WLI

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

Last week, prices in the Southern Plains were $2 higher on a live basis at $110/cwt., $5 higher in Nebraska at $110 and $1-$5 higher in the western Corn Belt at $106-$110. Dressed trade was $7 higher at $172.

Cattle futures closed lower Tuesday with pressure from surging grain futures and despite the prospect of higher cash prices this week as packers reload and retailers restock.

Live Cattle futures closed an average of 63¢ lower, except for an average of 5¢ higher in two contracts toward the back.

Feeder Cattle futures closed an average of 99¢ lower from 52¢ lower at the back to $1.37 lower in spot Jan.

Choice boxed beef cutout value was $2.48 higher Tuesday afternoon at $210.30/cwt. Select was $1.17 lower at $195.48.

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

Soybean futures closed 35¢ to 40¢ higher through Aug ’21, and then mostly 6¢ to 13¢ higher.

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Major U.S. financial indices edged lower Tuesday on some likely profit taking and pressure from further COVID-19 stimulus wrangling in Congress.

The Dow Jones Industrial Average closed 68 points lower. The S&P 500 closed 8 points lower. The NASDAQ was down 49 points. 

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“Our livestock producers need all the tools in the toolbox to help protect against animal diseases and continue to meet the challenge of feeding everyone now and into the future. If we do not put these safe biotechnology advances to work here at home, our competitors in other nations will,” said U.S. Secretary of Agriculture Sonny Perdue last week, in announcing a significant step in modernizing regulations of agricultural animals modified or produced by genetic engineering.

USDA will move forward with an Advanced Notice of Proposed Rulemaking (ANPR) to solicit public input and feedback on a contemplated regulatory framework that would modernize the current system into a scientifically-sound, risk-based, and predictable process that facilitates the development and use of these technologies for U.S. farmers and ranchers under USDA’s authorities.

“Science-based advances in biotechnology have great promise to continue to enhance rural prosperity and improve the quality of life across America’s heartland and around the globe,” Secretary Perdue explained. “With this effort, we are outlining a pragmatic, science-based, and risk-based approach that focuses on potential risk to animal and livestock health, the environment, and food safety in order to provide our farmers and ranchers the tools they need to continue to feed, clothe and fuel the world.”

Last year, President Trump directed federal agencies to modernize the regulatory framework for agricultural biotechnology products by establishing regulatory approaches proportionate to the product’s risks, avoid unjustified distinctions across similar products, and promote future innovation and competitiveness.

The ANPR will transition portions of the U.S. Food and Drug Administration’s (FDA) pre-existing animal biotechnology regulatory oversight to USDA.

As mentioned previously in Cattle Current, the FDA last month approved the first intentional genomic alteration (IGA) in an animal for both human food consumption and as a source for potential therapeutic uses. It’s for a line of domestic pigs referred to as GalSafe pigs. The IGA is intended to eliminate alpha-gal sugar on the surface of the pigs’ cells. People with Alpha-gal syndrome (AGS) may have mild to severe allergic reactions to alpha-gal sugar found in red meat (e.g., beef, pork, and lamb).

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

Last week, prices in the Southern Plains were $2 higher on a live basis at $110/cwt., $5 higher in Nebraska at $110 and $1-$5 higher in the western Corn Belt at $106-$110. Dressed trade was $7 higher at $172.

The five-area direct weighted average steer price last week was $109.19/cwt. on a live basis, which was $3.07 more than the previous week. The average steer price in the beef was $6.51 more at $171.80, according to USDA’s weekly report.

The five-area direct weighted average fed heifer price was $109.68/cwt. on a live basis, which was $3.25 more week to week. The average dressed heifer price was $6.74 more at $171.91.

Choice boxed beef cutout value was 21¢ higher Monday afternoon at $207.82/cwt. Select was $1.28 lower at $196.65.

Estimated total cattle slaughter for the week ending Dec. 26 was 419,000 head, which was 56,000 head fewer (-11.8%) than the same time a year earlier. Year-to-date estimated total cattle slaughter of 31.7 million head was 1.1 million head fewer (-3.5%) than in 2019.

Total estimated beef production for the week of 352.5 million lbs. was 40.2 million lbs. less (-10.2%) than the same time last year. Estimated year-to-date beef production of 26.37 billion lbs. was 264.3 million lbs. less (-1%) than a year earlier.

Cattle futures closed mostly higher Monday, but off of session highs, supported by stronger cash prices late last week, higher outside markets and a winter storm aiming for the Corn Belt.

Live Cattle futures closed an average of 46¢ higher.

Feeder Cattle futures closed narrowly mixed from an average of 9¢ lower to an average of 14¢ higher.

Corn futures closed mostly 2¢ to 3¢ higher.

Soybean futures closed 7¢ to 8¢ lower through Aug ’21, and then 1¢ to 4¢ higher.

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Major U.S. financial indices bounced higher Monday, supported by President Trump’s signature on the government-spending bill, which includes an additional $900 billion in COVID-19 relief. 

The Dow Jones Industrial Average closed 204 points higher. The S&P 500 closed 32 points higher. The NASDAQ was up 94 points.

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Although signals are mixed, Derrell Peel, Extension livestock marketing specialist at Oklahoma State University says it’s likely the beef cowherd Jan. 1 will be unchanged from the prior year to 1% less.

In his weekly market comments, Peel explains cowherd expansion or liquidation depends on both heifer retention and cow culling.

At the beginning of this year, beef replacement heifers were 18.4% of the beef cow inventory.

“This was down from the peak retention in 2016 of 21.0%, when herd expansion was in full force,” Peel says. “Historically, the replacement heifer percentage drops below 18% during herd liquidation. Of course, producer plans can change during the year. The July inventory estimate for beef replacement heifers was unchanged from last year but is a low enough level to potentially suggest some herd liquidation.”

Concurrently, Peel explains heifers in feedlots in 2020, on average, were 1.1% less year over year, with an Oct. 1 estimate about equal to a year earlier. Heifer slaughter this year is projected to be down about 3.6% compared to last year. 

“Heifer slaughter as a percent of the cow inventory is not low enough to suggest herd expansion nor large enough to suggest significant liquidation,” Peel says.  “Taken together, the various heifer data seem to suggest mostly steady heifer retention, which could support a 2021 herd inventory either side of unchanged from 2020 levels.”

As for cow culling, estimated beef cow slaughter in 2020 is 2.6% higher year over year, implying a net beef cow culling rate (beef cow slaughter as a percent of herd inventory) of 10.5%, according to Peel.

“Beef cow culling has increased from the record low level of 7.6% in 2015, when herd expansion was accelerated. Herd culling above 10% is consistent with modest levels of herd liquidation, though the current level is below the culling rates (typically above 11%) that indicate significant herd liquidation. The mid-year cattle report pegged the beef cow inventory down 0.8% year over year, generally consistent with the cow slaughter data this year,” Peel says.

If beef cow numbers are the same to 1% less than the previous year, in the next Cattle report (due out Jan. 29), then Peel says it would continue the slow tightening of beef cattle numbers and beef production in 2021.

“Total 2021 cattle slaughter is forecast to be down about 1%, leading to a year-over-year decrease in beef production of 1% to 2%,” Peel says. “Herd dynamics in 2021 could affect these forecasts. If herd liquidation should accelerate, the short-term impacts would be an increase in cattle slaughter due to more heifers and cows in the slaughter totals. Conversely, should the industry move to expand cattle inventories, cattle slaughter would be reduced with fewer heifers in feedlots and fewer cows culled. There is potential for either scenario. The cattle inventory trajectory in 2021 will depend on numerous factors including control of the pandemic, U.S. macroeconomic conditions, global protein markets, drought conditions, and feed prices, among others.”

Negotiated cash fed cattle was not reported Thursday or Friday. On Wednesday, prices were $2 higher in the Southern Plains at $110/cwt., according to the Agricultural Marketing Service. There were some early dressed sales in Nebraska and the western Corn Belt at $172; a few live sales in the western Corn Belt at $110. Trade in those regions the previous week was at mostly $105 on a live basis and mostly $165 in the beef.

Choice Boxed beef cutout value was $3.13 lower on Wednesday at $207.54/cwt. Select was $1.66 lower at $197.93.

The average dressed steer weight the week ending Dec. 12 was 922 lbs., which was the same as the prior week but 18 lbs. heavier than the same week a year earlier, according to USDA’s Actual Slaughter Under Federal Inspection report. The average dressed heifer weight of 848 lbs. was 2 lbs. lighter week to week but 7 lbs. heavier year over year.

Cattle futures closed narrowly mixed but mostly slightly higher in Thursday’s short session, amid extremely light holiday trade. Heading into the new week, support from stronger cash prices and the outlook for higher wholesale beef values will likely compete with year-end position squaring.

Live Cattle futures closed an average of 21¢ higher except for 7¢ lower in the back contract.

Feeder Cattle futures closed an average of 25¢ higher except for unchanged to 40¢ lower in three contracts.

Corn futures closed mostly 1¢ to 2¢ higher.

Soybean futures closed 4¢ to 5¢ higher through Aug ’21, and then fractionally lower to 1¢ lower.

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Major U.S. financial indices edged higher Thursday amid light holiday trade.

The Dow Jones Industrial Average closed 70 points higher. The S&P 500 closed 13 points higher. The NASDAQ was up 33 points.

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Total cattle slaughter under federal inspection (FI) in November of 2.66 million head was 80,100 fewer (-2.93%) than the same time last year, according to USDA’s monthly Livestock Slaughter report. For January through November total FI cattle slaughter of 29.42 million head was 939,000 head fewer (-3.09%) than the same period last year.

FI fed steer and heifer slaughter in November of 2.09 million head was 49,400 (-2.31%) less year over year. For January through November, total FI fed cattle slaughter was 23.17 million head, which was 823,200 head fewer (-3.43%) than the same time last year.

Commercial beef production in November of 2.26 billion lbs. was 34 million lbs. less (-1.48%) than a year earlier. For January through November, commercial beef production of 24.82 billion lbs. was 62.4 million lbs. less (-0.25%) than the same period last year.

However, total commercial red meat production through the first 11 months of the year was 50.80 billion lbs., which was 513.2 million lbs. more (+1.02%) year over year. Pork production drove the increase.

Negotiated cash fed cattle prices were $2 higher in the Southern Plains Wednesday at $110/cwt., with moderate trade and demand, according to the Agricultural Marketing Service. Elsewhere, trade was slow on light to moderate demand. Although too few to trend, there were some early dressed sales in Nebraska and the western Corn Belt at $172; a few live sales in the western Corn Belt at $110. Trade in those regions last week was at mostly $105 on a live basis and mostly $165 in the beef.

Also on Wednesday, Central Stockyards hosted its weekly Fed Cattle Exchange auction with a new bidding platform. Cattle feeders offered 803 head. Of those, 545 head (four lots) sold for an average of $110/cwt. Cattle sold were all heifers and all from the Southern Plains. Three lots sold via Bid-the-Grid^TM; the other on a live basis.

Stronger week-to-week prices were also seen at the fat auction in Tama, IA where Choice steers and heifers traded $1.75 to $2.25 higher. There were 136 Choice 2-4 steers bringing an average price of $107.22/cwt.

Choice boxed beef cutout value was $3.13 lower at $207.54/cwt. Wednesday afternoon. Select was $1.66 lower at $197.93.

Net U.S. beef export sales of 6,000 metric tons for the week ending Dec. 17 were 40% less than the previous week, but up noticeably from the prior four-week average, according to USDA’s weekly U.S. Export Sales report. Increases were primarily for Japan, South Korea, Mexico, Canada and Hong Kong.

Cattle futures closed higher Wednesday, supported by stronger cash prices and a surge in Lean Hog futures, likely tied in part to the previous day’s friendly Cold Storage report. As well, the Quarterly Hogs and Pigs report that came out later in the day indicates the inventory of all hogs and pigs as of Dec. 1 was 1% less year over year; 3% lower for the breeding inventory.

Live Cattle futures closed an average of 97¢ higher from 65¢ higher toward the back to $1.60 higher in waning spot Dec.

Feeder Cattle futures closed an average of 35¢ higher except for 15¢ lower in Oct.

Corn futures closed mostly 3¢ higher through Jly ‘22 and then mostly fractionally higher.

Soybean futures closed 5¢ to 11¢ higher through Aug ’21, and then mostly 3¢ to 7¢ lower.

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Major U.S. financial indices closed mixed Wednesday. Primary uneasiness seemed tied to President Trump vetoing the Defense Bill and waiting to sign the Spending Bill, demanding more COVID-19 relief.

The Dow Jones Industrial Average closed 114 points higher. The S&P 500 closed 2 points higher. The NASDAQ was down 38 points.

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Higher feed costs are pressuring projected feedlot returns for the majority of the next nine months, according to the latest Historical and Projected Kansas Feedlot Net Returns from Kansas State University (KSU).

Keep in mind that the following projections assume no price risk management.

From December through August of next year, KSU projected positive returns in four months for fed steers: December, March, May and June. Projected returns range from +$14.99 per head in December to +$91.11 in May, with estimated feedlot cost of gain (FCOG) ranging from $84.67/cwt. (Dec.) to $91.11 in May.

Conversely, KSU projects losses in five of those nine months, ranging from -$6.28 per head in August to -$47.92 in July, with FCOG in those months ranging from $86.14/cwt. in January to $92.38 in April.

Projected fed steer return in November was $35.83 per head with an FCOG of $78.92/cwt.

Projected returns for fed heifers follow a similar path, with positive returns expected in December, March and May, ranging from +$11.90 per head in March to +$60.83 in May, with FCOG at $92.17 (Dec.) to $98.00 (May).

Negative fed heifer returns are projected in six of the nine months, from -$21.71 per head in June to -$100.99 in July, with FCOG from $94.59/cwt. in January to $100.48 in July.

Projected fed heifer return in November was $42.42 per head with FCOG of $85.41/cwt.