Soybean futures closed sharply higher Monday, boosted by a bounce in oil prices, carrying Corn along for the ride. Extreme heat in the short-term forecast added support.
Soybean futures closed 31¢ to 38¢ higher through Sep ‘23 and then mostly 26¢ to 27¢ higher.
Corn futures closed mostly 5¢ to 6¢ higher.
Even so, Cattle futures firmed Monday, supported by stronger wholesale beef values.
Choice Boxed beef cutout value was $1.64 higher Monday afternoon at $270.55/cwt. Select was 87¢ higher at $242.66/cwt.
Live Cattle futures closed an average of 42¢ higher (42¢ to $1.05 higher).
Feeder Cattle futures closed an average of 37¢ higher, except for an average of 18¢ lower in two nearby contracts.
There was no established negotiated cash fed cattle trade through Monday afternoon, according to the Agricultural Marketing Service.
Last week, live prices were $137/cwt. in the Southern Plains, $140-$145 in Nebraska and $143.50-$145.00 in the western Corn Belt. Dressed prices were $228-$230.
Major U.S. financial indices gave back some of the previous session’s gains on Monday, with mixed earnings reports and lingering concerns about inflation and economic growth.
Builder confidence plunged month to month in July as high inflation and increased interest rates stalled the housing market by dramatically slowing sales and buyer traffic. In a further sign of a weakening housing market, builder confidence in the market for newly built single-family homes posted its seventh straight monthly decline in July, falling 12 points to 55, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). This is the lowest HMI reading since May 2020 and the largest single-month drop in the history of the HMI, except for the 42-point drop in April 2020.
“Production bottlenecks, rising home building costs and high inflation are causing many builders to halt construction because the cost of land, construction and financing exceeds the market value of the home,” says NAHB Chairman Jerry Konter, a home builder and developer from Savannah, Ga. “In another sign of a softening market, 13% of builders in the HMI survey reported reducing home prices in the past month to bolster sales and/or limit cancellations.”
“Affordability is the greatest challenge facing the housing market,” explains NAHB Chief Economist Robert Dietz. “Significant segments of the home buying population are priced out of the market. Policymakers must address supply-side issues to help builders produce more affordable housing.”
The Dow Jones Industrial Average closed 215 points lower. The S&P 500 closed 32 points lower. The NASDAQ was down 92 points.
West Texas Intermediate Crude Oil futures on the CME closed $3.99 to $5.01 higher through the front six contracts, supported by snug supplies and indications that Saudi Arabia will not increase production.
When USDA issues the mid-year cattle report this Friday, Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, expects to see the beef cow inventory 2.5% to 3.0% less year over, and the smallest since 2015. In his weekly market comments, Peel points out beef cow slaughter was 14.6% more than 2021 through the first half of this year. Last year’s beef cow slaughter was 9% more year over year.
“Fed cattle slaughter was up 0.6% year over year in the first half of the year. However, fed steer slaughter was down 1.4% while fed heifer slaughter was up 3.8%. Heifer slaughter in the first half of the year was 52.1% of the January 1 inventory of other heifers. That is the highest rate of heifer slaughter in the first half of the year since 2004 and has averaged 48.3% in the past 15 years. Reduced beef heifer retention may lead to a decrease in the beef replacement heifer inventory of 2.5% or more,” Peel says.
So, it will take time to begin expanding the herd when drought eases.
“Cow culling can drop rather quickly if conditions improve but the availability of replacement heifers, especially bred heifers, may take a year or more,” Peel explains. “Heifer liquidation this year may mean that a limited supply of bred heifers is available next year. If drought conditions improve this summer/fall, it may be possible to save some additional replacement heifer calves, but most will not calve until 2024. Even if we can and want to, the ability to rebuild the beef cow herd may be limited in 2023. Hopefully, the upcoming report will provide some indication of what lies ahead.”