WLI

Cattle futures sagged lower Thursday, pressured by softer cash prices. Also, net 2020 beef export sales for the week ending Aug. 20 were 11,800 metric tons, down 40% from the previous week and 36% from the prior four-week average, according to the weekly U.S. Export Sales report from USDA’s Foreign Agricultural Service.

Live Cattle futures closed an average of 54¢ lower, from 10¢ lower in the back contract to $1.17 lower.

Feeder Cattle futures closed an average of 55¢ lower. 

Choice boxed beef cutout value was 9¢ higher Thursday afternoon at $231.54/cwt. Select was 15¢ higher at $214.26.

Total cattle slaughter the week ending Aug. 15 was 643,681, according to USDA’s Actual Slaughter Under Federal Inspection report. That was 10,713 head more than the previous week, but 9,601 fewer (-1.47%) than the same week a year earlier.

Fed cattle slaughter for the week of 519,567 head was 7,312 head more than the previous week, and just 1,140 head fewer than the previous year.

The average dressed steer weight was 909 lbs., which was 3 lbs. heavier than the previous week and 28 lbs. heaver than the same week last year. The average dressed heifer weight of 833 lbs. was 1 lb. heavier than the prior week and 24 lbs. heavier than the previous year.

Heavier carcass weights continue to increase year-over-year beef production with less slaughter. Total beef production of 536.7 million lbs. was 10.5 million lbs. more than the previous week  and 6.4 million lbs. more than the previous year. 

Corn futures closed mostly 1¢ to 3¢ higher.

Soybean futures closed 12¢ to 17¢ higher through Jly ’21 and then mostly 5¢ to 8¢ higher.

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Major U.S. financial indices closed mixed on Thursday.

Support included approved updates to the Federal Open Market Committee’s (FOMC) Statement on Longer-Run Goals and Monetary Policy Strategy.

Among other things, according to an FOMC statement, “The FOMC adjusted its strategy for achieving its longer-run inflation goal of 2% by noting that it, ‘seeks to achieve inflation that averages 2% over time.’ To this end, the revised statement states that, ‘following periods when inflation has been running persistently below 2%, appropriate monetary policy will likely aim to achieve inflation moderately above 2% for some time.’”

In other words, it seems the FOMC will be more hesitant about increasing interest rates when inflation accelerates.

“The economy is always evolving, and the FOMC’s strategy for achieving its goals must adapt to meet the new challenges that arise,” says Federal Reserve Chair Jerome H. Powell. “Our revised statement reflects our appreciation for the benefits of a strong labor market, particularly for many in low- and moderate-income communities, and that a robust job market can be sustained without causing an unwelcome increase in inflation.”

The Dow Jones Industrial Average closed 160 points higher. The S&P 500 closed 5 points higher. The NASDAQ closed 39 points lower.

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Customer transaction declines at major restaurant chains improved into the single-digits after 21 weeks of double-digit declines, according to The NPD Group (NPD). Customer transactions were 9% less than a year earlier for the week ending Aug. 16. That represents a 35-point gain from the steepest decline of 44% for the week ending April 12, according to NPD’s CREST^®Performance Alerts.

Customer transactions at major quick service restaurant chains, which represent the bulk of industry transactions, were down 8% compared to year ago. Full service chain restaurants, which were most impacted by the mandated dine-in closures that are slowly being lifted, realized customer transactions declines of  19% versus a year earlier for a 57-point gain from the steepest year-over-year decline of  76% in week ending April 12.

“Although transactions are still down, the move into the single-digits is a positive sign for the U.S. restaurant industry,” says David Portalatin, NPD food industry advisor. “Although we’re stuck in neutral for now, I firmly believe there is still a lot of upside recovery for restaurants. My belief is rooted in one reality: consumers are not willing to give up on the convenience and experience a restaurant meal brings to them and their families regardless of the barriers.”

Negotiated cash fed cattle trade continued up north on Wednesday, with live sales in Nebraska $1.50 lower than last week at $105/cwt., and $2-$4 lower in the western Corn Belt at $104-$105. Dressed trade in both regions was $2 lower at mostly $167, according to the Agricultural Marketing Service. Live trade in the Southern Plains so far this week is $1 lower at $105.

After attempted support early in the session, softer cash prices and wonderments about demand pressured Cattle futures lower on Wednesday.

Live Cattle futures closed an average of $1.18 lower.

Except for 22¢ higher in spot Aug, Feeder Cattle futures closed an average of $1.36 lower. 

Wholesale beef values continued to gain on Labor Day buying.

Choice boxed beef cutout value was $1.77 higher Wednesday afternoon at $231.45/cwt. Select was $1.85 higher at $214.11.

Corn futures closed mostly fractionally lower.

Soybean futures closed 1¢ to 5¢ higher through Aug ’21 and then mostly 4¢ lower

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Major U.S. financial indices closed higher Wednesday, led by tech stocks and positive economic news that included further promising trial results from Moderna, a coronavirus vaccine.

The Dow Jones Industrial Average closed 83 points higher. The S&P 500 closed 35 points higher. The NASDAQ closed 198 points higher.

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Get through 2020, and beef exports should increase, according to the new quarterly Outlook for U.S. Agricultural Trade from USDA’s Economic Research Service (ERS).

Beef exports for 2021 are forecast $200 million more than the previous Outlook, with higher volumes more than offsetting a decline in unit values. For this year, ERS pegs U.S. beef exports $500 million less than the previous estimate, on lower volumes and lower prices.

“The outbreak of the global COVID-19 pandemic is forecast to cause the world’s real gross domestic product (GDP) to decline in 2020 for the first time since 2009. While some economists believe the worst of the economic and public health shock has already been observed, with the GDP of many advanced economies falling at annualized nominal rates of greater than 30% during the second quarter of this year, there remains significant uncertainty as to the length and speed of the recovery,” say ERS analysts. “Despite an anticipated recovery in the growth rate for most economies in 2021, real GDP is  expected to remain below levels seen before the global pandemic. The economic recovery will depend on public and private efforts to mitigate and contain the pandemic and to efficiently adapt economies to changing conditions.”

Total U.S. agricultural exports in Fiscal Year (FY) 2021 are projected at $140.5 billion, up $5.5 billion from the revised forecast for FY 2020, driven mostly by higher exports of soybeans and corn.

Live Cattle futures edged higher Tuesday, as Feeder Cattle firmed, despite a bounce higher in Corn futures.

Except for 7¢ lower in spot Aug, Live Cattle futures closed an average of 68¢ higher, recovering what was lost in the previous session.

Except for 10¢ lower in Apr, Feeder Cattle futures closed an average of 16¢  higher. 

Choice boxed beef cutout value was $2.21 higher Tuesday afternoon at $229.68/cwt. Select was $1.01 higher at $212.26.

Corn and Soybean futures jumped Tuesday with the heat and dryness across the Midwest.

Corn futures closed mostly 8¢ to 9¢ higher through Jly ’21 and then mostly 4¢ to 5¢ higher.

Soybean futures closed mostly 10¢ to 14¢ higher through Sep ’21 and then mostly 8¢ higher.

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Major U.S. financial indices closed mixed Tuesday.

Support included a surge in new home sales.

New residential sales in July totaled 901,000, according to the U.S. Census Bureau. That was 13.9% more than in June and 36.3% more than a year earlier.

On the other hand, pressure included declining consumer sentiment.

Month to month, the Conference Board Consumer Confidence Index® decreased 6.9 points to 84.8 in August.

“Consumer Confidence declined in August for the second consecutive month,” says Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “The Present Situation Index decreased sharply, with consumers stating that both business and employment conditions had deteriorated over the past month. Consumers’ optimism about the short-term outlook, and their financial prospects, also declined and continues on a downward path. Consumer spending has rebounded in recent months but increasing concerns amongst consumers about the economic outlook and their financial well-being will likely cause spending to cool in the months ahead.”

The Dow Jones Industrial Average closed 60 points lower. The S&P 500 closed 12 points higher. The NASDAQ closed 86 points higher.

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“Commercial cattle slaughter was 2.918 million head for the month of July, a 0.7% decrease from last year but the second largest monthly slaughter for 2020 behind March (2.922 million head),” according to the Livestock Marketing Information Center (LMIC), in the latest Livestock Monitor. “Although cattle slaughter declined marginally from last year, commercial beef production reached its highest level for the year at over 2.4 billion lbs. produced in July, a 2.6% increase over 2019. The growth in beef production is attributable to cattle dressed weights. In July, federally inspected dressed weights were 834 lbs., a 3.5% (28 lb.) increase from a year ago. The backlog of cattle created by the pandemic has led to higher than normal dressed weights which has bolstered beef production.”

On a related note, total pounds of beef in freezers July 31 were 3% more than the previous month but 3% less than the prior year, according to the most recent USDA Cold Storage report.

Frozen pork supplies were slightly less than the previous month, but were 25% less year over year.

Total red meat supplies in cold storage were 1% more than the previous month, but 15% less than a year earlier.

Total frozen poultry supplies were up 4% from the previous month, but were slightly less than a year earlier.

The five-area direct weighted average steer price last week was $1.53 higher at $106.59/cwt. on a live basis, according to the Agricultural Marketing Service. The dressed steer price was $1.37 higher at $169.41.

Cattle futures closed lower on Monday, especially Feeder Cattle, pressured by Friday’s Cattle on Feed (see below and note the correction).

Live Cattle futures closed an average of 64¢ lower (22¢ to $1.15 lower).

Feeder Cattle futures closed an average of $1.32 lower (62¢ to $2.45 lower).

Choice boxed beef cutout value was $1.53 higher Monday afternoon at $227.47/cwt. Select was $2.26 higher at $211.25.

Corn futures closed mostly 2¢ to 4¢ higher.

Soybean futures closed mostly 1¢ to 3¢ higher. 

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Major U.S. financial indices closed higher on Monday. Primary support seemed centered around more optimism about the pandemic, with the number of new COVID-19 cases continuing to decline. As well, the Food and Drug Administration approved use of a new plasma treatment for those hospitalized with the virus.

The Dow Jones Industrial Average closed 378 points higher. The S&P 500 closed 34 points higher. The NASDAQ closed 67 points higher.

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Correction As many of you likely noticed, yesterday’s Cattle Current carried a review of the July Cattle on Feed report, rather than for the most recent August report. Sorry about that. Here’s the August report.

Placements in feedlots (feedlots with 1,000 head or more capacity) during July of 1.89 million head were 188,000 more (+11.03%) than a year earlier, according to the monthly Cattle on Feed report. That was significantly more than pre-report expectations of a 6% increase. In terms of placement weight, 38.83% went on feed weighing less than 699 lbs., 47.17% went on feed weighing 700-899 lbs. and 14.0% weighed more than 900 lbs.

For broader perspective, in his weekly market comments, Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, explains, “Placements were down 17.7% year over year in February, March and April. Despite the 11% increase in July, placements are down 7.1% year over year for the last six months.”

Marketings in July of 1.99 million head were 12,000 head fewer than last year (-0.60%), about in line with average analyst estimates ahead of the report.

“Marketings dropped dramatically in April and May (down 25.6% year over year in those two months) and are down 6.0% in the six months from February to July,” according to Peel.

Total cattle on feed Aug. 1 numbered 11.28 million head, which was 172,000 head more (+1.5%) than the same time a year earlier, a little more than expectations and the largest inventory for the month since the data series began in 1996.

“One of the biggest concerns in fed cattle markets is the extent to which the backlog of fed cattle created in April and May still remains,” Peel says. “Although June and July marketings were about equal to one year ago, a significant portion of those marketings were likely fed cattle that were carried over from April and May. Reductions in placements as far back as February have reduced the number of cattle finishing starting as early as June. Not only were total placements down in the February to July period, but more of the reduction was in heavyweight placements, further reducing the number of cattle finishing now. In the last six months, feedlot placements under 700 lbs. have made up a larger percentage of total placements, which further reduces the number of cattle finishing at this time.” 

Add it all up and Peel says data and anecdotal indications suggest the backlog of fed cattle is rapidly diminishing and may be nearly cleaned up. 

“Going forward, the 1 million head decrease in feedlot placements in February, March and April suggests that front-end feedlot supplies will be relatively tight at least through September,” Peel says.