reform “Product of the USA” generic labeling
• Ensure proper oversight of cattle market players by concluding the ongoing U.S. Department of Justice investigation into the meatpacking sector

Cattle futures dropped hard Tuesday, in response to the uncertainties spawned by disruptions to JBS processing facilities, caused by the Sunday cyber-attack on that company’s global IT infrastructure. They clawed back some of the losses by the end of the session, though.

According to a JBS news release: “On Sunday, May 30, JBS USA determined that it was the target of an organized cyber-security attack, affecting some of the servers supporting its North American and Australian IT systems. The company took immediate action, suspending all affected systems, notifying authorities and activating the company’s global network of IT professionals and third-party experts to resolve the situation. The company’s backup servers were not affected, and it is actively working with an Incident Response firm to restore its systems as soon as possible.

“The company is not aware of any evidence at this time that any customer, supplier or employee data has been compromised or misused as a result of the situation. Resolution of the incident will take time, which may delay certain transactions with customers and suppliers.”

Widespread reports suggested JBS packing facilities closed. At press time there was no word on when normal production would resume. However, there were unconfirmed reports Tuesday evening that operations would resume Wednesday.

There was no negotiated trade report from the Agricultural Marketing Service as of press time Tuesday evening.

Negotiated cash fed cattle prices last week were at $116-$120/cwt. in the Texas Panhandle, at $119-$120 in Kansas and at $120 in Nebraska and the western Corn Belt. Dressed prices were at $191 in Nebraska and at $189-$191 in the western Corn Belt.

Feeder Cattle futures closed mixed on Tuesday, with JBS uncertainty weighing on the front months.

Feeder Cattle futures closed an average of $1.28 lower through the front half of the board, (45¢ lower to $2.20 lower in spot Aug) and then an average of 36¢ higher.

Live Cattle futures closed an average of $1.70 lower in the front three contracts (77¢ to $2.32 lower) and then an average of 89¢ higher, except for unchanged in the back contract.

Choice boxed beef cutout value was $3.59 higher Tuesday afternoon at $334.56/cwt. Select was $5.55 higher at $306.45.

Grain markets were up on Tuesday on news of a hot, dry forecast for the next two weeks in northern U.S. growing areas as well as southern Canada. Brazil’s drought also worsened.

Corn futures closed 28¢ to 32¢ higher through Jly ’22 and then mostly 10¢ to 15¢ higher.

Soybean futures closed mostly 16¢ to 24¢ higher.

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Major U.S. financial closed narrowly mixed Tuesday as investors wait for economic data coming out this week to indicate how well the economy is rebounding and to get a feel for inflation.

The Dow Jones Industrial Average closed 46 points higher. The S&P 500 2 points lower. The NASDAQ closed 12 points lower.

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“With the economy opening up and growing rapidly, meat markets of all types are enjoying strong demand,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University. “In numerous cases, wholesale prices for specific meat products are at record levels, exceeding the levels provoked by the pandemic disruptions one year ago; and unlike last year, lack of supply is not the issue. Year-to-date production of beef, pork and broilers is higher, not only compared to last year but also compared to 2019 levels.”

Wholesale beef tenderloin set a new record at more than $17/lb., Peel says, in his weekly market comments. Ribeye prices also set a new record at more than $13/lb.

“Tenderloin is almost exclusively a restaurant item, while ribeye is popular in restaurants, at retail grocery and for export,” Peel explains. “Strip loins are very popular at retail grocery and prices have also increased sharply this year but failed to exceed the pandemic levels from last year. Brisket prices have increased dramatically since January, averaging over $7/lb. in May; another indication that BBQ is back.”

Prices for chuck and round products—driven by retail grocery for use as value cuts and ground beef—are higher, too, but less steeply than middle meats, Peel says.

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

Live prices last week were steady to $3 lower in the Texas Panhandle at $116-$120/cwt., steady to $1 lower in Kansas at $119-$120 and steady at $120 in Nebraska and the western Corn Belt. Dressed prices were steady to $1 higher in Nebraska at $191; steady in the western Corn Belt $189-$191.

Live Cattle futures closed mixed Friday, an average of 46¢ lower through the front four contracts, and then unchanged to an average of 7¢ higher. Part of the pressure likely stemmed from the lack of budge in cash prices, while the rally in wholesale beef values appears long in the tooth.

Choice boxed beef cutout value was 99¢ higher Friday at $330.97/cwt. Select was $3.20 lower at $300.90.

Feeder Cattle futures closed an average of $1.28 lower. Even though Corn futures were mostly 3¢ to 9¢ lower, the steep climb in the previous session continued to apply pressure. Feeder Cattle were down an average of about $3 in the last two sessions.

Total estimated cattle slaughter the week ending May 29 was 629,000 head, according to USDA. That was 40,000 head fewer than the previous week. Total estimated beef production for the week was 518.0 million lbs., which was 32.7 million lbs. less than the prior week.

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Major U.S. financial indices edged higher Friday on generally positive economic news.

Personal consumption expenditures (PCE), excluding food and energy, increased $80.3 billion (0.5%), according to the U.S. Bureau of Economic Analysis. The core PCE price index, excluding food and energy—a key inflation gauge the Federal Reserve monitors—was 3.1% more than a year earlier, according to the U.S. Commerce Department. The pace of inflation was slightly more than analyst expectations but reportedly less than many traders feared.

The Dow Jones Industrial Average closed 64 points higher. The S&P 500 closed 3 points higher. The NASDAQ was up 12 points.

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Between new packing plants and plans for expanding current facilities, the North American Meat Institute (the Meat Institute) estimates there’s an additional 4,150 head per day (+4%) packing capacity in various stages of completion. However, even with added capacity, Sarah Little, vice president of communications for the Meat Institute explains, “Labor is, and is likely to remain, a significant factor that affects utilization of production; and is also a factor that will challenge new small and medium sized facilities entering the market.”

As mentioned previously in Cattle Current, there are no easy solutions to the ongoing predicament of lower derivative demand for fed cattle from packers, relative to elevated derivative demand from wholesalers and overall strong consumer beef demand. Economic fundamentals explain the current reality, no matter how frustrating.

Plenty of emotion is understandably involved, but sharing myths as fact hinders legitimate discussion and the search for long-term market solutions. With that in mind, the Meat Institute shared facts to counter several popular cattle market myths. Among them:

Myth: Fed cattle marketing options such as forward contracting and formula-based sales, allow meatpackers to exert more control, limit competition and depress sales in the live cash market.

Fact: Forward contracts and formula-based sales provide an effective way for producers to hedge their risk and lock in prices. They also often pay premiums for quality. This allows packers and producers and feeders to predict needs in advance…In its 2018 report to Congress, USDA’s Agricultural Marketing Service reported, “Stakeholders were in general agreement that formula-based purchases provide greater benefits, in terms of operational efficiency, for both packers and feedlots.”

Fact: From 2002 to 2019, according to USDA data compiled by economist and industry expert Nevil Speer, PhD, while the number of cattle sold on a cash market basis declined 55%, beef grading in the top two quality grades (Choice and Prime) increased 39%. During the same period of time, consumer per capita beef expenditures increased 56%.

Myth: Packers can control prices and defy expectations of market fundamentals.

Fact: The cattle market works as economists would have predicted, given the current conditions: when supplies of cattle increase, prices decrease, and vice versa.

Fact: There appears to be insufficient long-term profitability to attract many investors to the beef packing sector. According to Rabobank analysts, “Several considerable hurdles must be addressed by both incumbents and new entrants…First, the upfront cost of a new plant is extremely expensive…$100 million to $120 million USD for every 1,000 head of daily capacity.

“… the capital depth and longevity required to build and maintain a new plant through its first cattle cycle precludes most would-be investors from considering such a project…That’s not a recipe for thin capital or weak hearts.”

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

So far this week, live prices are $116-$120/cwt. in the Texas Panhandle, $119-$120 in Kansas and at $120 in Nebraska and the western Corn Belt. Dressed prices are at $191 in Nebraska and $189-$191 in the western Corn Belt.

Feeder Cattle futures closed an average of $1.69 lower Thursday, from 20¢ lower in spot May to $2.35 lower. Corn futures applied the pressure, up 33¢ to 40¢ higher through Jly ’22 and then mostly 13¢ to 24¢ higher. Dryness in the forecast and strong exports helped fuel the bounce. Soybean futures tagged along, closing 26¢ to 34¢ higher.

Live Cattle futures edged an average of 20¢ higher, except for 10¢ lower in spot Jun. Support included positive export news.

Net U.S. beef export sales of 27,900 metric tons (mt) for 2021 were 19% more than the previous week and 45% more than the prior four-week average, according to USDA’s U.S. Export Sales report for the week ending May 20. Increases were primarily for China, Japan, South Korea, Indonesia, and Taiwan.

Choice boxed beef cutout value was 49¢ higher Thursday afternoon at $329.98/cwt. Select was 5¢ higher at $304.10

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Major U.S. financial indices closed flat to higher Thursday, supported by fewer initial weekly unemployment insurance claims than analysts expected. Initial claims were 406,000 for the week ending May 22, according to the U.S. Department of Labor. That was 38,000 fewer than the previous week and the least since March of last year.

The Dow Jones Industrial Average closed 141 points higher. The S&P 500 closed 4 points higher. The NASDAQ was down 1 point.

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La Niña conditions ended earlier this month and NOAA forecasters estimate about a 67% chance that neutral conditions will continue through the summer.

As it is, dryness and drought continues across much of the United States, according to the U.S. Drought Monitor. Specifically, 61.4% of the nation is classified from abnormally dry to exceptional drought, compared to 34.4% a year earlier; 21.3% is experiencing extreme or exceptional drought versus 1.2% last year.