WLI

Negotiated cash fed cattle trade was at a standstill in all major cattle feeding regions through Tuesday afternoon, according to the Agricultural Marketing Service. Live prices last week were at $114/cwt. and dressed trade was at $182.

Cattle futures closed mixed Tuesday, with continued pressure from Corn futures and uncertainty about the week’s cash direction.

Live Cattle futures closed an average of 33¢ higher, except for 25¢ lower in the back contract.

Feeder Cattle futures closed mixed, from an average of 42¢ lower to an average of 18¢ higher.

Choice boxed beef cutout value was $4.35 lower Tuesday afternoon at $234.68/cwt. Select was $1.47 lower at $226.17.

Corn futures closed mostly 4¢ to 7¢ higher; 13¢ higher in spot Mar.

Soybean futures closed 10¢ to 11¢ higher through Jan ‘22, and then mostly 3¢ higher.

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Major U.S. financial indices closed lower Tuesday, with likely profit taking from the previous day’s sharp rebound.

The Dow Jones Industrial Average closed 143 points lower. The S&P 500 closed 31 points lower. The NASDAQ was down 230 points.

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Bipartisan U.S. Senators—Deb Fischer (R-Neb.) and Ron Wyden (D-Ore.)— introduced a bill on Tuesday aimed at increasing transparency and price discovery in cash fed cattle markets.

The Cattle Market Transparency Act of 2021, according to the Senators, will:

Establish regional mandatory minimum thresholds of negotiated cash and negotiated grid trades to enable price discovery in cattle marketing regions. It will require the Secretary of Agriculture, in consultation with the Chief Economist, to establish regionally sufficient levels of negotiated cash and negotiated grid trade, seek public comment on those levels, then implement.

Require USDA to create and maintain a publicly available library of marketing contracts between packers and producers in a manner that ensures confidentiality.

Prohibit the USDA from using confidentiality as a justification for not reporting and make clear that USDA must report all Livestock Mandatory Reporting (LMR) information, and they must do so in a manner that ensures confidentiality.

Senator Fischer, a member of the Senate Agriculture Committee first introduced the bill last September.

“I am pleased to reintroduce this bill with bipartisan support,” says Senator Fischer. “It will help facilitate price discovery and provide cattle producers with the information they need to make informed marketing decisions. I am committed to working across the aisle to advance the bill forward this Congress.”

The need for increased market transparency and cash price discovery is recognized widely. Choosing a voluntary or mandatory approach is where opinions diverge just as widely.

“Cattle producers continue to face serious obstacles when it comes to increasing profitability and gaining leverage in the marketplace,” explains Ethan Lane, Vice President of Government Affairs for the National Cattlemen’s Beef Association (NCBA). “Leveling the playing field and putting more of the beef dollar in producer pockets remains the top priority of this association. NCBA shares Senator Fischer’s objectives, as do its affiliates and indeed the entire industry. The best way to achieve those objectives, however, continues to be hotly debated by the very cattle producers this legislation would directly impact. We have worked and will continue to work alongside our affiliates, Congress, and USDA toward regionally robust negotiated trade, the establishment of a cattle contract library, and commonsense in USDA’s rules of confidentiality by taking direction from our membership through the grassroots policy process.”

NCBA is two months into the implementation phase of a voluntary approach, which established a series of triggers to evaluate negotiated trade volumes in each region and benchmarks for improvement.

Negotiated cash fed cattle trade was at a standstill in all major cattle feeding regions through Monday afternoon, according to the Agricultural Marketing Service. Live prices last week were at $114/cwt. and dressed trade was at $182.

The weekly five-area direct average fed steer price last week was $114.07/cwt., which was even with the previous week but 78¢ less than the previous year. The average five-area dressed steer price was $181.63, which was $1.06 more than the previous week but $3.15 less than the previous year.

Cattle futures extended losses Monday, with pressure including last week’s steady cash prices, the outlook for steady money this week and expectations for declining wholesale beef values.

Live Cattle futures closed an average of 47¢ lower, except for unchanged to an average of 8¢ higher in three contracts.

Feeder Cattle futures closed an average of 70¢ lower (10¢ lower toward the back to $1.47 lower in spot Mar), except for 50¢ higher in the back contract.

Boxed beef cutout value: Choice boxed beef cutout value was $1.50 lower Monday afternoon at $239.03/cwt. Select was $2.09 lower at $227.64.

Grain Futures softened Monday, pressured by the stronger U.S. Dollar and recently weaker export sales.

Corn futures closed 8¢ to 9¢ lower through the front three contracts, 1¢ to 5¢ lower through the next five and then 1¢ higher.

Soybean futures closed 9¢ to 13¢ lower through Aug’21, and then mostly 1¢ to 4¢ higher

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Major U.S. financial indices roared back Monday, helped along by a lower Treasury yield rate and U.S. approval of a third COVID-19 vaccine—this one a single-shot version from Johnson & Johnson.

The Dow Jones Industrial Average closed 603 points higher. The S&P 500 closed 90 points higher. The NASDAQ was up 396 points.

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Although the La Niña weather pattern leveled off recently, it will return with warm and dry conditions over most of the United States into the summer, according to Dr. Art Douglas, professor emeritus at Creighton University.

“The Pacific jet stream is positioned far north from normal preventing moisture from reaching the continent,” Douglas explained at last week’s CattleFax Outlook, held during the virtual 2021 Cattle Industry Convention Winter Reboot. “The only significant moisture will be in the Ohio Valley and along the Canadian border from northeast North Dakota into Minnesota.”

Douglas forecasts the Southwest U.S. will be warmer than normal, and the western half of the country will be relatively dry. Dry conditions in the Rockies will eventually extend into the central Corn Belt, he said, causing concerns for corn and soybean growers.

With crops and feed costs in mind, Mike Murphy, CattleFax vice president of research and risk management services, estimated that there will be 181 million planted acres of corn and soybeans in 2021, the most ever combined acres for those two commodities.

“That number is likely to be even higher, and in some regards it needs to be larger to balance the demand and build back supply,” said Murphy. He explained corn should be able to balance supply and demand, but soybean supplies will be snugger globally, with a smaller crop expected from South America.

On the demand side of the ledger, Murphy explained China is looking for higher quality feed ingredients, such as corn and soybeans, as that nation rebuilds its pork industry in the wake of African Swine Fever. That includes the estimated 700 million bu. of corn China purchased from the U.S. this year.

“As soybean prices drive higher, soybeans will have a greater influence on the value of corn, bringing corn prices with it,” said Murphy.

Spot soybean prices are expected to be $13.50-$16.50/bu. for the remainder of 2021, according to Murphy.

Negotiated cash fed cattle trade continued sluggish on Friday. Live trade last week was steady in Nebraska and the Southern Plains at $114/cwt.; steady to $1 lower at $114 in the western Corn Belt. Dressed trade was steady to $2 higher at $182.

Sluggish cattle trade, near-term heavy fed cattle supplies and month-end position squaring all helped pressure Cattle futures Friday.

Live Cattle futures closed an average of $1.50 lower, from 95¢ lower toward the back to $3.90 lower in expiring Feb.

Feeder Cattle futures closed an average of $2.27 lower.

Choice boxed beef cutout value was 14¢ higher Friday afternoon at $240.53/cwt. Select was 94¢ higher at $229.73.

Estimated total cattle slaughter last week of 666,000 head was 114,000 head more than the previous week and 38,000 more than the prior year. Year-to-date estimated cattle slaughter of 5.17 million head is 227,000 head fewer than the same time last year. Beef production of 4.37 billion lbs. is 87.9 million lbs. less (-1.97%) year over year.

Corn futures closed mostly 3¢ to 4¢ lower.

Soybean futures closed mostly 7¢ to 9¢ lower.

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Major U.S. financial indices closed mixed Friday, from the sharply lower Dow to higher tech stocks. Primary pressure continued to be investor fears about rapidly rising inflation and interest rates.

The Dow Jones Industrial Average closed 469 points lower. The S&P 500 closed 18 points lower. The NASDAQ was up 72 points.

CME WTI Crude Oil futures closed $1.93 to $2.03 lower through the front six contracts.

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“Beef in cold storage followed a fairly typical seasonal pattern in 2020 despite the coronavirus pandemic,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “However, beef in cold storage accelerated more than normal the last quarter of 2020. This resulted in beef in cold storage at the end of January 2021 totaling 519 million lbs., which is the largest quantity of beef in cold storage at the end of January since 2017. This is not an unmanageable quantity of beef, but it could indicate that beef is slowly backing up in the supply chain.” He adds that recently higher wholesale beef values may suggest supplies will be easily cleared.

Total pounds of beef in freezers Jan. 31 were down 3% from the previous month, but up 6% from last year, according to the latest USDA Cold Storage report.

Negotiated cash fed cattle trade was limited on light demand in Nebraska through Thursday afternoon, according to the Agricultural Marketing Service. There were a few live trades at $114/cwt., and a few in the beef at $182, but too few to trend.

There were also a few dressed trades in the western Corn Belt at $182, but too few to trend.

Last week, live sales were at $114 in the Southern Plains and Nebraska; $114-$115 in the western Corn Belt. Dressed trade was at $180-$182.

Cattle feeders offered 790 head (6 lots) in Central Stockyards’ special Fed Cattle Exchange auction Thursday, all from the Southern Plains. None sold. Reserve prices were $115-$116 and bids were $114.25 to $114.50.

Cattle futures closed mixed Thursday. Weaker Corn futures, tied to lower export sales and profit taking, helped Feeder Cattle.

Feeder Cattle futures closed an average of 35¢ higher.

Sharply lower outside markets, the continued lack of cash direction and weaker export sales helped to mostly pressure Live Cattle.

Net U.S. beef export sales of 8,500 metric tons for 2021 were 63% less than the previous week and 66% less than the prior four-week average, according to the U.S. Export Sales report for the week ending Feb. 18. Increases were primarily for South Korea, Japan, Mexico, Canada, and Taiwan.

Live Cattle futures closed an average of 33¢ lower, except for an average of 17¢ higher in three contracts.

Choice boxed beef cutout value was 36¢ lower Thursday afternoon at $240.39/cwt. Select was $1.00 lower at $228.79.

The average dressed steer weight the week ending Feb. 13 was 919 lbs., the same as a week earlier, but 14 lbs. heavier than the previous year, according to USDA’s Actual Slaughter Under Federal Inspection report. The average dressed heifer weight of 850 lbs. was 2 lbs. heavier than the prior week and 17 lbs. heavier than the previous year. Fed cattle slaughter of 468,241 head was 40,812 head less than the previous week; 20,542 head less than the prior year.

Corn futures closed 3¢ to 7¢ lower through Sep ‘21, and then mostly 1¢ to 2¢ lower.

Soybean futures closed 5¢ to 18¢ lower through Jan ‘22, and then mostly fractionally higher to 1¢ higher.

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Major U.S. financial indices closed sharply lower Thursday with investors apparently rattled by a surge in Treasury bond yield rates. That came in the face of a more positive unemployment report than the trade expected.

Weekly initial unemployment insurance claims were 730,000 the week ending Feb. 20, down 111,000 from the previous week, according to the U.S. Department of Labor.

The Dow Jones Industrial Average closed 559 points lower. The S&P 500 closed 96 points lower. The NASDAQ was down 478 points. 

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Beef byproduct values continue to gain after sinking to a pandemic low of $6.57/cwt. the latter part of last April. Prices mostly gradually increased since then to $9.78 by Feb. 24; about 7% more than a year earlier.

“Beef and beef byproducts are typically produced in nearly fixed proportions; however, when packers experienced line disruption in 2020, many plants changed fabrication methods to keep more whole muscles/primals intact and keep less offal to maximize line speed,” explains Brenda Boetel, livestock economist at the University of Wisconsin-River Falls, in the latest issue of In the Cattle Markets. “The decrease in beef and offal provided less opportunities for exports and byproduct values decreased…When these edible offal products are not exported, they will often go into rendering or into pet food and ultimately decrease the overall value of the finished steer.”

Total offal value plus hides accounted for 20.7% of U.S. beef export value in 2020, down from 22% in 2019, according to Boetel.

For perspective, basis a steer at 1,400 lbs., byproduct value increased $44.94 per head to $136.92 at the end of February, compared to the pandemic low.

“With the continued recovery from COVID disruptions, byproduct production has mostly returned to pre-COVID levels. Given the relatively fixed pounds of byproducts per 1,400 lb. steer, the byproduct drop value contributions have been increasing due primarily to changes in demand,” Boetel says.

Negotiated cash fed cattle tradewas limited on light demand in all major cattle feeding regions through Wednesday afternoon, according to the Agricultural Marketing Service. There were a few live trades in the Southern Plains steady with last week at $114/cwt., but too few to trend.

Cattle feeders offered 1,145 head (9 lots) in Central Stockyards’ (CS) Fed Cattle Exchange auction Wednesday, all from the Southern Plains. Of those, 409 head sold (250 heifers and 159 steers) for a weighted average price of $114.25/cwt. CS will host a special sale Thursday.

On the other hand, slaughter steers sold steady to $3 lower, with instances of $4 lower at Sioux Falls Regional in South Dakota. There were 534 head of Choice 3-4 steers weighing an average of 1,654 lbs., bringing an average of $112.06, which was $2-$3 lower than cash trade in the region last week.

Cattle futures closed higher Wednesday, helped along by sharply higher outside markets, broad commodity support and recent strength in Lean Hog futures.

 Live Cattle futures closed an average of 91¢ higher.

Feeder Cattle futures closed an average of $1.23 higher, from 67¢ higher at the back to $2.15 higher toward the front.

Choice boxed beef cutout value was 46¢ higher Wednesday afternoon at $240.75/cwt. Select was 74¢lower at $229.79. 

Corn futures closed mostly 3¢ to 7¢ higher.

Soybean futures closed 14¢ to 18¢ higher through Jan ‘22, and then mostly 5¢ to 10¢ higher.

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Major U.S. financial indices closed higher Wednesday, amid another volatile session. Support seemed to center around optimism for the economy picking up steam. Remarks from Federal Reserve Vice Chair, Richard Clarida also helped quell inflation worries, with remarks to the U.S. Chamber of Commerce, mirroring the dovish tone of Chair Jerome Powell a day earlier.

The Down Jones Industrial Average closed 424 points higher. The S&P 500 closed 44 points higher. The NASDAQ was up 132 points.

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Cattle markets continue to underperform, beneath the weight of record high beef production since the middle of June. But, Randy Blach, CattleFax CEO, expects cattle prices to increase from now through 2024, especially after the first half of this year. Profitability will increase significantly for cow-calf producers and margin operators, he says.

CattleFax shared its Market Outlook Wednesday, as part of the National Cattlemen’s Beef Association Winter Reboot.

Part of the price optimism has to do with declining cattle numbers, after working through current front-end supplies.

CattleFax projects modest herd liquidation of 200,000 beef cows this year and 350,000 head next year, due in part to the likelihood of expanding La Niña drought this spring and summer.

Leverage will also swing back in producers’ favor as packing plant capacity utilization declines, according to Kevin Good, CattleFax vice president of industry relations and analysis.

At the same time, CattleFax expects consumer beef demand to continue strong.

Blach explained domestic consumer beef demand last year was the strongest in more than 30 years, based on the U.S. Consumer Beef Demand Index. That was helped by consumer incomes being replaced almost entirely by government stimulus.

Internationally, CattleFax expects U.S. beef exports to increase at least 5% this year.

In terms of cattle prices, these are the CattleFax projections for this year.

                                                Annual Av.                Range

Fed steer                               $119/cwt.                  $108 to $128

800 lbs. steer                       $145/cwt.                  $135 to $160

550 lbs. steer                       $170/cwt.                  $160 to $180

Utility cows                          $64/cwt.                     $52 to $74

Bred cows                            $1,600/hd                 $1,200 to $1,900

There are headwinds, of course.

Even before considering the drought, Mike Murphy, CattleFax vice president of research and risk management services, said both supply and demand mean feed costs will likely remain elevated into the next crop marketing year.

As well, the folks at CattleFax expect inflation and interest rates to begin rising.