Corn futures eased mostly 3¢ to 4¢ lower, providing some lift to Cattle futures.
Feeder Cattle futures closed an average of $1.26 higher (75¢ at the back to $2.25 in spot Sep). Live Cattle futures closed an average of 67¢ higher.
Negotiated cash fed cattle trade ranged from slow on light demand to a standstill through Tuesday afternoon, according to the Agricultural Marketing Service. Although too few to trend, there were a few early live sales in Nebraska at $145/cwt.
Last week, live prices were $142 in the Southern Plains, $145 in Nebraska and $147-$148 in the western Corn Belt. Dressed prices were $232 in Nebraska and $232-$234 in the western Corn Belt.
Choice Boxed beef cutout value was $3.25 lower Tuesday afternoon at $259.79/cwt. Select was $3.07 lower at $239.68/cwt.
Major U.S. financial indices continued lower with carryover pressure from more interest rate hikes on the horizon here and abroad.
The Dow Jones Industrial Average closed 308 points lower. The S&P 500 closed 44 points lower. The NASDAQ was down 134 points.
West Texas Intermediate Crude Oil futures on the CME closed $3.65 to $5.37 lower through the front six contracts. Pressure appeared to include a new COVID outbreak reported in China.
“The global economic outlook for 2022 and 2023 is growing more uncertain due to the continued materialization of downside risks. Previous growth projections are moderated due to ongoing trade disruptions, above-target inflation rates, and rising energy prices,” says analysts with USDA’s Economic Research Service (ERS), in the latest quarterly Outlook for U.S. Agricultural Trade.
ERS analysts say global real gross domestic product (GDP) is projected to increase by 3.2% this year, down 0.4% from the previous forecast. Global GDP is projected to increase by 2.9% in 2023.
“The Russian invasion of Ukraine is ongoing and continues to impose far-reaching economic disruptions. The disruptions have thus far led to elevated energy prices that continue to disproportionately affect the European market,” ERS analysts explain. “Supply chain complications have slowly abated, but spot shipping rates remain elevated compared with their pre-pandemic levels. Central banks around the world, including the Federal Reserve, have begun monetary tightening cycles to combat rising inflation rates. The tightening of monetary policy counters inflation but also typically presents short-term barriers to economic growth.”
Against this economic backdrop, U.S. agricultural exports in fiscal year (FY) 2023 are projected at $193.5 billion, down $2.5 billion from the revised forecast for FY 2022.
“This decrease is primarily driven by lower exports of cotton, beef, and sorghum that are partially offset by higher exports of soybeans and horticultural products,” say ERS analysts.
Beef exports are forecast down $1.1 billion to $9.8 billion as higher prices fail to offset lower volumes driven by tight U.S. supplies.
“Evidence of declining consumer confidence in the face of slowing economies and rising inflation is building. In general, beef markets are resilient to changes in economic conditions. However, we see movement within supply channels and price points that tend to favor cheaper options, such as ground beef and quick-service restaurants, over more expensive cuts and consumption channels,” says RaboBank analysts, in the third-quarter Beef Quarterly from RaboResearch.
“With economic conditions slowing, we expect consumers to favor lower-priced beef cuts in second-half 2022, which is positive for trimmings demand. If the US cow kill slows, there is pricing upside potential for lean trimmings…” explain RaboBank analysts.