WLI

Negotiated cash fed cattle demand and trade through Friday afternoon ranged from a standstill to inactive and light, according to the Agricultural Marketing Service.

For the week live prices were $2 lower in the Southern Plains at $106/cwt.; $3-$4 lower in Nebraska at $104-$105 and $2 lower in the western Corn Belt at $103-$105. Dressed prices were $4-$7 lower in Nebraska at $162-$165 and $3-$4 lower in the western Corn Belt at $163-$165.

Through Thursday, the five-area direct weighted average steer price was $105.11/cwt. on a live basis, which was $2.50 less than the same period last week and $4.74 less than a year earlier. The average dressed steer price of $163.97 was $4.43 less than the previous week and $10.91 less than last year.

Cattle futures continued mostly lower on Friday beneath the weight of the week’s gloom and higher grain prices. Friday’s Cattle on Feed report will likely offer no support on Monday (see below).

Live Cattle futures closed narrowly mixed, from an average of 37¢ lower to an average of 7¢ higher.

Feeder Cattle futures closed an average of 49¢ lower, except for 7¢ higher in the back contract.

Choice boxed beef cutout value was $1.37 lower Friday afternoon at $207.49/cwt. Select was 32¢ higher at $191.40.

Estimated cattle slaughter of 643,000 head for the week was 11,000 few than the previous week but 3,000 head more than the previous year. Year-to-date total cattle slaughter of 26.11 million head is 1.04 million head fewer (-3.82%) than last year. Estimated year-to-date beef production of 21.67 billion lbs. is 257.6 million lbs. less (-1.18%) than the same period last year.

Corn futures closed 1¢ to 3¢ higher through Jly ’21 and then 1¢ to 2¢ lower.

Soybean futures closed 3¢ to 10¢ higher through Aug ’21 and then mostly fractionally mixed.

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Major U.S. financial indices closed narrowly mixed on Friday, amid surging coronavirus cases and wonderments about economic stimulus.

The Dow Jones Industrial Average closed 28 points lower. The S&P 500 closed 11 points higher. The NASDAQ was up 42 points. 

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Unless the trade already counted on the bearishness of the monthly Cattle on Feed report issued Friday, there will likely be more pressure on futures and cash prices to start the week. Keep in mind the report accounts for feedlots with 1,000 head or more capacity.

Placements of 2.23 million head in September were 124,000 head more (+5.9%) than the same time last year. That was about 3% more than expectations ahead of the report. In terms of weights 36% went on feed weighing 699 lbs. or less, 46% weighing 700-899 lbs. and 18% weighing 900 lbs. or more.

Marketings of 1.85 million head in September were 108,000 head more (+6.2%) year over year, a touch more positive than expectations.

Cattle on feed Oct. 1 of 11.72 million head were 429,000 head more (+3.8%) than the previous year. That’s the most for the date since the data series began in 1996 and a little more than what the trade anticipated.

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The 461.99 million lbs. of beef in cold storage Sept. 30, was 3% more than the previous month but 6.99 million lbs. less (-1.5%) than the same time last year, according to USDA’s latest Cold Storage report.

Frozen pork supplies were up slightly from the previous month but down 22% from last year.

Total red meat supplies in freezers were up 1% from the previous month but down 13% from last year.

Total frozen poultry supplies were down 2% from the previous month and down 3% from a year ago.

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

For the week so far live prices are $2 lower in the Southern Plains at $106/cwt.; $3-$4 lower in Nebraska at $104-$105 and $2 lower in the western Corn Belt at $103-$105. Dressed prices are $4-$7 lower in Nebraska at $162-$165 and $3-$4 lower in the western Corn Belt at $163-$165.

Total cattle slaughter the week ending Oct. 10 was 637,073 head, according to USDA’s Actual Slaughter Under Federal Inspection report. That was 26,074 head fewer (-4.02%) than the previous week and 11,205 head fewer (-1.73%) than the previous year. Total fed cattle slaughter of 502,345 head was 22,199 head fewer than the prior week (-4.23%) and 7,117 head fewer (-1.40%)than the same week last year.

The average dressed steer weight for that week of 928 lbs. was 4 lbs. more than the previous week and 27 lbs. more than the prior year. The average dressed heifer weight of 846 lbs. was 3 lbs. more than the previous week and 18 lbs. more than a year earlier.

Cattle futures continued to erode amid light trade on Thursday as grain prices hold their ground and cash fed cattle prices soften. As well, there was likely skittishness over the monthly Cattle on Feed report due to be published Friday afternoon.

Live Cattle futures closed an average of 70¢ lower, 30¢ to $1.30 lower

Feeder Cattle futures closed an average of 82¢ lower, from 57¢ lower in spot Oct to $1.05 lower.

On a positive note, wholesale beef values edged higher. Choice boxed beef up 39¢ at 208.86. Select up 17¢ at 191.08.

As well, U.S. net 2020 beef export sales of 21,700 metric tons (mt) for the week ending Oct. 15 were 62% more than the previous week and 13% more than the prior four-week average, according to the weekly U.S. Export Sales report from USDA’s Foreign Agricultural Service. Increases were primarily for South Korea, China, Japan, Mexico, and Hong Kong.

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

Net export sales of 2020-21 corn for the week ending Oct. 15 was 1.83 million metric tons, up noticeably from the previous week and 21% more than the prior four-week average.

Soybean futures closed mostly unchanged to fractionally mixed.

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Major U.S. financial indices closed higher on Thursday, supported by increased optimism surrounding economic stimulus talks and FDA approval of a drug for treating coronavirus.

The Dow Jones Industrial Average closed 152 points higher. The S&P 500 closed 17 points higher and the NASDAQ was up 21 points.

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The Creighton University Rural Mainstreet Index (RMI) rose for the sixth consecutive month in October to its highest level since January, before the onset of the pandemic. The RMI is based on a monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.

The overall index for October climbed above growth neutral (50.0) to 53.2 from  46.9 in September. The farmland price index advanced above growth neutral to 50.6 in October; only the third time in the last 82 months.

“Recent improvements in agriculture commodity prices, federal farm support, and the Federal Reserve’s record low interest rates have underpinned the Rural Mainstreet Economy. Still, 35.5%, of bank CEOs reported their local economies were experiencing recessionary economic conditions,” says Ernie Goss, Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business.

Bankers were asked in the latest survey to identify the industry in their area most harmed by the pandemic. More than eight of 10 (80.6%) named restaurants/bars as experiencing the greatest negative impacts. Others areas identified by bankers as economically impacted were: farmers (3%), medical care (3.4%), retailers (6.3%) and hourly workers (6.7%).

“Our worst problem right now is that so much anti-COVID-19 vaccine information has been spread for political reasons that about half the people I talk to say they won’t take the vaccine when it is available. That will hurt our hopes for an economic recovery looking forward,” says Lonnie Clark, president of the State Bank of Chandler, in Chandler, MN.

“It will take many months of above growth neutral readings to get back to pre-COVID-19 employment levels for the region,” Goss says.

Negotiated cash fed cattle trade and demand were moderate in Nebraska through Wednesday afternoon, according to the Agricultural Marketing Service. Live sales were $3 lower than last week at $104-$105/cwt. Dressed sales were $4-$7 lower at $162-$165. Earlier in the week, live sales in the Southern Plains were $2 lower at $106.

Cattle feeders offered 1,096 head in the weekly Fed Cattle Exchange auction. Of those, 702 head—four lots from the Southern Plains—sold: 558 head for a weighted average price of $106.50/cwt. on delivery at 1-9 days; 144 head for a weighted average price of $106.25 on delivery of 1-17 days.

Choice steers and heifers sold $1.00-$1.50 lower at the fat auction in Tama, IA. There were 159 Choice 2-4 steers weighing an average of 1,410 lbs. selling for an average price of $105.23. That was steady to $2 lower than country trade in the region last week.

Cattle futures continued to stabilize Wednesday, closing narrowly mixed, with continued pressure from grain prices, as well as demand uncertainty and wonderments about the monthly Cattle on Feed report due out on Friday.

Live Cattle futures closed an average of 40¢ lower, except for unchanged and 30¢ higher in the back two contracts.

Feeder Cattle futures closed from an average of 27¢ higher in five contracts to an average of 33¢ lower.

Choice boxed beef cutout value was $2.13 lower Wednesday afternoon at $208.47/cwt. Select was 76¢ lower at $190.91.

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

Soybean futures closed 4¢ to 8¢ higher through Sep ’21 and then mostly 2¢ higher.

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Major U.S. financial indices closed lower Wednesday, with pressure from unresolved economic stimulus talks and election uncertainty.

The Dow Jones Industrial Average closed 97 points lower. The S&P 500 7 points lower. The NASDAQ down 31 points.

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Current markets offer promising value of gain across a wide range of weights, according to Brenda Boetel, agricultural marketing specialist at the University of Wisconsin-River Falls.

“Relative weights are the largest driving factor for the relationship between feeder cattle prices,” Boetel explains, in the latest issue of In the Cattle Markets. “The normal relationship between different cattle prices is for prices per hundredweight to decline when cattle weights increase. This price slide is because the prices reflect what it costs to add weight to the animal. The price slide is a big indicator for gross margin, or value of gain, for stocker production.

“Currently, the value of gain is a bit stronger for gains towards the heavy end of feeder weights. A 650-lb. beginning weight has a value of gain of $1.19/lb. for 300 lbs. of gain up to 950 lbs., whereas a 450-lb. beginning weight has a value of gain of $1.11/lb. for 300 lbs. of gain up to 750 lbs. These values suggest that stocker producers have considerable flexibility about what weight to buy and how much weight to put on stocker cattle at this time.”

She notes the above analysis does not indicate profit potential. It assumes the same prices for all weights at completion of the stocker period as when purchased. So, the question is what prices levels could be early next year.

“June to September 2020 saw larger feedlot placements compared to 2019, indicating larger fed cattle supply for early 2021 than previously anticipated. Feedlots looking to fill lots in early 2021, coupled with two consecutive years of declining calf crops provides the potential for heavyweight feeder cattle prices to remain steady to slightly higher than fall 2020 prices,” Boetel says. “Given the drought in the West, the forage availability is the biggest challenge for southern and western stocker cattle. Many of these operations will likely not have adequate forage this winter, indicating that heavyweight feeder cattle supply for spring may be tighter than anticipated as lightweight animals are placed directly on feed this winter. If heavyweight feeder cattle prices remain stable and if the producer has adequate forage available, there is some potential for profit from stocker cattle this winter.”

Boetel emphasizes producers need to analyze their own costs and revenue potential. Wisconsin Extension has some decision tools available here.

Negotiated cash fed cattle trade was limited on light demand in all major cattle feeding regions through Tuesday afternoon, according to the Agricultural Marketing Service (AMS). There were a few live trades in the Southern Plains at $106/cwt., which was steady with the previous day and $2 lower than last week.

Cattle futures firmed Tuesday, regaining a portion of what was lost in the previous session’s selloff. Other than being oversold, there was no compelling explanation.

Live Cattle futures closed an average of 74¢ higher, from 12¢ higher in spot Oct to $1.07 higher toward the back.

Feeder Cattle futures closed an average of $1.87 higher, (70¢ to $2.40 higher) except for 10¢ lower in spot Oct.

Choice boxed beef cutout value was 86¢ higher Tuesday afternoon at $210.60/cwt. Select was 17¢ lower at $191.67.

Corn futures closed mostly 1¢ to 3¢ higher.

Soybean futures closed 8¢ to 11¢ higher through Sep ’21 and then 5¢ to 6¢ higher.

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Major U.S. financial indices closed higher Tuesday, buoyed by promising chatter about Congress getting closer to agreement concerning an economic stimulus deal.

The Dow Jones Industrial Average 113 points higher. The S&P 500 closed 16 points higher. The NASDAQ was up 37 points. 

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Late last week, the National Cattlemen’s Beef Association (NCBA) released its widely anticipated framework for voluntarily enhancing negotiated cash fed cattle trade volume. In broad terms, it calls for minimum levels of cash trade in each of four designated cattle feeding regions, as well as weekly participation by the four largest beef packers.

“The framework explains in detail what we are calling the 75% Plan, which is designed to provide negotiated trade and packer participation benchmarks for the industry to strive toward,” explains, Marty Smith, NCBA president, in a letter to that organization’s members.

To avoid tripping triggers, in any given quarter, each region will have to:

• Achieve no less than 75% of the weekly negotiated trade volume that current academic literature indicates is necessary for robust price discovery in that specific region.
• Achieve this negotiated trade threshold no less than 75% of the reporting weeks in a quarter.
• Achieve no less than 75% of the weekly packer participation requirements, to be determined in short order, and assigned to each specific region (more later).
• Achieve this packer participation threshold no less than 75% of the reporting weeks in a quarter.

That’s outlined in A Voluntary Framework to Achieve Robust Price Discovery in the Fed Cattle Market. It was developed by NCBA’s Regional Triggers Subgroup. The NCBA Live Cattle Marketing Work Group tasked that group to develop a voluntary framework, including triggers, to increase frequent and transparent regional trade to a regionally sufficient level.

Levels of weekly trade volume are based on previous and ongoing cash price discovery research conducted by Stephen Koontz, agricultural economist at Colorado State University.

“For instance, in Kansas, the robust number that Dr. Koontz identified was 21,000 head of negotiated trade on a weekly basis, so 75% of that is 15,750 head per week,” explained Jerry Bohn, chairman of the Regional Triggers Subgroup, during last Friday’s Beltway Beef podcast. “We did that for every region of the country. From there, we put together this trigger plan of 75% of the required volume each week, 75% of the time.”

The framework defines four cattle feeding regions: 1) Texas, Oklahoma and New Mexico; 2) Kansas; 3) Nebraska and Colorado; 4) Iowa and Minnesota. Weekly robust cash trade levels for the regions range from 5,000 head (Colorado) to 31,000 head (Nebraska).

As for the packer side of the equation, according to the framework:

“Each of the four major packers shall be responsible to participate in negotiated trade, at appropriate and adequate levels, within each of the regions from which they predominantly procure fed cattle. At this time, there is insufficient data published under LMR (Livestock Mandatory Reporting) to measure the participation of the major packers in negotiated trade within each region. NCBA is currently involved in conversations with U.S. Department of Agriculture’s Agricultural Marketing Service (USDA-AMS) to determine what packer participation information can be shared under the current LMR statutes and USDA’s rules of confidentiality. The subgroup has drafted a potential framework for the packer participation silo, but will await additional information from USDA-AMS before finalizing.”

Trigger Tripping

The framework defines eight minor triggers, each having to do with whether or not threshold-level negotiated trade volume and threshold-level packer participation were achieved in various regions.

The subgroup will evaluate, on a quarterly basis in arrears, the weekly negotiated trade volume and packer participation information for each reporting region, using LMR data from USDA-AMS.

To avoid tripping a minor trigger, each region must:

• Weekly trade 75% or more of its “robust” price discovery threshold via negotiated means, no less than 75% of the reporting weeks, and
• Weekly fulfill its packer participation obligations (to be determined as outlined above) no less than 75% of the reporting weeks.

In any given quarter, the tripping of three or more minor triggers equals a major trigger.

“In the event that a major trigger is tripped during any two out of four rolling quarters, the subgroup shall recommend NCBA pursue legislative or regulatory measures to compel adequate negotiated trade for robust price discovery,” according to the report.

“While certainly not a silver-bullet solution, I truly believe that this approach provides the industry a goal to strive towards and, perhaps more importantly, a path forward if progress is not demonstrated toward that goal,” wrote Smith.

“It’s not intended to be the ultimate fix to the marketplace, but ultimately what we wanted is to have the industry in the driver’s seat until such a time that it was determined that we can’t achieve what we need to on a voluntary basis,” explained Tanner Beymer, NCBA director of government affairs and market regulatory policy, during the podcast.

Negotiated cash fed cattle trade was $2 lower at $106/cwt. on a live basis in the Southern Plains through Monday afternoon on light demand, according to the Agricultural Marketing Service (AMS). There were a few live sales in Nebraska $3 lower at $105, but too few to trend.

Prices last week:

Southern Plains: $108 on a live basis.

Nebraska: mostly $108 live and at $169 in the beef.

Western Corn Belt: $105-$107 on a live basis and $167-$168 dressed.

Last week’s five-area direct fed steer prices was 74¢ less than the previous week at $107.52/cwt. on a live basis, according to AMS. The average price in the beef of $168.35 was $1.32 lower.

Cattle futures closed sharply lower Monday, with follow-through pressure from the last session, softer outside markets, declining open interest and what appeared to be algorithmic piling on. Recently expanded CME limits offered extra rein.

Live Cattle futures closed an average of $2.90 lower.

Feeder Cattle futures closed an average of $3.67 lower.

Choice boxed beef cutout value was 29¢ lower Monday afternoon at $209.74/cwt. Select was $1.68 lower at $191.84.

Corn futures closed mostly 1¢ to 3¢ higher.

Soybean futures closed mostly 3¢ to 4¢ higher across the front half of the board and then mostly fractionally higher to 1¢ higher.

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Major U.S. financial indices dropped Monday, beneath the weight of increasing coronavirus cases and continued uncertainty about the government’s ability to come to terms on another round of economic stimulus.

The Dow Jones Industrial Average closed 410 points lower. The S&P 500 closed 56 points lower. The NASDAQ was down 192 points.

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“Despite the rising number of cattle on feed, front-end supplies—the number of cattle on feed over 150 days—diminished for the third consecutive month,” according to analysts with USDA’s Economic Research Service, in the monthly Livestock, Dairy and Poultry Outlook. “This is the result of an improving pace of fed cattle slaughter, which was faster than a year ago for the last two months and above the five-year average. The improving pace, combined with an ample supply of fed cattle at heavier weights, has led to higher expected beef production in third-quarter 2020, relative to 2019. Nonetheless, firm demand and higher than year-ago wholesale prices are likely supporting packer margins, as the recent uptick in steer prices remains in line with year-ago prices.”

ERS increased the expected five-area direct fed steer price for the fourth quarter by $5 to $109/cwt. Projections for the first quarter next year increased by $6 to $113; by $3 to $110 in the fourth quarter.

As for feeder steers (basis Oklahoma City), ERS increased expectations for the fourth quarter by $3 to $143. The annual average price for next year increased by $2 to $139.