WLI

Negotiated cash fed cattle trade declined another $2 in the Texas Panhandle on Thursday to $102/cwt., according to the Agricultural Marketing Service. For the week, across all regions, live sales are generally $2-$3 lower than last week at $102-$104. Dressed trade is $3-$5 lower at $162-$164.

Cattle futures were lower again Thursday, following cash prices and wholesale beef values. Outside markets also pressured.

Live Cattle futures closed an average of 54¢ lower.

Feeder Cattle futures closed an average of $1.06 lower, except for unchanged in the back contract.

Choice boxed beef cutout value was 34¢ lower Thursday afternoon at $227.24/cwt. Select was $1.32 lower at $212.50.

Actual total cattle slaughter for the week ending Aug. 22 of 650,018 head was 6,937 head more (+1.1%) than the previous week, but 6,402 head fewer than the same week a year earlier. The average dressed steer weight was 1 lb. heavier than the previous week at 910 lbs., which was 26 lbs. heavier than the prior year. The average dressed heifer weight of 833 lbs. was the same as a week earlier but 21 lbs. more than a year earlier. Beef production for the week of 542.5 million lbs. was 6.6 million lbs. more (+1.2%) than a year earlier.

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

Soybean futures closed mostly 3¢ to 6¢ higher.

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Major U.S. financial indices closed sharply lower on Thursday. There appeared to be no key reason, other than some widespread profit taking–especially from tech stocks–ahead of the long weekend.

Initial weekly jobless claims came in lower than the trade expected at 881,000, which was 130,000 fewer than the previous week, according to the U.S. Department of Labor.

The Dow Jones Industrial Average closed 807 points lower. The S&P 500 closed 125 points lower. The NASDAQ closed 598 points lower.

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“The response to COVID-19 has induced market disruptions and a sharp, but indeterminate, economic contraction that has affected the agricultural sector in disparate ways depending on the commodity,” say analysts with the Food and Agricultural Policy Institute (FAPRI) at the University of Missouri. “However, large carryout stocks and sizable 2020-21 production for many commodities, uncertainty regarding fulfillment of the Phase 1 trade agreement with China and the timing of the rebound of the size of the Chinese hog herd have also significantly contributed to market conditions.”

FAPRI released Updates for U.S. Agricultural Markets last week, which provides revised five-year price projections, reflecting coronavirus market impacts, with information available through the middle of August.

As alluded to in Wednesday’s Cattle Current, FAPRI projects the five-area direct average fed steer price at $113.15/cwt. next year, compared to an estimated $109.84 this year. After 2021, projected prices increase steadily from $119.94 in 2022 to $130.91 in 2025.

For feeder steers (600-650 lbs., Oklahoma City), the forecast price for next year is $150.54, compared to an estimated $144.46 for this year. After 2021, projected prices increase steadily from $164.43 in 2022 to $179.03 in 2025.

That’s with the forecast beef cow inventory declining from 31.3 million head on Jan. 1 of this year to 30.0 million head in 2025.

Throughout the timeline, projected beef production hovers between 27.3 and 27.6 billion lbs.

“Supply chain disruptions due to COVID-19 have increased the cost of processing livestock and dairy products. These impacts should moderate in 2021 but will still pressure the producer’s share of consumer expenditures,” say FAPRI analysts.

Among other highlights:

“The total amount of beef, pork and poultry meat supplies to the domestic market in per-capita terms is projected to contract in 2021 and 2022 for the first time since 2014. Economic uncertainty will impede consumer spending for meat and dairy products.

“Consumer food price inflation is projected at 3.2% in 2020, the highest since 2011. As increased processing and marketing costs, due to COVID-19 ease in 2021, food inflation moderates to 1.4%.

“Corn planted acres for 2020 is projected at 92.0 million acres, in line with USDA estimates and a sharp decline from March intended acres. A modest downward adjustment in Iowa corn yields–given the derecho that occurred subsequent to the gathering of data for USDA’s estimate–pushes the production estimate 203 million bu. lower than USDA’s estimate to 15.075 billion bu., a record production volume. Carryout stocks sharply increase and farm corn prices are projected to fall to $3.24/bu., growing modestly in subsequent years as area remains flat to modestly lower.”

Negotiated cash fed cattle trade was mostly light on light to moderate demand through Wednesday afternoon, according to the Agricultural Marketing Service.

So far this week, prices are $1 lower in the Southern Plains on a live basis at mostly $104/cwt., $2 lower in Nebraska at $103 and $1-$4 lower in the western Corn Belt at $103. Dressed sales are $3-$5 lower at $162-$164.

Cattle feeders offered 436 head in the weekly Fed Cattle Exchange Auction on Wednesday, three lots from the Southern Plains. Of those, 365 head–two lots–sold for a weighted average price of $103/cwt.–218 head for 1-9 day delivery and 147 head for delivery at 1-17 days.

Cattle futures sagged lower, pressured by softer cash prices and the beginning of seasonally lower wholesale beef values.

Live Cattle futures closed an average of 65¢ lower.

Except for 50¢ higher in the back contract, Feeder Cattle futures closed an average of $1 lower, from 55¢ lower to $1.42 lower in spot Sep.

Choice boxed beef cutout value was 76¢ lower Wednesday afternoon at $227.58/cwt. Select was 93¢ lower at $213.82.

Corn futures closed mostly 1¢ higher.

Soybean futures closed mostly 7¢ to 8¢ higher.

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Major U.S. financial indices closed higher on Wednesday, despite less job growth than expected in the closely watched ADP National Employment Report^®. According to that report, private sector employment increased by 428,000 jobs from July to August. 

“The August job postings demonstrate a slow recovery,” says Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “Job gains are minimal, and businesses across all sizes and sectors have yet to come close to their pre-COVID-19 employment levels.”

The Dow Jones Industrial Average closed 454 points higher. The S&P 500 closed 54 points higher. The NASDAQ closed 116 points higher.

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The latest Cattle on Feed report suggests that feedlots continue to make progress in working through the backlog of fed cattle that was created by COVID-19 packing disruptions, according to Elliot Dennis, Extension livestock economist at the University of Nebraska-Lincoln.

“For example, the number of cattle on feed over 90 days has dipped below 2019 levels for the first time since April. However, cattle on feed over 120 days is still about 10% higher than 2019,” Dennis explains, in the latest issue of In the Cattle Markets. “The result of cattle being on feed longer is sustained record level dressed weights for both steers and heifers. Heavier carcasses have led to higher beef production in recent months, relative to 2019, putting downward pressure on cattle prices.”

With net feedlot placements higher year over year and compared to the five-year average, Dennis says feedlots appear to be reloading with cattle weighing less than 700 lbs. In turn, he explains that means record beef production could continue for a longer period of time.

“With lower, but growing domestic demand and concerns about what a second government shutdown might do to domestic demand, beef export demand is likely to play a larger and more prominent role in sustaining domestic cattle prices,” Dennis says.

In the meantime, Dennis points to the baseline projections updated last week by the Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri.

“Their estimates continue to support the idea the U.S. cattle cycle peaked and will continue to contract over the next five years. Despite declining beef cows, total beef production is forecasted to be relatively stable at 27 billion pounds per year,” Dennis explains. “Smaller cow numbers will reduce the size of future calf crops, reducing the number of feeder and fed cattle marketed and ultimately boxes of beef available to be sold. Combined, this has the effect of raising prices along the supply chain. Planning prices in 2021 were estimated as follows: boxed beef at $221/cwt. five-area steers at $113/cwt. and Oklahoma City feeder steers at $151/cwt.

Negotiated cash fed cattle trade was $1 lower Tuesday, at $104/cwt. on a live basis in the Texas Panhandle, according to the Agricultural Marketing Service. Although too few transactions to trend, early prices also were lower in other regions: $103-$104 in Kansas, $103 in Nebraska and $102.50-$103.00 in the western Corn Belt. Early dressed sales in Nebraska were at $163-$164.

Even so, Cattle futures continued to mostly edge higher.

Other than 2¢ lower in away-Dec and $2.70 higher in recently minted away-Feb, Live Cattle futures closed an average of 31¢ higher.

Except for 17¢ lower in spot Sep, Feeder Cattle futures closed an average of 39¢ higher. 

Choice boxed beef cutout value was 39¢ higher Tuesday afternoon at $228.34/cwt. Select was 57¢ lower at $214.75.

Corn futures closed fractionally higher to 1¢ higher.

Soybean futures closed mostly 3¢ to 5¢ higher.

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Major U.S. financial indices closed higher on Tuesday. Along with continued support from big tech stocks, positive manufacturing data boosted optimism.

“After the coronavirus (COVID-19) brought manufacturing activity to historic lows, the sector continued its recovery in August, the first full month of operations after supply chains restarted and adjustments were made for employees to return to work,” says Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management^®(ISM^®) Manufacturing Business Survey Committee. “The August PMI^®registered 56%, up 1.8 percentage points from the July reading of 54.2%. This figure indicates expansion in the overall economy for the fourth month in a row after a contraction in April, which ended a period of 131 consecutive months of growth.”

The Dow Jones Industrial Average closed 215 points higher. The S&P 500 closed 26 points higher. The NASDAQ closed 164 points higher.

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Agricultural producer sentiment increased significantly from July to August, according to the Purdue University/CME Group Ag Economy Barometer. The index rose to a reading of 144, up 26 points, to the highest level since February of this year, when record highs were established before the pandemic began.

The Ag Economy Barometer is based on survey responses from 400 U.S. agricultural producers and was conducted Aug. 17-21.

Both of the barometer’s sub-indices also recorded substantial increases. The Index of Current Conditions improved to a reading of 124, up 13 points from July, while the Index of Future Expectations increased 33 points to a reading of 154.

“With a positive crop production outlook, rebounding commodity prices, and news of additional export sales to China, producers were much more optimistic about the future for the U.S. agricultural economy,” says James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture.

Producers also were more optimistic about U.S. agriculture’s trade prospects compared to the past several months. In August, 67% of respondents said they expect exports to rise over the next five years, compared to 57% during the spring and summer months of this year. In part, Mintert attributes this change in perspective to rising export sales to China that began over the summer and now appear likely to continue into fall.

Producer perspectives toward land values also improved in August. Those expecting land values to increase over the next 12 months rose to 20% in August, up from 16% in July and 7% back in April. The percentage of producers expecting values to increase in the next five years rose to 59%, up from 48% in July and just 40% in May.

The percentage of respondents who expect their equity position to decline in the upcoming 12 months was 38% in August, the second lowest percentage since the survey question was first asked in 2016 and well below 48% a year earlier.

Last week, the five-area direct weighted average steer price was $105.09/cwt. on a live basis, which was $1.50 lower than the previous week. The weighted average dressed steer price of $166.53 was $2.88 less.

Cattle futures closed higher for the first time in four sessions on Monday, despite softer wholesale beef values and the outlook for cash prices to continue lower this week; perhaps helped along by month-end position squaring.

Live Cattle futures closed an average of 61¢ higher, from 35¢ higher at the back to $1.27 higher in expiring Aug.

Feeder Cattle futures closed an average of 45¢ higher. 

Choice boxed beef cutout value was $1.45 lower Monday afternoon at $227.95/cwt. Select was 46¢ higher at $215.32.

Corn futures closed mostly 1¢ to 2¢ lower.

Soybean futures closed mostly 3¢ to 5¢ higher.

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Major U.S. financial indices closed mixed on Monday, with most of the support continuing to come from tech stocks.

The Dow Jones Industrial Average closed 223 points lower. The S&P 500 closed 7 points lower. The NASDAQ closed 79 points higher.

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Early on, Derrell Peel, Extension livestock marketing specialist at Oklahoma State University says winter grazing prospects appear promising in the Southern Plains. In Oklahoma, for instance, he says conditions range from very dry to adequate moisture with generally favorable soil temperatures.

“Current feeder cattle prices provide an indication of the economic prospects for fall and winter grazing. In the last week of August, the Oklahoma average auction price for 475-lb. steers was $165.25/cwt. with 750 lb. steers at $140.40/cwt. This calculates to a value of gain of $0.975/lb. for 275 lbs. of gain,” Peel explains. “Across beginning weights of 450-600 lbs., the value of gain ranges from $0.90 to $1.00/lb., using current auction prices. Cost of production is likely less than $0.90/lb. in many cases, suggesting potential positive returns for stocker production.”

According to Peel, a common wheat pasture grazing budget is based on October stocker purchases with feeders marketed in early March, including roughly 120 days of winter grazing. Based on current market conditions, he projects the October price at $160-$165/cwt. for steers weighing 475 lbs. Across various budgets using a range of purchase prices, feed costs, and average daily gain, March breakeven prices are projected at $129-$139/cwt., most likely $132-$136. That’s for steers weighing about 750 lbs. Current Feeder Cattle futures for March, adjusted for Oklahoma basis, suggest a March price of about $140/cwt. at 750 lbs. So, he says, current market conditions suggest some potential for winter grazing returns above production costs.

“General economic uncertainty and volatility will continue to be particularly important in cattle markets and risk management should be carefully considered,” Peel says. “Futures markets may offer an opportunity to lock in a margin on winter grazing. However, risk management requires deliberate action to implement a plan. Market opportunities are often fleeting and producers may have to act quickly to take advantage of changing market conditions.”

Negotiated cash fed cattle prices ended the week $1 lower in the Southern Plains at $105/cwt. on a live basis, $1.50 lower in Nebraska at $105 and $2 lower in the western Corn Belt at $104-$107. Dressed trade was $2-$3 lower at mostly $167.

Through Thursday, the five-area direct weighted average steer price was $105.12/cwt. on a live basis, which was $1.50 lower than the previous week. The weighted average dressed steer price of $166.52 was $2.59 less.

Cattle futures continued to soften Friday, with follow-through pressure from the week’s lower cash prices and outlook for declining wholesale beef values.

Other than 25¢ higher in almost spent spot Aug, Live Cattle futures closed an average of 72¢ lower.

Feeder Cattle futures closed an average of $1.02 lower from 22¢ lower at the back to $1.30 lower.

Choice boxed beef cutout value was $2.14 lower Friday afternoon at $229.40/cwt. Select was 60¢ higher at $214.86.

Estimated total cattle slaughter for the week ending Aug. 29 of 654,000 head was 2,000 more than the previous week’s estimate and 1,000 head more than the same time a year earlier. Year-to-date cattle slaughter is estimated at 20.99 million head, which would be 1.06 million fewer (-4.80%) than the same time last year. Estimated beef production so far this year is 17.36 billion lbs., which is 381.2 million lbs. less (-2.1%) than last year.

Corn futures closed mostly fractionally lower.

After 13¢ higher in spot Sep, Soybean futures closed mostly 6¢ to 8¢ higher

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Major U.S. financial indices closed higher on Friday. Support included the previous day’s FOMC policy change allowing inflation to run above its 2% target rate without increasing interest rates. As well, U.S. consumer spending and income in July beat trade expectations.

Personal consumption expenditures increased 1.9% in July to $267.6 billion, according to the U.S. Bureau of Economic Analysis. Personal income increased 0.4% to $70.5 billion.

The Dow Jones Industrial Average closed 161 points higher. The S&P 500 closed 23 points higher. The NASDAQ closed 70 points higher.

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Although sales by food-at-home retailers increased year over year since the pandemic began, total food sales remain lower, due to the decline in away-from-home food purchases, according to USDA’s Economic Research Service (ERS).

“In 2019, before the COVID-19 pandemic, U.S. consumers, businesses, and government entities spent an average of $137.4 billion per month on food,” explain ERS analysts. “Normal seasonal variations were present, with total food spending being lowest in January and February and highest in May, August, and December. Early 2020 followed the same pattern, with lower-than-average total food spending in January and February, but this trend continued into the spring with spending on food falling to $105 billion in April 2020, as spending at food-away-from-home establishments—restaurants, school cafeterias, sports venues, and other eating places—dropped to $36 billion. Spending on food-away-from-home rebounded in May and June but remained below 2019 spending in those months. Total food sales rose in May and June 2020 but were still lower than a year ago.”

For perspective, total food sales were $123 billion in May and $128 billion in June. For the same months last year, total food sales were $144 billion and $140 billion, respectively.