Cattle Current Daily—Dec.6, 2021

Cattle Current Daily—Dec.6, 2021

Widely volatile outside markets, stemming from worries about the potential impact of the new COVID variant (omicron), pressured Cattle futures last week, despite another solid gain in cash prices. Yet, buoyant cash prices and fundamental strength continued to provide optimism.

For the week, negotiated cash fed cattle prices were $2 higher on a live basis at $142/cwt. in the Southern Plains and Colorado. They were steady to $4 higher in Nebraska at $140 and steady to $5 higher in the western Corn Belt at $140. Dressed prices were $3 higher in Nebraska at $220; $3-$7 higher in the western Corn Belt at $220.

Total estimated cattle slaughter last week of 676,000 head was 110,000 head more than the previous holiday-shortened week and 7,000 more than the same week last year. Year-to-date estimated total cattle slaughter of 30.8 million head was 872,000 head more (+2.9%) than the same period last year. Estimated total year-to-date beef production of 25.52 billion lbs. was 610.9 million lbs. more (+2.5%) than a year earlier.

“Fed cattle prices have increased nearly $18/cwt. since the first week of October. Compare that to October 2020 when it took until the first week of April for the market price to increase $18 and reach the spring price peak,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “Cattle feeders should be satisfied with the way prices have been moving the past two months, but upside potential looks to be minimal moving from today through the spring. In other words, the market may hold its own the next several weeks or months, but pushing much higher will be a challenge. There should be price support moving into the spring as demand will seasonally increase exiting the winter. However, the market has probably already experienced it largest gains from fall to spring.”

Live Cattle futures closed an average of 36¢ lower on Friday, except for 2¢ higher in spot Dec. Week to week, they closed an average of 95¢ lower week to week on Friday (10¢ to $2.25 lower) except for 12¢ higher in away Dec.

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Calf and feeder cattle prices last week were mainly higher to sharply higher, based on weekly auctions monitored by Cattle Current.

“…demand remains strong while buyers are trying to make quick work of purchasing cattle as there is an expectation that prices will continue strengthening,” Griffith says. “There is no doubt a fire has been lit under the cattle markets as calf prices are following feeder cattle prices and feeder cattle prices are following finished cattle prices.”

Feeder Cattle futures closed an average of $1.18 lower on Friday, amid some likely profit taking from the previous day’s session as well as week-end positioning. Week to week, though, they closed broadly mixed, from an average of $1.31 lower in the front three contracts (2¢ to $3.02 lower) to an average of 54¢ higher (20¢ to $1.07 higher).

The CME Feeder Cattle Index was $3.63 higher week to week on Friday at $161.58.

After fractionally lower in spot Dec, Corn futures closed an average of 9.5¢ lower in the next five contracts week to week on Friday.

Week to week on Friday, Soybean futures closed an average of 11.2¢ lower through the front six contracts.

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Wholesale beef prices continued lower last week, although there could be another holiday bump or two along the way.

Choice boxed beef cutout value was $5.65 lower week to week on Friday at $274.36/cwt. Select was $3.64 lower at $258.64. Steer byproduct value declined 72¢ to $14.24/cwt., with likely pressure from global economic concerns related to the new COVID variant.

Despite the sizable price decline in boxed beef prices since the last week of August, and the increase in fed cattle prices, Griffith says packer profitability remains strong.

“There is no reason at this time to expect beef demand to soften, which should continue supporting wholesale beef prices and the cattle complex,” Griffith says. “There may still be a little more holiday buying that needs to take place, but most holiday purchases will have been completed at this point. The expectation moving forward will be for a strong restocking of the beef counter following consumer holiday purchasing and some of the focus shifting from middle meats to end cuts as winter establishes a hold on the market.”

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Volatility continued in equity markets Friday. Besides the seesawing uncertainty through the week, tied to the COVID variant, pressure came from significantly fewer new jobs than the trade expected.

Employment increased 210,000 from October to November, according to the Employment Situation Summary from the U.S. Bureau of Labor Statistics. Average hourly earnings increased by 8¢ to $31.03.

The Dow Jones Industrial Average closed 59 points lower. The S&P 500 closed 38 points lower. The NASDAQ was down 295 points.

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Supply chain disruptions and inflation continue helping propel fertilizer prices to record and near-record highs.

“According to the USDA Agricultural Marketing Service (AMS) Illinois Production Cost Report (a bi-weekly report) the average price for anhydrous ammonia last week was $1,434.38/ton, the highest on record according to data going back to 2008 and a more than three-fold increase from the same week a year ago,” say analysts with the Livestock Marketing Information Center (LMIC), in the latest Livestock Monitor. “Since the start of the year, anhydrous ammonia prices have increased 186.5% or $934 per ton, and since late-September prices have jumped 82.0% or $646.”

Although less drastic, price increases for other fertilizer prices are steep, too.

Citing the AMS report, compared to a year earlier, LMIC analysts say the average price for urea (46-0-0) jumped 155% ($557) to $915/ton, liquid nitrogen (28% spread) is up 166% ($351) to $564 per ton, and potash is 127% ($439) higher at $785 per ton. Diesel prices are 60% higher at $2.87/gal.

“Depending on how fertilizer prices react in the coming months may drive producer decisions on how many corn and soybean acres to plant,” LMIC analysts say. “Producers are likely to actively consider ways to minimize fertilizer costs, which will include crop planting decisions. Extension educators have been recommending producers have soil tests conducted to determine if fertilizer is needed and plan application needs as necessary.”

2021-12-05T16:01:16-06:00

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