WLI

Negotiated cash fed cattle prices continued steady to lower on Thursday with live trade in Kansas $1 lower at $110, steady to $1 lower in Nebraska at $109-$110. Dressed trade in Nebraska was steady to $2 lower at $172-$174.

Cattle futures closed lower on Thursday, pressured by softer cash prices, lower wholesale beef values and another day of higher front-month corn futures.

Live Cattle futures closed an average of 82¢ lower.

Feeder Cattle futures closed an average of $1.36 lower from 95¢ lower to $2.00 lower in spot Jan.

Choice boxed beef cutout value was $1.70 lower Thursday afternoon at $239.19/cwt. Select was $3.02 lower at $219.93.

Corn futures closed 2¢ to 3¢ higher.

Soybean futures closed 10¢ to 16¢ higher through Sep ’21 and then mostly 7¢ to 8¢ higher.

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Major U.S. financial indices closed narrowly mixed Thursday. Positive news on the day included fewer unemployment claims than traders were expecting.

Initial weekly unemployment insurance claims the week ending Nov. 26 totaled 712,000, which was 75,000 fewer than the previous week, according to the U.S. Department of Labor.

The Dow Jones Industrial Average closed 85 points higher. The S&P 500 closed 2 points lower. The NASDAQ was up 27 points.

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Ranchers and farmers scored high marks with consumers in trust and sustainability efforts, according to a recent national public opinion poll from the American Farm Bureau Federation (AFBF).

Nearly nine in 10 adults (88%) trust agricultural producers, a 4% increase from AFBF’s June 2020 polling, pointing toward public recognition that food supply chain challenges brought on by the pandemic were not within the control of farmers and ranchers.

The survey of 2,200 U.S. adults found that more than half (58%) rate the sustainability practices of U.S. farmers positively, with broad agreement from a majority of adults across demographic groups. 

The survey also explored public attitudes about the environmental sustainability achievements of farmers and ranchers, as well as future direction to advance climate-smart farming. Overall, the public agrees farmers shouldn’t be expected to bear the financial burden alone. More than four in five adults (84%) say environmental sustainability and economic sustainability are both important for farmers, and most adults say both are very important. More than four in five adults also say feeding the world (84%) and farmers passing farms on to future generations (83%) are important. 

“Americans have a high level of trust in farmers, and they understand that we’re committed to protecting the soil, air and water,” said AFBF President Zippy Duvall. “We want to leave the land better than we found it for our children and grandchildren, as well as our nation. Our survey demonstrates that Americans are impressed by advancements in climate-smart farming and we look forward to building on that success.”

Looking to the future, the survey explores how Americans think sustainability efforts on farms and ranches should be funded. Seventy percent of adults say government incentives to encourage farmers to adopt additional sustainable agricultural practices would be effective. More than three-quarters of adults believe it is important for the government to fund science-based research (76%) and improve infrastructure (78%) to support agriculture.

At a time when some corporations are making sustainability commitments that include or impact agricultural production, a bipartisan majority of adults (62%) say corporations should compensate agricultural producers for the additional cost of implementing environmental practices to help achieve sustainability goals.

Negotiated cash fed cattle prices started the week’s trade on a mixed basis Wednesday. Live trades were unevenly steady in Texas at $110-$112/cwt. on moderate trade and light to moderate demand, according to the Agricultural Marketing Service. There were a few early trades in Kansas at $110, but too few to trend. Prices in the Southern Plains last week were at $111.

Live trade in Nebraska was steady to $1 lower at $110 on light to moderate trade and demand. There were a few dressed trades at $172-$174, but too few to trend; $174 last week. Trade in the western Corn Belt last week was at $109-$110 on a live basis and at $172-$174 in the beef.

Cattle futures mostly eked out gains on Wednesday, despite a pullback in Choice boxed beef value and stronger front-month Corn futures.

Live Cattle futures closed an average of 22¢ higher.

Feeder Cattle futures closed an average of 18¢ higher except for 5¢ lower in the back two contracts.

Choice boxed beef cutout value was $2.51 lower Wednesday afternoon at $240.89/cwt. Select was 13¢ lower at $222.95.

Corn futures closed 2¢ to 4¢ higher through Sep ’21 and then mostly fractionally higher to 1¢ higher.

Soybean futures closed 7¢ to 9¢ lower through Sep ’21 and then 3¢ to 5¢ lower.

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Major U.S. financial indices closed narrowly mixed Wednesday as investors awaited more clarity about the next round of federal economic stimulus and approval of COVID-19 vaccines.

The Dow Jones Industrial Average closed 59 points higher. The S&P 500 closed 6 points higher. The NASDAQ was down 5 points. 

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In October, the National Cattlemen’s Beef Association (NCBA) introduced what’s being termed the 75-percent rule in order to voluntarily ensure cash fed cattle trade is adequate for robust cash price discovery each week. That was in response to several bills introduced to Congress that would mandate minimum levels of weekly cash trade.

A Voluntary Framework to Achieve Robust Price Discovery in the Fed Cattle Market relies on what is termed robust cash trade volume for each of four regions, utilizing price discovery research from Stephen Koontz, agricultural economist at Colorado State University.

In order to comply with the framework, at least 75% of these robust trade levels must be achieved in each of four regions no fewer than 75% of the weeks in each quarter. The framework also outlines minimum levels of weekly regional participation from the four major packers. The framework is supposed to go into effect Jan. 1, 2021.

You can find details outlined in the Oct. 21 Cattle Current here.

“The question is whether this policy meets the objective to increase the level of negotiated trade and cattle price transparency,” says Elliott Dennis, Extension livestock economist at the University of Nebraska-Lincoln, in the latest issue of In the Cattle Markets. “In other words, if this policy were historically in place, how likely would have minor (major) triggers occurred?”

Dennis used public data published weekly and available through USDA-AMS from 2013-2020, in order to find an answer.

“The industry’s 75 percent-rule was developed in response to proposed legislation to solve potential concerns about thinness in negotiated trade across different regions,” Dennis explains. “The current concern surrounding thinness in negotiated trade has more to do with lower cash prices received by producers due to the Holcomb Fire and COVID-19 pandemic. Changes to the federal law or industry policy would not have effectively raised producer prices received for cattle. Further, if this policy would have been implemented before either the Holcomb Fire or COVID-19 it would not have changed packing plants’ ability to process cattle (supply from feedlots) or lack of foodservice’s demand for beef.”

There are lots more to Dennis’ findings than space allows for here. You can find complete details here.

“This policy, in its current form and from the four cattle feeding regions perspective, is not likely to significantly improve the level of negotiated trade nor cattle market transparency. Since it does not change the supply of fed cattle nor the demand for wholesale beef, it is also not likely to increase the cash price received by producers,” Dennis emphasizes. “Anytime a policy is implemented, whether industry prompted or legislatively enacted, there is a potential for creating increased costs and reducing profitability for the entire beef complex. For example, to avert potential legislation, packers and feedlots could change cattle marketing behavior from profit-maximizing to negative policy aversion, creating inefficiencies in the beef complex. Consistent with the economic theory of derived demand, these additional costs, spurred on by potential policies, are likely to predominately be carried by the cow-calf industry.”

Negotiated cash fed cattle trade was mostly inactive on very light demand in Nebraska and the western Corn Belt through Tuesday afternoon. Elsewhere, it was at a standstill, according to the Agricultural Marketing Service. Last week, live prices were at $111/cwt. in the Southern Plains, $110-$111 in Nebraska and $109-$110 in the western Corn Belt. Dressed trade was at $172-$174.

Cattle futures closed higher on Tuesday, supported by ongoing strength in wholesale beef values and the outlook for steady to higher cash prices this week.

Live Cattle futures closed an average of 47¢ higher.

Feeder Cattle futures closed an average of 81¢ higher.

By the way, winter wheat condition improved week to week, according to the USDA Crop Progress report for the week ending Nov. 29. 46% was rated as Good (40%) or Excellent (6%) versus 43% the previous week and 52% the previous year. 18% was rated as Poor (13%) or Very Poor (5%) compared to 21% the prior week and 14% the prior year.

Choice boxed beef cutout value was 28¢ lower Tuesday afternoon at $243.40/cwt. Select was 65¢ higher at $223.08.

Corn futures closed mostly 3¢ to 5¢ lower through Sep ’21 and then mostly 1¢ to 2¢ lower.

Soybean futures closed 4¢ to 6¢ lower.

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Major U.S. financial indices closed higher Tuesday. Support included news of a new proposed economic stimulus plan and hawkish comments from Janet Yellen, President-elect Biden’s choice for Treasury Secretary, who stressed urgency in the nation taking more strides in addressing the economic fallout borne by the pandemic.  

The Dow Jones Industrial Average closed 185 points higher. The S&P 500 up closed 40 points higher. The NASDAQ was up 156 points.

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Agricultural producer sentiment declined in November, according to the Purdue University/CME Group Ag Economy Barometer. It dropped 16 points to a reading of 167 after setting a record high in October.

“This is the opposite of what happened following the November 2016 election. That year producers became much more optimistic about the future following the election and, in turn, that optimism about the future helped drive the Ag Economy Barometer up sharply in late 2016 and early 2017,” says James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture.

The Index of Future Expectations fell 30 points to a reading of 156 in November. However, the on-going rally in commodity prices and CFAP-2 payments continued to support producers’ view of current economic conditions with the Index of Current Conditions rising 9 points in November to 187, an all-time high for the index.

To learn more about what factors might be motivating the shift in producers’ sentiment before and after the November election, a series of questions focused on producers’ future expectations for environmental regulations, taxes and other key aspects of the agricultural economy were included in both the October and November surveys.

Comparing results from October to November, far more producers in November said they expect to see: 1) environmental regulations impacting agriculture to tighten over the next five years; 2) higher income tax rates for farms and ranches; 3) higher estate tax rates for farms and ranches; 4) less government support for the U.S. ethanol industry and 5) a weaker farm income safety net provided by U.S. government program policies.

Also of note, since the summer of 2019, Purdue researchers have been tracing producers’ perceptions regarding the ongoing trade dispute between the U.S. and China. Specifically, the survey asks whether respondents think the dispute will be resolved soon and if the outcome will ultimately benefit U.S. agriculture. In January and February of this year, 80% of survey respondents said they expected to see the trade dispute with China be resolved in a way that benefits U.S. agriculture. In November, though, only 50% had the same expectation. Only 44% of respondents in November think it’s likely that China will fulfill the Phase One Trade Agreement requirements, down from 59% a month earlier.

Negotiated cash fed cattle trade was at a standstill through Monday afternoon, according to the Agricultural Marketing Service. Last week, live prices were at $111/cwt. in the Southern Plains, $110-$111 in Nebraska and $109-$110 in the western Corn Belt. Dressed trade was at $172-$174.

More narrowly, last week’s five-area direct average steer price was $110.27/cwt. on a live basis, which was 70¢ higher than the previous week, according to USDA data. The average steer price in the beef was $1.67 higher at $173.37.

Cattle futures closed mixed on Monday, amid month-end position squaring and some support from weaker grain futures.

Live Cattle futures closed an average of 31¢ lower except for an average of 7¢ higher in the back two contracts.

Feeder Cattle futures closed an average of 75¢ higher, from 55¢ higher at the back to $1.22 higher in spot Jan.

Choice boxed beef cutout value was 83¢ higher Monday afternoon at $243.68/cwt. Select was $1.75 higher at $222.43.

Corn futures closed mostly 5¢ to 7¢ lower.

Soybean futures closed 14¢ to 23¢ lower.

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Major U.S. financial indices closed lower Monday, likely with some month-end positioning and profit taking.

The Dow Jones Industrial Average closed 271 points lower. The S&P 500 closed 16 points lower. The NASDAQ was down 7 points.

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“Exactly what to expect in fed cattle markets in the coming months depends on numerous factors including: the demographics of the feedlot population (both size and gender), feed costs, the time of the year, weather conditions and regional impacts,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments.

Starting with gender of feedlot placements, Peel points out the latest quarterly inventory report indicated steers represented 62.4% of the feedlot inventory and heifers comprised 37.6%. At the same time a year earlier, the inventory was 60.8% steers and 39.2% heifers.

As for weights, Peel says 22% of the cattle placed on feed over the last six months weighed less than 600 lbs., 18% weighed 600-700 lbs., 22% weighed 700-800 lbs., 23% were 800-900 lbs. and 15% weighed more than 900 lbs.

“Feedlot placement weight is related to finished weight of fed cattle. However, the relationship is not one to one,” Peel explains. “For both steers and heifers in the typical range of placement weights, a 1 lb. increase in placement weight results in 0.5 lb. of additional finished weight.” 

Based on data from Kansas State University’s Focus on Feedlots, Peel says average daily gain (ADG) each month so far this year is higher year over year for steers and heifers. Steer ADG averaged 3.53 lbs. the last six months; 3.11 lbs. for heifers. Feed efficiency improved year over year, too.

“Feedlots will manage and balance these and many other factors as they deal with coming winter weather, rising feed costs, the mix of steers and heifers and the availability of feeder cattle of various sizes,” Peel says.