WLI

Negotiated cash fed cattle trade began to develop in the Southern Plains on Wednesday, according to the Agricultural Marketing Service. Live prices were $2 higher in Kansas at $103/cwt. and $1.50-$2.00 higher in the Texas Panhandle at $103.00-$103.50.

That helps explain why there were no sales in the weekly Fed Cattle Exchange Auction, where 613 were offered—all from the Southern Plains. Two lots in that sale were passed on at $102.25.

At the fat auction in Tama, IA, though, 221 head of Choice 2-4 steers weighing an average of 1,379 lbs. brought an average of $104.63, which was more than the $100-$103 country trade in the region last week.

Similarly, slaughter steers sold steady to $2 higher in the fat auction at Sioux Falls Regional in South Dakota, where 250 head of Choice 2-3 steers weighed an average of 1,431 lbs. and brought an average of $105.20.

Cattle futures closed mixed again, with Feeder Cattle receiving some pressure from grains.

Live Cattle futures closed mixed but mostly marginally higher (an average of 15¢ lower to an average of 20¢ higher).

Feeder Cattle futures closed an average of 71¢ lower (27¢ to $1.27 higher).

Choice boxed beef cutout value was 71¢ lower Wednesday afternoon at $215.38/cwt. Select was $1.77 lower at $204.51.

Corn futures closed 4¢ to 5¢ higher through Jly ’21 and then mostly 2¢ to 3¢ higher. 

Soybean futures closed 13¢ to 19¢ higher through Aug ’21 and then mostly 3¢ to 8¢ higher, helped along by recent export sales.

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Major U.S. financial indices closed mixed on Wednesday, pressured by big tech stocks, while some other sectors received support from the FOMC announcement it was maintaining the current interest rate levels.

“The Committee decided to keep the target range for the federal funds rate at 0% to 0.25% and expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment and inflation has risen to 2% and is on track to moderately exceed 2% for some time,” according to the FOMC statement.

In other words, it will likely be a good while before they entertain an increase in interest rates.

The Dow Jones Industrial Average closed 36 points higher. The S&P 500 closed 15 points lower. The NASDAQ closed 139 points lower.

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“Farm commodity prices are down by 10.4% over the last 12 months. As a result, and despite the initiation of $32 billion in USDA farm support payments in 2020, only 8% of bankers reported their area economy had improved compared to July, while 18.4% said economic conditions had worsened,” says Ernie Goss, Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business.

Goss is referring to the Creighton University Rural Mainstreet Index (RMI) and monthly survey of bankers in 10 regional states, dependent on agriculture and/or energy. It focuses on approximately 200 rural communities with an average population of 1,300, and offers the most current real-time analysis of the rural economy.

The RMI increased slightly in August to 44.7, compared to 44.1 in July. The index ranges between 0 and 100; a reading of 50.0 represents growth neutral.

Bank CEOs included in the survey note that August’s index represented the sixth straight month with a reading in a recessionary economic zone.

For only the second time in the last 81 months, the farmland price index moved above growth neutral with an August reading of 50.1, up from July’s 45.6.

Economic COVID-19 impacts vary among state economies, depending on government enforced shutdowns. For instance, Todd Douglas, CEO of the First National Bank in Pierre, South Dakota, says, “We were a state that did not shut down. Western parts of the state have seen a significant boost to the economy due to tourism from shut down states.”

Goss and Bill McQuillan, former chairman of the Independent Community Banks of America, created the monthly economic survey in 2005.

Bankers estimated that farm loan defaults would rise by 5.3% over the next 12- month period. That’s slightly higher than the 5% recorded the previous month, and the 4.8% a year earlier.

Cattle futures closed narrowly mixed Tuesday, awaiting cash direction.

Live Cattle futures closed mixed but mostly marginally lower (an average of 17¢ lower to an average of 25¢ higher).

Feeder Cattle futures closed an average of 72¢ higher (17¢ higher in spot Sep to $1.10 higher).

Choice boxed beef cutout value was $1.12 lower Tuesday afternoon at $216.09/cwt. Select was $1.48 lower at $206.28.

Corn futures closed mostly 3¢ lower. 

Soybean futures closed 4¢ to 8¢ lower through May ’21 and then 2¢ higher to 2¢ lower.

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Major U.S. financial indices edged higher Tuesday, with support from tech stocks and ahead of the FOMC meeting scheduled for Wednesday and Thursday. 

The Dow Jones Industrial Average closed 2 points higher. The S&P 500 closed 17 points higher. The NASDAQ closed 133 points higher.

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“La Niña conditions were present in August, and there’s a 75% chance they’ll hang around through the winter,” according to the latest update from the National Oceanic and Atmospheric Administration (NOAA), which issued a La Niña Advisory in recent days.

While every El Niño Southern Oscillation is different, the NOAA folks say it makes certain outcomes more likely. In this case, La Niña winters tend to be warmer and drier in the Southern tier of the United States and tend to be colder in the Northern tier.

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“Drive-thru and other off-premises operations will be a major part of the U.S. restaurant industry’s recovery and future,” says David Portalatin, food industry advisor for The NPD Group (NPD). “Drive-thru operations are delivering a high ROI during the pandemic, offering convenience, speed, and the comfort of social distance to consumers using them. Fast casual and traditional quick service chains have already announced expansion plans for their drive-thru operations, and we will hear about more chains doing the same.”

Compared to pandemic lows, drive-thru restaurant visits increased by 26% in the April, May, and June quarter and represented 42% of all restaurant visits, according to NPD. Although more restaurants reopened in July, drive-thru visits still increased by 13%.

For perspective, according to NPD, drive-thru visits declined 17% year over year in the second quarter, but they fared significantly more positively than other restaurant categories and segments.

Visits to fast casual chains were down 26% year over year in the second quarter. Prior to the pandemic, and for the last several years, they outpaced the U.S. restaurant industry in visits and unit growth. Many of them don’t have drive-thru operations.

Likewise, most full service restaurants don’t have drive-thrus. They were most impacted by the mandated dine-in closure, with year-over-year declines of 48% in April, May and June, before improving to a year-over-decline of 32% in July.

The five-area direct average steer price last week was $101.21/cwt. on a live basis, according to the Agricultural Marketing Service. That was $1.91 less than the prior week. The average steer price in the beef of $160.66 was $2.41 less.

Cattle futures took a step higher Monday, building on last week’s gains, tied to the outlook for slightly snugger supplies and support from lean hog prices, which appear ready to advance, on South Korea and China banning pork exports from Germany, due to African Swine Fever discovered in that nation.

Live Cattle futures closed an average of $1.20 higher (77¢ to $1.80 higher).

Feeder Cattle futures closed an average of $1.75 higher ($1.50 to $2.02 higher).

Choice boxed beef cutout value was $2.68 lower Monday afternoon at $217.21/cwt. Select was 66¢ higher at $207.76.

After 7¢ higher in spot Sep, Corn futures closed mostly fractionally mixed to 1¢ lower. 

After 13¢ higher in spot Sep, Soybean futures closed 4¢ to 8¢ higher.

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Major U.S. financial indices closed higher Monday, buoyed by merger and acquisition news, as well as increasing optimism about a COVID-19 vaccine being developed by the end of the year.

The Dow Jones Industrial Average closed 327 points higher. The S&P 500 closed 42 points higher. The NASDAQ closed 203 points higher.

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Although food and meat supplies continue to strengthen, following the worst of pandemic disruptions, returning to a balanced marketplace requires an economic recovery that reduces unemployment and revives household incomes, according to Greg Pompelli, director of the Texas A&M AgriLife-led Center of Excellence for Cross-Border Threat Screening and Supply Chain Defense Center. He adds that, given the importance of global markets to U.S. agriculture, the focus will be on returning to pre-pandemic trade levels.

In the meantime, David Anderson, Extension livestock economist at Texas A&M University says the pandemic may prompt a new normal in consumer purchasing practices.

For instance, Anderson points to more delivery services, boxed meals and curbside grocery pickup options as consumers maintain some of their habits from when store shelves and meat cases were bare and people were asked to stay home.

“Another adjustment I think we are going to continue to see over time is more delivery services of groceries and food. More and more of the shoppers in the grocery aisles are employees putting together grocery orders, either for curbside pickup or for companies that bring the order to your home,” Anderson explains.

“Where we see changes at the retail level boils down to human behavior,” Pompelli says. “In the early days of the pandemic, with paper towels or toilet paper, people assumed they wouldn’t be able to find these products for a year, so they stocked up.” Now, he says, consumers are adapting and moving away from their initial reactions as their concerns about food availability diminish.

Prior to the COVID-19 shutdowns, consumers typically purchased about 50% of their food from grocery stores for home consumption and 50% from food services, such as restaurants and schools.

With restaurants continuing to operate at limited capacity and with students recently returning to schools, Anderson explains the food supply chain is still adjusting to the changing markets.

Negotiated cash fed cattle prices in the Texas Panhandle through Friday afternoon were mostly $1 higher than earlier in the week at $102/cwt., which was $1 lower than last week, according to the Agricultural Marketing Service.

Cattle futures edged higher Friday, supported by resurgent Lean Hog futures, tied to South Korea banning pork exports from Germany after a wild boar carcass in that European nation tested positive for African Swine Fever.

Live Cattle futures closed an average of 34¢ higher (7¢ to 47¢ higher).

Feeder Cattle futures closed an average of 47¢ higher (7¢ to 97¢ higher).

Choice boxed beef cutout value was 94¢ lower Friday afternoon at $219.89/cwt. Select was 22¢ lower at $207.10.

Corn and soybean futures gained some lift from the monthly World Agricultural Supply and Demand Estimates (see below), with soybeans receiving added support from recently strong export sales.

Corn futures closed 3¢ to 7¢ higher through May ’21 and then mostly 1¢ to 2¢ higher. Week to week on Friday, they closed an average of 11¢ higher through the front six contracts.

Soybean futures closed 16¢ to 20¢ higher through the front four contracts and then 6¢ to 12¢ higher across the next three; mostly 1¢ to 2¢ lower the rest of the way. Week to week on Friday, they closed an average of 25¢ higher through the front six contracts.

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Major U.S. financial indices closed mixed Friday, with continued pressure from the selloff in big tech stocks.

The Dow Jones Industrial Average closed 131 points higher. The S&P 500 closed 1 point higher. The NASDAQ closed 66 points lower.

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USDA increased expected beef production for this year by 20 million lbs. to 27.05 billion lbs., in September’s World Agricultural Supply and Demand Estimates (WASDE), compared to the previous month’s estimate. That’s based on increased expected slaughter in the second half of 2019. The total would be 107 million lbs. less than last year. Estimated beef production is forecast at 27.36 billion lbs. next year, which would be 307 million lbs. more (+1.14%) than this year.

The projected annual average fed steer price (five-area direct) for this year is $107.30/cwt., which would be $9.48 less than last year. ERS analysts increased the forecast annual price next year by $2 to $112, compared to the previous month’s projection, based on expected lower production. More immediately, the WASDE pegs the average third-quarter price this year at $101, followed by an average of $104 in the fourth quarter and $107 in the first quarter of 2021.

Estimated total red meat and poultry production for this year was lowered from the previous month, with lower forecast pork and broiler production more than offsetting higher beef and turkey production.

Total red meat and poultry production is estimated at 106.30 billion lbs. this year, which would be 1.03 billion lbs. more (+0.98%) than in 2019. Next year’s total red meat and poultry production is forecast at 107.35 billion lbs., which would be 1.05 billion lbs. more than this year.

Corn

Corn production for grain is projected 2% less than the previous month at 14.9 billion bu. That’s 378 million bu. less, based on reducing harvested corn acres by 550,000 acres, due to the late-summer derecho, according to the latest Crop Production report from the National Agricultural Statistics Service (NASS). Estimated production would still be 9% more than last year.

Although 3.3 bu./acre less than the previous moth’s projection, forecast yield of 178.5 bu./harvested acre would be record large and 11.1 bu./acre more than last year. That’s based on conditions as of Sept. 1

With a smaller crop more than offsetting increased beginning stocks–mostly due to lower estimated exports for 2019-20–WASDE reduced projected ending stocks by 253 million bu. and increased the season-average corn price by 40¢ to $3.50/bu.

Soybeans

Soybean production for beans was forecast at 4.31 billion bu., down 3% from the previous forecast, but up 21% from last year, according to the Crop Production report. Expected average yield is a record high 51.9 bu./harvested acre, down 1.4 bu. from the previous forecast but 4.5 bu. more than in 2019. Area harvested for beans in the United States is forecast at 83.0 million acres, unchanged from the previous forecast and 11% more than last year.

The U.S. season-average soybean price is forecast at $9.25/bu., up 90¢ from last month. The soybean meal price is projected at $315 per short ton, up $25 dollars. The soybean oil price forecast is 32.0¢/lb., up 2¢.

Wheat

The 2020-21 U.S. wheat supply and demand outlook was unchanged in the latest WASDE. The projected season-average farm price remains at $4.50/bu.

So far this week, negotiated cash fed cattle prices are mainly $2-$3 lower on a live basis at $101/cwt. in the Southern Plains and Nebraska and at $100-$101 in the western Corn Belt, according to the Agricultural Marketing Service. Dressed trade is $2-3 lower at $160-$161.

Cattle futures reversed course again on Thursday, regaining most of what was lost in the previous session and despite the surge in Corn futures. At least part of the support came from limit-up moves in nearby Lean Hog futures, after news that a wild boar carcass in Germany tested positive for African Swine Fever. In turn, South Korea banned pork imports from Germany, which was the second largest European pork exporter last year.

Except for 17¢ lower in away Feb, Live Cattle futures closed an average of 72¢ higher (27¢ to $1.00 higher).

Feeder Cattle futures closed an average of $1.59 higher (77¢ higher in spot Sep to $1.95 higher).

Choice boxed beef cutout value was $2.12 lower Thursday afternoon at $220.83/cwt. Select was 19¢ lower at $207.32.

Actual total fed cattle slaughter for the week ending Aug. 29 was 527,439 head, according to USDA’s Actual Slaughter Under Federal Inspection report. That was 4,100 more than the previous week and 6,872 head more than the prior year. The average dressed steer weight of 916 lbs. was 6 lbs. heavier than the previous week and 32 lbs. heavier than a year earlier. The average dressed heifer weight of 834 lbs. was 1 lb. heavier than a week earlier and 23 lbs. heavier than the same week last year.

After 7¢ higher in spot Sep, Corn futures closed 3¢ to 4¢ higher through Sep ’21 and then fractionally mixed to 2¢ higher. Support included reports of successive typhoons impacting China’s main corn-growing region.

After 5¢ higher in spot Sep, Soybean futures closed mostly 1¢ to 3¢ lower

USDA’s monthly World Agricultural Supply and Demand Estimates are due out Friday morning.

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Major U.S. financial indices closed strongly lower Thursday, amid a resumed selloff in big Tech stocks.

Also negative, initial weekly unemployment insurance claims last week were 884,000, more than traders expected. The number was on par with the previous week’s revised figure, according to the U.S. Department of Labor.

The Dow Jones Industrial Average closed 405 points lower. The S&P 500 closed 59 points lower. The NASDAQ closed 221 points lower.

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“With the large cow slaughter levels of recent years, there has been a lack of harvest capacity, especially in some regions of the U.S. That will become a less critical factor depressing prices if culling rates begin to subside as expected,” say analysts with the Livestock Marketing Information Center (LMIC), in the latest Livestock Monitor. Plus, LMIC forecasts some strength in fed cattle prices, which tends to be supportive of cull cow prices.

As it is, AMS pegged the national live cull cow price (packer direct) at $57.65/cwt. the last week of August, according to LMIC. That was about $2 more than a year earlier, but more than $15 less than the five-year average (2014-18). 

“Generally, year-over-year increases in cull cow prices are expected for the balance of this year and throughout next year,” say LMIC analysts. That runs counter to typical seasonal expectations, when cull cow prices usually begin dropping in late September through November.

However, the LMIC folks say it’s essential to also consider non-typical changes within seasonal cull cow slaughter patterns. For instance, they point to beef imports. Most non-fed, lean beef imported to the U.S. comes from South America and Australia. Long-term, widespread Australian drought increased cow slaughter and non-fed beef exports in recent years. Easing drought in that country suggests a reduction in U.S. imports.