WLI

Feeder Cattle futures closed $1.72 lower Tuesday, pressured by grain futures.

Live Cattle futures closed, though, closed an average 23¢. in the front three contracts to down an average of 30¢the rest of the way, with support from cash prices and wholesale beef values.

Choice boxed beef cutout value was down 74¢Tuesday afternoon at $216.24/cwt. Select was $1.17 lower at $206.84.

Grain futures rallied with support from crop conditions overseas and potential positioning ahead of Friday’s USDA World Agricultural Supply and Demand Estimates.

Corn futures closed mostly 3¢to 5¢higher.

Soybean futures closed mostly 12¢ to 22¢ higher through May ’21 and then fractionally higher to 9¢ higher. 

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Major U.S. financial closed lower Tuesday on the announcement President Trump is halting economic stimulus talks until after the November election.

The Dow Jones Industrial Average closed 375 points lower. The S&P 500 closed 47 points lower. The NASDAQ was 177 points lower.

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Agricultural producer sentiment rose to its highest level in September since the start of the pandemic, according to the Purdue University/CME Group Ag Economy Barometer. The index increased 12 points to 156, compared to August… the low for the year was 60 in April. The Current Conditions Index jumped 18 points to 142 in September. The Future Expectations Index rose 9 points to 163.

The Ag Economy Barometer is based on survey responses from 400 U.S. agricultural producers and was conducted Sept. 21-25.

According to James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture, “In September, producers were more optimistic about both current conditions and the future for agriculture than they’ve been since the pandemic began. He explains “A continued crop price rally and the announcement of the USDA’s Coronavirus Food Assistance Program payments appear to be fueling much of their optimism.”

However, there was less optimism concerning the future of U.S. agriculture’s trade prospects. In September, 58% of respondents said they expect agriculture exports to increase over the next five years, down from 67% in August. The shift was primarily due to more producers indicating they expect exports to remain about the same in the future, rather than increase.

In a related question, producers were asked whether they expect China to fulfill the food and agricultural import requirements established in the Phase One trade agreement signed earlier this year. Farmers’ opinions were split, with less than half (47%) of respondents indicating they expect China to fulfill its commitment to import food and ag products from the U.S.

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

Live sales last week were at mostly $107/cwt. in the five-area feeding regions. Dressed prices were at $168 in Nebraska and at $167-$168 in the western Corn Belt.

The average five-area direct steer price was last week was $107.12/cwt. on a live basis, which was $2.07 higher than the previous week. The average price in the beef was $2.81 higher at $167.70.

Cattle futures firmed with last week’s stronger cash prices, as well as an increase in slaughter.

Live Cattle futures closed up an average 42¢ higher.

Feeder Cattle futures closed an average 47¢ higher (5¢ to 85¢ higher).

Choice boxed beef cutout value was $1.90 lower Monday afternoon at $216.98/cwt. Select was 40¢ higher at $208.01.

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Major U.S. financial rallied Monday. Most attributed the lift to President Trump able to leave the hospital and renewed hopes for another round of federal economic stimulus.

The Dow Jones Industrial Average closed 465 points higher. The S&P 500 closed 60 points higher. The NASDAQ was up 257 points.

CME WTI Crude Oil futures also rallied on the day, up $2.06 to $2.17 through the front six contracts.

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“The current feeder price patterns mean that producers should consider the implications of current animal weight, short-term weight gain and timing as they evaluate fall marketing alternatives,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University. For example, he explains, in his weekly market comments, “In the current market, the value of 50 to 100 lbs. of gain will be significantly lower for steers less than 600 lbs. compared to steers over 600 lbs.”

Peel is referring to Oklahoma price patterns, specifically, which he says are developing along typical lines.

“The price slides across steer weights are very different for feeder cattle below 600 lbs. compared to cattle over 600 lbs. A larger price slide for the lightweight cattle means that the value of gain is lower,” Peel explains.

By way of illustration, using current combined Oklahoma auction prices, he calculated the value of gain at 60¢/lb. to add 50 lbs. to a steer weighing 500 lbs., versus $1.37 for adding the same weight to a steer weighing 600 lbs.

In the meantime, Peel points out La Niña conditions, expanding drought in the Southern Plains and the impact on wheat pasture could pressure stocker cattle prices this fall.

“On average, Oklahoma calf prices are at or near the seasonal low in the late September/early October period. With larger fall runs of calves expected in October and November, the lack of wheat pasture demand may add additional seasonal pressure to calf markets this fall.

Moreover, he says the lack of wheat pasture and other forages may change the timing of calf and feeder cattle sales this fall. 

Through Thursday, the average five-area direct steer price was $107.11/cwt. on a live basis, which was $2.08 higher than the previous week. The average price in the beef was $2.81 higher at $167.68.

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

For the week, live sales in the Southern Plains were mostly $2 higher at $107/cwt., with a few up to $108 in the Texas Panhandle. Live prices were $2 higher in Nebraska at $107 and $2-$3 higher in the western Corn Belt at $107-$108. Dressed trade was $2-$3 higher at $167-$168.

According to Andrew P. Griffith, agricultural economist at the University of Tennessee, “Prices are still a long way from the fourth quarter target high of $115 to $120, but he says a $7 to $8 price improvement over the next two months is obtainable.

Moreover, in his weekly market comments, Griffith says “Reaching those fed cattle price levels will likely result in strong competition for feeder cattle moving forward.”

In the meantime, Derrell Peel, Extension livestock marketing specialist at Oklahoma State University explains, “The July-August bulge in placements suggests higher feedlot marketings in the first quarter of 2021. He adds that July placements were skewed to the lighter weight cattle, while August placements included more heavyweight placements, which further implies that cattle could be somewhat bunched up. However, Peel says, winter weather typically spreads cattle out a bit, so the exact timing is uncertain.

Estimated total cattle slaughter last week of 665,000 head was 14,000 head more than the previous week and 20,000 head more than the previous year. Year-to-date estimated total cattle slaughter of 24.17 million head is 1.04 million head less than the same time last (-4.14%) year.

Cattle futures softened, with pressure from outside markets.

Live Cattle down an average 61¢.

Except for an average of 39¢ lower in two contracts, Live Cattle futures closed an average of 48¢ higher week to week on Friday.

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Nationwide, calves and feeder cattle sold from $2/cwt. lower to $2 higher, according to the Agricultural Marketing Service.

“Demand remains good for yearling cattle, with light to moderate demand for fresh calves,” say AMS analysts. They explain, “Bawling and un-weaned calves continue to see discounts, while Buyers are quite willing to pay premiums for cattle if producers invest time in them and provide a documented health program.”

Feeder Cattle futures took the brunt of the pressure from last week’s crop-friendly quarterly Grain Stocks report. They were down an average $1.04 on Friday. Week to week they closed an average of 72¢ lower. 

Old crop corn stocks in all positions on Sept. 1 of 2.00 billion bu., were 10% less than a year earlier and significantly less than the trade expected, according to the aforementioned grain stocks report.

Week to week on Friday, Corn futures closed an average of 13¢ higher through the front six contracts.

Similarly, old crop soybeans stored in all positions were 42% less than a year earlier at 523 million bu., significantly less than the trade expected.

Week to week on Friday, Soybean futures closed an average of 18¢ higher through the front six contracts.

“As we work through 2020 and into 2021, feeder cattle supplies should continue to tighten modestly,” Peel says. In his weekly market comments, he points out total feedlots placements are 4.2% less than last year for the year to date, despite significant increases the last two months.

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Wholesale beef values hovered on either side of steady last week. Choice boxed beef cutout value was 46¢ lower week to week on Friday at $218.88/cwt. Select was 63¢ higher at $207.61.

The average dressed steer weight for the week ending Sept. 19 was 919 lbs., according to USDA’s Actual Slaughter Under Federal Inspection report. Although 23 lbs. heavier than the previous year, the average weight was 1 lb. lighter than the previous week. That was the first week-to-week decline since mid July, according to AMS.

“There are several factors that may influence the beef market moving through the last quarter of the year, Griffith says. “The first would be more stimulus money being deposited in the bank accounts of American consumers. If Congress passes another substantial stimulus package, then this could result in more beef purchases as discretionary income inevitably increases… A second major factor will continue to be the export market.”

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Major U.S. financial indices closed lower amid volatile trade Friday.

Pressure included increased uncertainty with announcements that President Trump tested positive for COVID-19.

As well, the monthly national Employment Situation Summary was less robust than traders expected. Total non-farm payroll increased 661,000 from August to September. The nation’s unemployment rate declined to 7.9%, according to the U.S. Bureau of Labor Statistics. Average hourly earnings for all employees on private non-farm payrolls increased 2¢ to $29.47.

The Dow Jones Industrial Average was down 134 points. The S&P 500 was down 32 points. The NASDAQ closed 251 points lower.

West Texas Intermediate Crude Oil on the CME was $1.56 to $1.67 lower through the front six contracts.

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Rep. Dusty Johnson (R-SD) and bipartisan cosponsors, introduced the Price Reform in Cattle Economics (PRICE) Act last week, aimed at improving cattle markets for producers. It includes existing legislative proposals to open new markets for state-inspected beef products, such as the Direct Interstate Retail Exemption for Certain Transactions (DIRECT) Act, and new provisions to aid producer-owned beef processing facilities and increase transparency in fed cattle transactions.

“The Tyson fire in Holcomb, KS and the supply chain disruptions caused by the COVID-19 pandemic have brought the issues of price transparency in the cattle markets and beef processing capacity to a boiling point within our industry,” says Ethan Lane, Vice President of Government Affairs for the National Cattlemen’s Beef Association (NCBA). “This legislation is a significant step in the right direction as we continue to explore ways to support producers who have been impacted by two major black swan events, in an already volatile cattle market. We are grateful to Rep. Johnson and all the cosponsors for their bipartisan leadership in this space, and will continue working alongside them to see these reforms enacted.”

Provisions of the legislation include (section by section explanation from Rep. Johnson’s office in italics):

Feasibility study on implementing requirements with respect to reported negotiated cash sales of cattle to individual packing plants…This section directs the USDA office of the Chief Economist to conduct a feasibility study and cost-benefit analysis for various proposals to increase price discovery through Mandatory Price Reporting.

Cattle Contract Library…This section amends the Packers and Stockyards act to include beef contracts in USDA’s existing reporting on swine contracts. This section directs requires the Secretary of Agriculture to establish and maintain a library or catalog of the types of contracts offered by packers to beef producers for the purchase of cattle.

Research on meat and poultry processing facilities…This section directs the National Institute of Food and Agriculture to commission a feasibility study or studies to determine if and where there are new opportunities for new or expanding packing plants, what challenges there are to entry and implications for compliance with federal inspection requirements.

Assistance for new and expanded livestock or meat processors…This section establishes a stand-alone direct and guarantee loan program at USDA Rural Development for new and expanding meat processors capacity.

Improving farm management knowledge and skills for livestock producers…This section creates a NIFA grant program to allow land-grant universities to establish livestock marketing tools to help producers utilize the futures market to manage risk by partnering with trade association and other outreach groups.

Although there were too few transactions to trend, negotiated cash fed cattle prices on Thursday continued steady to $1 higher than the week’s higher prices of $2 higher on a live basis at $107/cwt., except for in the Texas Panhandle, where prices are $2-$3 higher at $107-$108. Dressed trade is $2 higher at $167.

Live Cattle futures closed narrowly mixed, from an average of 26¢ lower to an average of 18¢ higher.

Feeder Cattle futures closed an average of 51¢ lower, except for an average of 17¢ higher in the back three contracts.

Choice boxed beef cutout value was $1.24 higher Thursday afternoon at $218.98/cwt. Select was 8¢ higher at $207.62.

The average dressed steer weight for the week ending Sept. 19 was 919 lbs., according to USDA’s Actual Slaughter Under Federal Inspection report. That was 1 lb. lighter than the previous week, but 23 lbs. heavier than the previous year. The actual dressed heifer weight of 836 lbs. was the same as a week earlier, but 13 lbs. heaver than the same week last year.

Actual total fed cattle slaughter of 513,153 was 7,154 head fewer than the prior year. Total cattle slaughter of 648,427 head was 12,430 head fewer (-1.88%). Beef production for the week of 543.3 million lbs. was just 600,000 lbs. less (-0.11%) than a year earlier.

Net U.S. beef export sales the week ending Sept. 24 totaled 24,700 metric tons for 2020, according to the U.S. Export Sales report from USDA’s Foreign Agricultural Service. That was 37% more than the previous week and 67% more than the prior 4-week average. Increases were primarily for Japan, Hong Kong, and Mexico.

Corn futures closed mostly 2¢ to 3¢ higher through Mar ’22 and then fractionally lower to 1¢ higher.

Soybean futures closed unchanged to fractionally mixed through Jan ’22 and then mostly 3¢ to 5¢ lower.

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Major U.S. financial indices mostly edged higher Thursday amid mixed economic news and shadowed by the inability of lawmakers to come to terms on another round of economic stimulus.

Weekly initial jobless claims for the week ending Sept 26 decreased by 36,000 from the previous week to 837,000, according to the U.S. Department of Labor. That was more positive than traders expected.

On the other hand, although economic activity in the manufacturing sector grew for the fifth consecutive month, it declined month to month, according to the Institute for Supply Management^®(ISM) manufacturing report on business^®. The September Purchasing Managers Index (PMI^®) registered 55.4%, down 0.6% from the August reading of 56%.

“After the coronavirus (COVID-19) pandemic brought manufacturing activity to historic lows, the sector continued its recovery in September. Survey Committee members reported that their companies and suppliers continue to operate in reconfigured factories and are becoming more proficient at maintaining output,” says Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee.

The Dow Jones Industrial Average closed 35 points higher. The S&P 500 closed 17 points higher. The NASDAQ closed 159 points higher.

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Restaurant traffic in August was 9% less than the previous year, while revenue was 10% less, according to the NPD Group (NPD). That was with slightly fewer than 25% restaurants nationwide operating with COVID-19 restrictions for on-premises dining.

“As the summer progressed and mandated restrictions were lifted, an increasing number of consumers became more comfortable dining out based on the safety protocols restaurants put in place,” says David Portalatin, NPD food industry advisor “After months of staying at home and cooking their own meals or ordering in, they were ready for the restaurant experience again.”

Since April, at the height of the stay-at-home and mandated dine-in closures, several areas of the restaurant industry improved or returned closer to pre-pandemic levels over the last months, according to NPD’s CREST® foodservice market research.

For example:

On-premises visits improved every month since April as the mandated dine-in closures lifted and restaurants were able to offer varying levels of dine-in capacity.

Digital orders accounted for more than 20% of all restaurant occasions in April, but declined to 17% of occasions in August.

A buy-one-get-one-free or other type of deal, was utilized in 30% of occasions in April but slowed every month since, and represented 27% of occasions in August.

In August, adult-only parties represented 63% of all restaurant occasions and parties with kids (families in most cases) represented 37%. In April, adult-only parties represented 59% of visit share and parties with kids 41% share.