Futures and equity markets were closed Friday, in observance of Good Friday. Through Thursday, from the previous Friday, Cattle futures were able to claw back some losses, supported by stronger cash sales and the continued seasonal increase in Choice wholesale beef value.
Negotiated cash fed cattle trade ranged from inactive on light demand to a standstill through Friday afternoon, with too few transactions to trend, according to the Agricultural Marketing Service.
Live prices last week were $1 higher in the Southern Plains at $139/cwt., $2 higher in Nebraska at $140-$142, $3 higher in the western Corn Belt at $143 and $2-$4 higher in Colorado at $140-$142. Dressed prices were $4 higher at $226.
“It is not surprising that finished cattle prices increased this week as the April market tends to be strong and the highlight of the spring,” says Andrew P. Griffith, agricultural economist at the University of Tennessee (UT). “However, pessimism has started to set in due to the failure of the market to break out of its narrow trading range. As was said last week, it will still be difficult for finished cattle prices to exceed the high price experienced in February, but there is more of a chance now than last week. The hope is that prices push higher and even challenge the $145 price mark, which would be $2 higher than the $143 price in February.”
Estimated total cattle slaughter last week of 634,000 head was 37,000 head fewer than the previous week and 7,000 head fewer than the same week last year. Year-to-date estimated total cattle slaughter of 9.69 million head was 50,000 more than last year. Year-to-date estimated beef production of 8.1 billion lbs. was 61.8 million lbs. more than in 2021.
Choice boxed beef cutout value was $2.15 higher week to week on Friday at $272.62/cwt. Select was $1.43 lower at $258.90.
Live Cattle futures closed an average of $1.97 higher from the previous Friday through Thursday ($1.42 higher at the back to $2.85 higher at the front).
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Calf and feeder cattle prices sold mixed but with mainly more week-over-week strength through the gut of the country, based on weekly auctions monitored by Cattle Current.
As mentioned in Cattle Current last week, optimism remains for higher prices in the latter half of this year.
USDA’s Economic Research Service (ERS) increased the anticipated annual feeder steer price this year to $163/cwt., in the latest monthly Livestock, Dairy and Poultry Outlook.
“With higher placements in the first quarter, it is likely that calves that might have remained on pastures later in the year were pulled forward. As a result, from last month, tighter anticipated feeder cattle supplies in second-half 2022 will likely support elevated prices,” say ERS analysts.
The projected third-quarter average feeder steer price (basis 750-800 lbs. Oklahoma City) was raised $4 to $165; the fourth-quarter price was bumped $6 higher to $172.
In the meantime, though, an assortment of challenges continues to cap price potential, including higher feedlot placements last month, apparently induced by drought, and continued heavy beef production on the back of heavier fed cattle carcass weights and increased non-fed volume.
From the previous Friday through Thursday last week, Feeder Cattle futures closed an average of 97¢ higher (32¢ to $2.40 higher), gaining back about a third of the previous week’s losses.
That was despite Corn futures closing an average of 17.9¢ higher through the front six contracts during the same period, about 50¢ higher over the last two weeks.
“Russia’s invasion of Ukraine, drought in the Southern Plains and Western U.S., high fertilizer prices, strong export demand, and the recent USDA Prospective Plantings report have all provided fuel to the rally,” explains Aaron Smith UT crop marketing specialist, in his weekly market comments. “The December contract has closed up 16 of the last 20 trading days. Prices are rapidly approaching the August 2012 high of $8.43 ¾. Prices will not go up forever, but right now there appears to be little that can slow the ascent in the short term.”
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CF Industries Holdings, Inc. (CF Industries) — a leading global manufacturer of hydrogen and nitrogen products — provided perspective to customers last week regarding ongoing supply chain disruptions that are adding an extra layer of heft to input prices.
CF Industries informed customers it serves by Union Pacific (UP) rail lines that railroad-mandated shipping reductions would result in nitrogen fertilizer shipment delays during the spring application season and that it would be unable to accept new rail sales involving Union Pacific for the foreseeable future.
UP shipping restrictions stem from efforts by that railroad to ease congestion, according to a letter to customers from Kenny Rocker, UP executive Vice President, marketing and sales.
“Over the last few weeks, our network has experienced some setbacks – including numerous service interruptions, crew shortages in select areas and delays to our network – as we have seen our operating inventory continue to climb over the past 60 days. This additional inventory has led to more congestion in yards, an imbalance of our resources, and further slowdown of our operational performance,” Rocker explains.
Among steps taken to ease congestion, Rocker cites the addition of 50 locomotives since January with 100 more to come, heavy recruitment and current training of 450 employees and asking come customers, like CF Industries, to voluntarily reduce their rail car inventories.
“If we do not see reductions to the operating inventory through their voluntary efforts, then we will begin metering traffic after April 18,” according to Rocker.
According to CF Industries, UP told it to reduce shipments by nearly 20% and that noncompliance will result in the embargo of its facilities by the railroad.
“The timing of this action by Union Pacific could not come at a worse time for farmers,” says Tony Will, CF Industries president and chief executive officer. “Not only will fertilizer be delayed by these shipping restrictions, but additional fertilizer needed to complete spring applications may be unable to reach farmers at all. By placing this arbitrary restriction on just a handful of shippers, Union Pacific is jeopardizing farmers’ harvests and increasing the cost of food for consumers.”
CF Industries believes it will still be able to fulfill delivery of product already contracted for rail shipment to Union Pacific destinations, albeit with likely delays. The company intends to engage directly with the federal government to ask that fertilizer shipments be prioritized so that spring planting is not adversely impacted.
CF Industries ships to customers via Union Pacific rail lines primarily from its Donaldsonville Complex in Louisiana and its Port Neal Complex in Iowa. The rail lines serve key agricultural areas such as Iowa, Illinois, Kansas, Nebraska, Texas and California. Products that will be affected include nitrogen fertilizers such as urea and urea ammonium nitrate as well as diesel exhaust fluid, an emissions control product required for diesel trucks. CF Industries is the largest producer of urea, urea ammonium nitrate and diesel exhaust fluid in North America. Its Donaldsonville Complex is the largest single production facility for the products in North America.