WLI

Negotiated cash fed cattle prices ended the week generally $1-$2 higher on a live basis at $97/cwt. in the Southern Plains, $100 in Nebraska, $98 in Colorado and steady at $101-$102 in the western Corn Belt. Dressed prices were $2 higher at $160.

Through Thursday, the average five-area direct weighted steer prices was $98.49/cwt. on a live basis, which was $1.26 more than the previous week, but $15.48 less than the same time last year. The average dressed steer price of $160.02 was $1.92 higher than the previous week, but $24.49 less than the previous year.

Cattle futures closed higher again Friday, helped along by cash strength, as well as week-end and month-end positioning and book squaring.

Live Cattle futures closed an average of $1.01 higher.

Feeder Cattle futures closed an average of $1.63 higher.

Choice boxed beef cutout value was $1.46 higher Friday afternoon at $203.26/cwt. Select was $1.61 lower at $189.89.

Corn futures closed mostly fractionally higher. 

Soybean futures closed 2¢ to 4¢ higher.

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Major U.S. financial indices closed higher Friday, at the end of a volatile session, but supported by bullish quarterly earnings posted by big tech stocks.

The Dow Jones Industrial Average closed 114 points higher. The S&P 500 closed 24 points higher. The NASDAQ closed 157 points higher.

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“Federally inspected beef production has been above year-ago levels since the second week of June, while federally inspected cattle slaughter is down nearly 70,000 head over the same timeframe, compared to last year,” explains Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “The increase in beef production stems from heavier cattle that spent more days on feed than was anticipated.”

The average dressed steer weight the week ending July 18 of 899 lbs. was 3 lbs. less than the prior week but 33 lbs. more than the same week a year earlier, according to USDA’s Actual Slaughter Under Federal Inspection report. The average dressed heifer weight of 829 lbs. was the same as a week earlier but 34 lbs. heavier than the prior year.

At the same time, the percentage of fed cattle grading Choice and Prime continues to grow, relative to the same time last year.

Griffith notes only 0.7% more cattle graded Choice through the first 23 weeks of this year, compared to the same time in 2019. But, 2.4% more graded Choice year over year during the past six weeks.

More broadly, according to weekly USDA National Steer and Heifer Estimated Grading Percent reports, from the week ending May 2 through the week ending July 18, 70.60% to 73.58% graded Choice each week, compared to 69.59% to 71.63% for the same weeks last year.

For the same period of time this year, carcasses grading Choice and Prime ranged from 81.89% to 84.34% each week, compared to 77.11% to 78.82% last year.

“This year-over-year increase is likely to continue through the end of the year, which means more Choice beef on the market. This may keep the Choice-Select spread in check the next several months compared to last year’s wide spread,” Griffith says.

So far for the week, negotiated cash fed cattle prices on a live basis are $1 higher in the Southern Plains at $97/cwt., $2 higher in Nebraska at $100, steady in Colorado at $98 and steady to $2 higher in the western Corn Belt at $100-$102. Dressed prices are $2 higher at $160.

Cattle futures closed higher again Thursday. Along with cash strength, support included bullish export news with net sales of 29,500 metric tons (mt) for the week of July 23—a market year high—up 89% from the previous week and up 81% from the previous four-week average. That according to the U.S. Export Sales report from USDA’s Foreign Agricultural Service.

Except for 15¢ lower in away Oct, Live Cattle futures closed an average of 41¢ higher.

Feeder Cattle futures closed an average of $1.05 higher (67¢ higher at the back to $1.85 higher toward the front).

Choice boxed beef cutout value was 69¢ higher Thursday afternoon at $201.80/cwt. Select was $2.01 higher at $191.50.

The average dressed steer weight the week ending July 18 of 899 lbs. was 3 lbs. less than the prior week but 33 lbs. more than the same week a year earlier, according to USDA’s Actual Slaughter Under Federal Inspection report. The average dressed heifer weight of 829 lbs. was the same as a week earlier but 34 lbs. heavier than the prior year.

Corn futures closed mostly fractionally higher. 

Soybean futures closed mostly 1¢ to 2¢ higher.

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Except for the tech sector, major U.S. financial indices closed lower Thursday, pressured by the expected but historic decline in second-quarter GDP.

Real gross domestic product decreased at an annual rate of 32.9% in the second quarter, according to the advance estimate released by the Bureau of Economic Analysis. Real GDP in the first quarter decreased 5%.

The Dow Jones Industrial Average closed 225 points lower. The S&P 500 closed 12 points lower. The NASDAQ closed 44 points higher.

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Potentially, the heated debate and hectic work related to enhancing price discovery in cash fed cattle markets reached a crossroads this week.

The National Cattlemen’s Beef Association’s (NCBA) Live Cattle Marketing Committee and the NCBA Board of Directors unanimously passed policy that supports voluntary efforts to improve cash fed cattle trade during the next 90 days, with the potential for mandates in the future if robust regional cash trade numbers are not reached by the industry.

Specifically, according to the organization’s resolution:

“NCBA supports a voluntary approach that:

“1) Increases frequent and transparent negotiated trade to regionally sufficient level, to achieve robust price discovery determined by NCBA funded and directed research in all major cattle feeding regions, and

“2) Includes triggers to be determined by a working group of NCBA producer leaders by October 1, 2020. 

“BE IT FURTHER RESOLVED, if the voluntary approach does not achieve robust price discovery as determined by NCBA funded and directed research, and meet the established triggers that increase frequent and transparent negotiated trade to a regionally sufficient level, and triggers are activated, NCBA will pursue a legislative or regulatory solution determined by the membership.

“BE IT FURTHER RESOLVED, NCBA support a three-year review/sunset provision on any negotiated trade solutions implemented to allow for a thorough cost benefit analysis to be conducted.”

That came after intense debate and more than six hours of wrangling, not to mention the years of effort leading up to it, including the research referenced in the resolution.

As an aside, depending on cash trade levels deemed sufficient in each region, there are a number of ways to achieve a deeper pool of cash fed cattle trade data, everything from changing the approach to confidentiality in livestock mandatory reporting (up for reauthorization in September), to bid-the-grid base prices, to a number of other voluntary options mentioned in the recent USDA Boxed Beef & Fed Cattle Price Spread Investigation Report. Stephen Koontz, agricultural economist at Colorado State University previously outlined many of those options in his ongoing research.

“The policy we passed today is the result of every state cattlemen’s association coming together to work through their differences and finding solutions that meet the needs of their members, all of whom agree that our industry needs more robust price discovery,” says  NCBA President Marty Smith. “This policy provides all players in the industry the opportunity to achieve that goal without seeking government mandates.”

The Live Cattle Marketing Committee considered several proposals, each aimed at encouraging greater volumes of cash cattle trade.

Negotiated cash fed cattle trade was $1 higher in the Southern Plains Wednesday at $97/cwt., according to the Agricultural Marketing Service. Although too few to trend, there were also some live sales in Nebraska at $98 and in the western Corn Belt at $99-$101. Early dressed sales were at $160.

Slaughter steers and heifers also sold steady to $1 higher at Sioux Falls Regional in South Dakota, where 184 head of Choice 2-3 steers weighed an average of 1,475 lbs. and brought an average price of $101.12.

Cash strength helped Cattle futures extend gains Wednesday.

Except for 2¢ lower in the back contract, Live Cattle futures closed an average of 77¢ higher (47¢ to $1.07 higher).

Feeder Cattle futures closed an average of 98¢ higher (25¢ to $1.47 higher), amid extremely light trade.

Wholesale beef prices continue to drag bottom, though. Choice boxed beef cutout value was $1.85 lower Wednesday afternoon at $201.11/cwt. Select was $1.17 higher at $189.49.

Corn futures closed 3¢ to 4¢ lower through May ’21 and then mostly fractionally lower to 1¢ lower.

Soybean futures closed fractionally lower to 5¢ lower though May ’21 and then mostly 1¢ to 3¢ higher.

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Major U.S. financial indices closed higher Wednesday. Besides tech stocks bouncing higher, support included the Federal Reserve leaving interest rates unchanged, as expected.

“Weaker demand and significantly lower oil prices are holding down consumer price inflation. Overall financial conditions have improved in recent months, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses,” according to a statement from the Fed. “The path of the economy will depend significantly on the course of the virus. The ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term.”

The Dow Jones Industrial Average closed 160 points higher. The S&P 500 closed 40 points higher. The NASDAQ closed 140 points higher.

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“We want beef to be the protein of choice, and we want the entire U.S. beef industry to be trusted and respected for its commitment to quality, safety, and sustainability,” says Kim Brackett, an Idaho rancher and leader of the Beef Industry Long Range Plan (BILRP) taskforce.

That group unveiled its plan for 2021-2025 at this week’s National Cattlemen’s Beef Association (NCBA) Cattle Industry Summer Business Meeting in Denver. The BILRP—updated every five years since 1995—is a designed to help the beef industry establish a common set of objectives and priorities. It communicates the industry’s strategic direction and provides insight to how the industry can serve its stakeholders by growing beef demand.

“The task force invested many hours, discussing the current state of the industry and what we need to accomplish over the next five years. We feel we’ve established some important priorities and strategies, as well as benchmarks for success that will help keep our industry on track through 2025 and beyond,” Brackett says.

The 2021-2025 Beef Industry Long Range Plan includes the following industry objectives:

1. Grow global demand for U.S. beef by promoting beef’s health and nutritional benefits, satisfying flavor and unparalleled safety.
2. Improve industry-wide profitability by expanding processing capacity and developing improved value-capture models.
3. Intensify efforts in researching, improving, and communicating U.S. beef industry sustainability.
4. Make traceability a reality in the U.S. beef industry.

Core strategies and goals to achieve those objectives include:

(core strategy in bold type; sample of goals in italics)

Drive growth in beef exports. 

*Grow U.S. beef exports to 17% of U.S. beef production by 2025.

*By 2025, 75% of all cattle producing states are participating in a nationwide animal disease traceability program (e.g. U.S. Cattle Trace).

Grow consumer trust in beef production.

*Grow BQA certifications by a cumulative total of 10% per year and achieve national standardization of the BQA program by 2023.

Develop and implement better business models to improve price discovery and value distribution across all segments.

*Maintain a beef cowherd of 30-31 million with a growth target of 32.0 to 32.5 million head.

*Grow packing capacity by 7% (7,000 head per day) by 2025.

Promote and capitalize on the multiple advantages of beef.

*By 2025, achieve a Wholesale Beef Demand Index of 124.

Improve the business and political climate for beef.

*By 2025, at least 75% of producers will agree that the beef industry is effectively addressing opportunities and challenges in a way that enhances the business climate for beef.

Safeguard and cultivate investment in beef industry research, marketing and innovation.

*Quantify the existing public research funding for beef industry production issues and grow that funding by 25% by 2025.

*Increase national industry program funding for beef marketing, research and promotion efforts to $100 million by 2025.

Although too few transactions to trend, there was some early negotiated cash fed cattle trade Tuesday. Live prices in the Southern Plains were on either side of steady at $95/cwt. in the Texas Panhandle and $95.00-$97.50 in Kansas, according to the Agricultural Marketing Service. Early dressed sales in the western Corn Belt were at $161, compared to $158 last week.

Cattle futures closed higher Tuesday, off of session highs and square in the same trading channel of recent weeks.

Live Cattle futures closed an average of 48¢ higher (22¢ to $1.17 higher).

Feeder Cattle futures closed an average of 78¢ higher (15¢ to $1.67 higher).

Choice boxed beef cutout value was 41¢ higher Tuesday afternoon at $202.96/cwt. Select was $1.81 lower at $188.32.

Corn futures closed mostly 3¢ to 4¢ lower.

Soybean futures closed 8¢ to 12¢ lower.

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Major U.S. financial indices closed lower Tuesday. Pressure included some likely profit taking in tech stocks and uncertainty about how quickly lawmakers will come to terms on another round of federal economic aid to address COVID-19.

The Dow Jones Industrial Average closed 205 points lower. The S&P 500 closed 20 points lower. The NASDAQ closed 134 points lower.

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Surging COVID cases across the nation and subsequent rollbacks in re-opening plans are stalling the U.S. restaurant industry’s recovery, according to The NPD Group. Since the second week of June, declines in major restaurant chain customer transactions range from 11% to 14% less than a year earlier. Until then, declines improved steadily for about six weeks.

“I believe there is still a lot of upside recovery for restaurants, but for now we’re stuck in neutral until we can get the industry operating at full capacity,” says David Portalatin, NPD food industry advisor. “The recovery phase will then tell us whether the industry can recapture enough customer traffic to get back to the pre-COVID baseline, or whether the new normal will reflect a re-set where consumers prepare more meals in their home kitchens for a longer term.”

Major restaurant chain total customer transactions were 12% less year over year for the week ending July 19, which was 2% more positive than the prior week, according to NPD’s CREST® Performance Alerts.

That same week, 78% of restaurants were in geographies permitting on-premises dining with varying capacity restrictions. For instance, 13% of the nation’s restaurant units are in California, where on-premise dining is prohibited.

Moreover, many restaurants continue to operate at capacities that are significantly less than normal in terms of menu offerings and store hours. Restaurant operators make those decisions based partly on the pandemic situation overall and partly on the difficulty in attracting labor.

Quick service restaurant chains (QSR) were responsible for improving customer transaction declines for the week ending July 19. QSR transactions were 11% less compared to the prior year. Full service restaurant (FSR) chain transactions were down 27%. According to NDP, FSR transactions would be worse without a significant shift to off-premises. In June, FSR off-premises traffic increased 91% versus year ago, while on-premises traffic declined 62%.

“Certainly full service restaurants need to recover their lost on-premises business since that will always be their main source of volume,” says Portalatin. “But, I wouldn’t be surprised to see new casual dining models emerge that are designed to optimize off-premises capabilities for the long-term.”

Cattle futures closed mostly lower Monday, despite logic suggesting a friendly to neutral Cattle on feed report Friday. Besides technical pressure and near expiration of spot Live Cattle, less estimated week-to-week cattle slaughter and the higher year-to-year cattle inventory could have lent bearishness.

Live Cattle futures closed an average of 90¢ lower, except for 75¢ higher in the back contract.

Feeder Cattle futures closed an average of $1.90 lower (35¢ to $3.12 lower), except for an average of 22¢ higher in the back three contracts.

Choice boxed beef cutout value was 78¢ lower Monday afternoon at $202.55/cwt. Select was 50¢ lower at $190.13.

Corn futures closed mostly fractionally mixed.

Soybean futures closed mostly 2¢ to 3¢ higher.

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Major U.S. financial indices closed higher Monday, led by tech stocks and buoyed by hopes surrounding another round of federal economic aid to address COVID-19.

The Dow Jones Industrial Average closed 114 points higher. The S&P 500 closed 23 points higher. The NASDAQ closed 173 points higher.

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There’s still plenty of backlogged market-ready fed cattle to work through, but it appears progress is being made, says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments.

“The calculated estimates of cattle on feed over 120 days are still very large compared to last year, but the difference has decreased by some 160,000 head since May,” Peel says, referring to Friday’s monthly Cattle on Feed report. “It appears that the backlog is decreasing but a sizable number of cattle remain to be cleaned up before feedlots will be current. In the January-April period, feedlot placements were down just over 1 million head year over year.”

Peel also notes the report may highlight some regional drought impacts, with increased June placements of cattle weighing less than 700 lbs. in Texas and Colorado.

As for the semiannual Cattle inventory report, also issued Friday, Peel says the slow decrease in beef cow numbers, relative to January, and the same number of beef replacement heifers suggest no accelerated liquidation at this point.

“The second half of the year may tell the tale as cow-calf producers react to fall calf market conditions,” Peel says. “Overall, it appears that cattle numbers continue a slow tightening of inventories going forward.”