WLI

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

Live sales for the week were mostly steady to $1 on either side of steady at $110-$111/cwt. in the Southern Plains, $109-$110 in the Northern Plains and $108-$110 in the western Corn Belt. Dressed trade was steady to $3 lower at $170-$173.

Through Thursday, the five-area direct average steer price was $109.23/cwt. on a live basis, which was 29¢ less than the previous week and $15.05 less than the same time last year. The average steer price in the beef was $172.59, which was 47¢ less than the previous week and $26.27 less year over year.

Sharply lower grain futures Friday helped fuel strong gains in Cattle futures. Higher wholesale beef prices added support, as did loftier Lean Hog futures, tied in part to reports of new African Swine Fever cases in China.

Live Cattle futures closed an average of $2.02 higher through the front four contracts, and then an average of 55¢ higher, except for 35¢ lower in the back contract.

Feeder Cattle futures closed an average of $2.81 higher, from $1.95 to $5.00 higher.

Choice boxed beef value was $1.62 higher Friday afternoon at $222.82/cwt. Select was $3.06 higher at $213.34.

Estimated total cattle slaughter for the week of 657,000 head was 6,000 more than the previous week and 13,000 head more than the same week last year. Estimated beef production for the week of 550.2 million lbs. was 5.4 million lbs. more than the previous week and 19.3 million lbs. more than the previous year.

Grain futures tumbled hard Friday, pressured by factors including profit taking and rains in South America.

Corn futures closed 17¢ to 23¢ lower through Jly ‘22 and then mostly 6¢ to 7¢ lower.

Soybean futures closed 44¢ to 58¢ lower through Aug ‘22 and then 31¢ to 38¢ lower.

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Major U.S. financial indices closed mixed Friday.

The Dow Jones Industrial Average closed 179 points lower. The S&P 500 closed 11 points lower. The NASDAQ was up 12 points.

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Markets could view Friday’s Cattle on Feed report (feedlots with 1,000 head or more capacity) as a bit bearish with December placements 0.77% more than the previous year, while estimates ahead of the report expected a decrease of about 3%. The 1.84 million head placements were the second most for the month since the data series began in 1996, according to the National Agricultural Statistics Service.

Marketings in December of 1.85 million head were 1% more than the prior year, slightly more than expectations ahead of the report.

The on-feed inventory Jan. 1 of 11.96 million head was slightly more than the previous year, whereas average of expectations was for a decline of about 0.5%.

Negotiated cash fed cattle trade was slow to moderate on light demand in Nebraska through Thursday afternoon. Dressed trade was unevenly steady with the previous week at $173/cwt. There were a few live sales at $109, but too few to trend; $109-$110 last week.

Trade was limited on light demand in Kansas with a few live trades at $110, which was steady with the previous day and week.

Elsewhere, trade was mostly inactive on light demand, according to the Agricultural Marketing Service. Live trade in the Texas Panhandle on Wednesday was at $110, steady to $1 lower than last week. Trade in Colorado on Wednesday was steady to $1 higher at $109-$110.

Last week, live sales in the western Corn Belt were at $108-$109; dressed trade at $173.

Although steady to weak cash prices are a disappointment this week, Live Cattle futures stabilized and gained Thursday, likely helped along by rising wholesale beef values. Feeder Cattle also continued to extend gains. Positioning ahead of Friday’s Cattle on Feed report likely played a role, too.

Live Cattle futures closed an average of 46¢ higher, from 2¢ higher at the back to $1.07 higher toward the front.

Feeder Cattle futures closed an average of 72¢ higher, from 2¢ to $1.62 higher, except for unchanged in the back contract.

Choice boxed beef cutout value was $2.29 higher Thursday afternoon at $221.20/cwt. Select was $3.00 higher at $210.28.

The average dressed steer weight the week ending Jan. 9 was 923 lbs., which was 3 lbs. heavier than the prior week and 19 lbs. heavier than the prior year, according to the USDA Actual Slaughter Under Federal Inspection report. The average dressed heifer weight of 851 lbs. was the same as a week earlier but 17 lbs. heavier than the same week a year earlier. Total cattle slaughter for the week of 652,330 head was 9,420 head more year over year. Beef production for the week of 549.1 million lbs. was 19.6 million lbs. more than the previous year.

Corn futures closed 1¢ to 3¢ higher through the front three contracts and then mostly unchanged to fractionally mixed.

Soybean futures closed 1¢ to 3¢ lower, except for fractionally higher to 2¢ higher in the front three contracts.

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Major U.S. financial indices closed narrowly mixed Thursday. Positive news included slightly fewer initial unemployment insurance claims than investors expected.

Initial unemployment insurance claims for the week of Jan. 16 were 900,000, according to the U.S. Department of Labor.

The Dow Jones Industrial Average closed 12 points lower. The S&P 500 closed 1 point higher. The NASDAQ was up 73 points.

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U.S. beef exports to China were record high from July through November of last year, suggesting progress and promise, but still represented less than 1% of the beef imported by that nation, according to USDA’s Economic Research Service (ERS). U.S. beef competitors accounted for 94% of China beef imports during that period.

“In part, this may be because the U.S. value per pound of total (bone-in and boneless) beef shipped to China is higher than that of most of its competitors in the China beef market,” ERS analysts explain, in the latest monthly Livestock, Dairy and Poultry Outlook.

ERS compared the unit values of China’s frozen boneless beef imports to help assess U.S. competitiveness. For January through November, U.S. unit value was $3.23/lb., compared to $1.90 to $2.79/lb. for Argentina, Uruguay, Brazil, New Zealand, and Australia. Those latter countries comprise most of China’s beef imports. Incidentally, the unit cost of Canadian imports to China was $4.01/lb.

“…A higher U.S. beef price reflects a better quality, grain-fed fresh/chilled product, which is different from what China typically imports from other countries,” ERS analysts explain.

For context, total U.S. beef exports in November of 277 million lbs. were 32 million lbs. (+13%) more year over year, driven mainly by moderate global economic recovery, according to ERS.

“China’s demand for animal proteins will continue to grow as its economy and population expand,” say ERS analysts. “Despite a higher unit price of U.S. beef and certain barriers that limit trade, China’s commitment to purchase an additional $200 billion of American-made goods and services over 2020 and 2021, under the U.S. China Phase 1 trade deal, could lead to continued growth of U.S. beef exports.”

Negotiated cash fed cattle trade was slow on light to moderate demand in Kansas through Wednesday afternoon. Live trades were unevenly steady with last week at $110/cwt. Trade was limited on light demand in the Texas Panhandle, where there were a few live sales at $110, but too few to trend. Elsewhere, trade was inactive with very light demand, according to the Agricultural Marketing Service.

Choice boxed beef cutout value was $1.42 higher Wednesday afternoon at $218.91/cwt. Select was 84¢ higher at $207.28.

Live Cattle futures edged lower again Wednesday as the week’s cash outlook appears either side of steady, despite continued strength in wholesale beef prices. They closed an average of 39¢ lower, except for from 2¢ higher in spot Feb.

Feeder Cattle futures extended gains Wednesday, helped along by another day of retreat in grain futures. They closed an average of 79¢ higher, from 40¢ to $1.12 higher.

Corn futures closed 4¢ to 6¢ lower through Jly ‘22 and then mostly 1¢ to 2¢ lower.

Soybean futures closed 16¢ to 21¢ lower.

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Major U.S. financial indices closed higher Wednesday, amid stronger than expected quarterly earnings reports from the likes of Netflix and Disney. President Biden’s inauguration likely removed a layer of investor uncertainty, as well.

The Dow Jones Industrial Average closed 257 points higher. The S&P 500 closed 52 points higher. The NASDAQ was up 260 points.

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Retail beef prices for 2020 were 9.7% more than the prior year, the steepest increase since 2014, when prices climbed 13.4% year over year, according to David Anderson, Extension livestock economist at Texas A&M University.

Anderson explains price increases in 2014 stemmed from tight supplies fostered by the drought. This year, much of it had to do with disruptions caused by the pandemic.

“Most of the increase in beef prices in 2020 occurred in the second quarter of the year, with price increasing 18% year over year. Beef prices also increased by 11% in the third quarter over the prior year,” Anderson says, in the latest issue of In the Cattle Markets. “In the aftermath of the drought, beef prices registered five consecutive quarters of year over year increases as supplies continued to decline and demand grew. In case anyone wondered, 2016 and 2017 were the last years that average all fresh retail beef prices declined compared to the prior year.”

Anderson notes All Fresh retail beef prices last year were above 2019 the entire year. The pre-pandemic price in March averaged $5.96/lb. and finished the year at $6.23. It peaked in June at $7.38.

“Several factors may be contributing to higher reported retail prices when wholesale and live cattle prices have been at or below last year’s levels,” Anderson says. “The data reflects only grocery store prices. Grocery stores have sold more beef, in volume and value, compared to the year before, due to restaurant shutdowns. It’s also likely that costs have increased between wholesale and retail levels due to compliance with coronavirus restrictions and constraints in processing. It may be difficult to get average retail prices below pandemic levels in coming months as beef production is expected to decline cyclically this year and, hopefully, the economy is able to fully open expanding restaurant demand.

Negotiated cash fed cattle trade was at a standstill in Kansas and the Northern Plains through Tuesday afternoon, according to the Agricultural Marketing Service. Elsewhere, trade was very limited with very light demand; too few transactions to trend.

Feeder Cattle futures extended gains Tuesday, helped along by softer Corn and Soybean futures. Live Cattle mostly edged lower.

Live Cattle futures closed an average of 26¢ lower, except for from 45¢ to $1.15 higher in the front three contracts.

Feeder Cattle futures closed an average of $1.44 higher, except for 17¢ lower in spot Jan. That’s mainly an average of $3.46 higher in the last two trading sessions.

Choice boxed beef cutout value was $2.45 higher through Tuesday afternoon at $217.49/cwt. Select was 60¢ higher at $206.44.

Corn futures closed 4¢ to 7¢ lower through the front six contracts, and then mostly 2¢ to 4¢ higher toward the back.

Soybean futures closed 23¢ to 31¢ lower through the front four contracts, mostly 7¢ to 8¢ lower through the next five contracts and then mostly 1¢ lower.

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Major U.S. financial indices closed higher Tuesday, amid chatter from the pending new Administration about another round of economic stimulus.

The Dow Jones Industrial Average closed 116 points higher. The S&P 500 closed 30 points higher. The NASDAQ was up 198 points.

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Although forecasts indicate increased year-over-year domestic red meat and poultry production, analysts with USDA’s Economic Research Service (ERS) expect per capita meat disappearance to decline about 1%, due to increased exports and reduced beef imports.

“Availability is the disappearance on the domestic market of what remains after exports and ending stocks are subtracted from the sum of production, beginning stocks, and imports. Dividing this amount by the U.S. population yields per capita disappearance,” explain ERS analysts, in the latest monthly Livestock, Dairy and Poultry Outlook (LDPO).

Beef production for this year was projected lower than the previous month at 27.2 billion lbs. but still would be more than in 2020.

“This adjustment was based in part on fewer fed cattle to be slaughtered in second-quarter 2021 as a result of lower expected placements in fourth-quarter 2020,” say ERS analysts. “Further, higher feed costs in 2021 are expected to negatively impact cattle carcass weights.”

According to USDA, from January through November of last year, total cattle slaughter was about 3% less than the previous year. Average carcass weights were about 3% heavier, though, which mostly offset decreased slaughter, in terms of beef production.

“Live steer prices in the five-area marketing region for the first week of January were reported at $111.27/cwt., more than $13 below last year for the same week and the lowest January starting price since 2011,” say ERS analysts. “However, the annual price forecast for 2021 was raised $0.50 to $115.50/cwt. on lower expected production and expected improved packer demand in 2021.”

USDA projects the average five-area direct fed steer price at $113 in the first and second quarters, at $115 in the third quarter and at $120 in the fourth quarter.

On the other end of the trade, ERS analysts say the average feeder steer price last year was about 5% less than the previous year at $135.45/cwt. That’s basis a 750-800 lb. steer selling at Oklahoma National Stockyards.

“Prices in the first two weeks of January 2021 averaged $134.81, about 7% below the monthly average for January 2020,” ERS analysts say. “To the extent that prices at the beginning of 2021 were higher than expected, the first-quarter 2021 forecast was raised $1 to $134/cwt. However, higher expected feed costs lowered expectations for prices the rest of the year, and as a result the annual price forecast for feeder steers was lowered $1 to $137.”

Specifically, the average feeder steer price is projected at $134/cwt. in the first and second quarters, $139 in the third quarter and $140 in the fourth quarter for an annual average of $136.75.

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 were generally $1-$3 lower last week at $108-$111/cwt. Dressed prices were $1-$4 lower at $172-$174.

The average five-area direct fed steer price last week was $109.52/cwt. on a live basis, which was $1.75 less than the previous week and $14.51 less than the same week last year. The average dressed steer price of $173.06 was $2.73 less than the prior week and $25.98 less than the prior year.

Futures and equity markets were closed Monday in observance of Martin Luther King Day.

Choice boxed beef cutout value was $2.12 higher Monday afternoon at $215.04/cwt. Select was $2.76 higher at $205.84.

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“As high feed prices push feedlot cost of gain up, feedlots have an incentive to buy more pounds and place heavier feeder cattle,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments.  “Thus, the cattle industry responds to corn market signals to use less corn by placing cattle at heavier weights and using other (i.e. forage) feeds to add additional weight to cattle prior to feedlot placement. This is the advantage (and necessity!) of the cattle industry to use the ruminant capabilities of cattle to respond to the corn market situation. If all the cattle finished in feedlots in 2021 (that would have been fed anyway) are placed, say, an average of 100 lbs. heavier, the amount of reduction in total concentrate feed use is significant.”

Peel provides context for the extraordinary climb in feed costs—demand rationing—using cash corn prices in Dodge City, which averaged $3.41/bu. from January through September of last year. The price was more than $4 by mid-October and at $5.44 in mid-January.

“When feedlots demand heavier cattle, prices for lighter weight feeder cattle will decline relative to heavier cattle,” Peel explains. “For example, the price of 825 lb. steers in Oklahoma is currently about $131/cwt. When corn is, say, $3.65/bu., feedlots would be willing to pay roughly $155/cwt. for a 575 lb. steer, based on the cost of gain to put on the 250 lbs. from 575 to 825 lbs. When corn price increases to, say, $5.35/bu., the increased cost of gain means that the feedlot would only be willing to pay roughly $146/cwt. for a 575 lb. steer, even though the price of the 825 lb. steer has not changed.  Of course, higher feed prices likely also means that the overall feeder cattle price level will decline as well. 

“The change in feedlot demand for light versus heavy weight feeder cattle simultaneously provides incentives for stocker producers to add the needed additional weight to feeder cattle. In the example above, the value of stocker gain is roughly $0.75/lb. when corn is $3.65/bu. but increases to $0.97/lb. when corn price increases to $5.35/bu.