Cattle Current Daily—March 19, 2021

Cattle Current Daily—March 19, 2021

Negotiated cash fed cattle trade was $2 higher on a dressed basis in Nebraska Thursday at $182.00/cwt., according to the Agricultural Marketing Service. That was on slow trade and light demand, but might suggest front-end inventory is current enough for prices to finally move beyond the rut of the last seven weeks. Live trade in Nebraska was at $114 on Wednesday.

Trade was limited on light demand in most other regions with too few transactions to trend.

On Wednesday, live prices were $2 higher in the western Corn Belt at $114-$115. Dressed trade in the region last week was at $178-$180.

Cattle futures closed sharply lower amid likely technical correction and positioning ahead of Friday’s Cattle on Feed report, despite wholesale beef values gathering some seasonal steam, sharply lower Corn futures and the likelihood that cash fed cattle prices are on the cusp of moving higher.

Pressure also included sharply lower Lean Hog futures, tied to chatter out of China that it’s close to rebuilding its hog herd to pre-ASF levels. That diverges widely from private sector reports citing further ASF challenges.

Net U.S. beef export sales were 25,900 metric tons (mt) the week ending Mar. 11, according to the weekly U.S. Export Sales report from USDA’s Foreign Agricultural Service. That was 24% more than the previous week and 39% more than the prior four-week average. Increases were primarily for Japan, South Korea, China, Taiwan, and Hong Kong.

Live Cattle futures closed an average of $1.92 lower.

Feeder Cattle futures closed an average of $1.78 lower (20¢ lower at the back to $3.55 lower).

Choice boxed beef cutout value was 14¢ higher Thursday afternoon at $228.61/cwt. Select was 52¢ higher at $218.11.

The average dressed steer weight the week ending Mar. 6 was 900 lbs. according to USDA’s weekly Actual Slaughter Under Federal Inspection report. That was 1 lb. heavier than the previous week but 3 lbs. lighter than the previous year. The average dressed heifer weight of 833 lbs. was 1 lb. lighter than the previous week but 3 lbs. heavier than the prior year.

Corn and soybean futures closed sharply lower Thursday. The most plausible explanations include rainier forecasts for South America and worries about how many acres might show up in USDA’s Prospective Plantings report due out at the end of the month. There’s also likely some queasiness about U.S. and Chinese officials meeting in Alaska this week.

Net U.S. corn export sales for 2020-21 were 985,900 mt the week ending Mar. 11, which was up noticeably from the previous week and from the prior four-week average.

Corn futures closed 10¢ to 12¢ lower through the front three contracts, and then mostly 3¢ to 7¢ lower.

Net U.S. soybean export sales of 202,400 mt for 2020-21 were down 42% from the previous week and 31% from the prior four-week average.

Soybean futures closed 20¢ to 29¢ lower.

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Major U.S. financial indices closed lower Thursday, pressured by surging bond yield rates, just a day after Federal Reserve Chair Jerome Powell expressed little concern that inflation would get out of hand.

 

The Dow Jones Industrial Average closed 153 points lower. The S&P 500 closed 58 points lower. The NASDAQ was down 409 points.

West Texas Intermediate on the CME closed $4.10 to $4.60 lower through the front six contracts. Reasons ranged from increasing inventory to the stronger dollar to the simple fact traders may have leaned too far over the skis of reality.

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Lower government payments and higher farm production costs could outweigh the projected increase in livestock and crop sales in 2021, leading to lower year-over-year farm income, according to the latest analysis of national and global agricultural trends from the University of Missouri (MU).

Even so, analysts at the MU Food and Agricultural Policy Research Institute (FAPRI) project net farm income this year at $112 billion, which would be significantly higher than in 2015-2019. Net farm income increased to $121 billion in 2020, the highest level since 2013, primarily because of $46 billion in government payments.

“The COVID-19 pandemic upended agricultural markets, contributing to a dismal outlook for the farm economy in the spring and summer of 2020,” says Patrick Westhoff, FAPRI director and Howard Cowden Professor of Agricultural and Applied Economics in the MU College of Agriculture, Food and Natural Resources (CAFNR). “A series of emergency support programs provided record government payments to farmers, and prices for many commodities rebounded in the final months of the year, resulting in a large increase in 2020 net farm income. Looking ahead, the outlook is uncertain, but certainly more optimistic than it was a few months ago.”

Economists with FAPRI and the MU Agricultural Markets and Policy (AMAP) team release the annual U.S. Agricultural Market Outlook report each spring. The baseline projections for agricultural and biofuel markets through 2030 were prepared using market information available in January, but do not reflect any subsequent policy changes.

FAPRI projects cattle prices higher, especially after 2021, as beef cow numbers decline from 30.8 million head Jan. 1 this year to a low for the time series of 29.6 million in 2026 and 2027.

FAPRI projects the five-area direct annual fed steer price at $116.61/cwt. this year, $122.48 in 2022 and $127.28 in 2023. From there, price projections peak at $136.55 in 2027.

Projected steer calf prices (basis 600-650 lbs., Oklahoma City) follow a similar path: $149.08/cwt. this year, $162.88 in 2022, $170.63 in 2023; peaking at $184.36 in 2027.

That’s with corn prices projected to be highest this marketing year (2020-21) at $4.20/bu.; $4.06 in 2021-22; $3.99 in 2022-23; $3.93 in 2023-24; and then declining to $3.78 to $3.79 from 2025-26 through 2030-31.

FAPRI projects utility cow prices (basis Sioux Falls) at $60.56/cwt. this year, $64.73 in 2022, $66.34 in 2023; peaking at $71.80 in 2027.

Among other highlights from the latest report:

Consumer food price inflation increased to 3.4% in 2020, in part because of a wider gap between producer prices for livestock and consumer prices for meat. FAPRI projects food inflation at 2.1% this year and then similar to overall inflation in subsequent years.

Margins between farm and wholesale prices remain higher than historical averages, but declined from last spring’s record high levels caused by pandemic disruptions. “The extent to which retailers and processors continue to endure higher pandemic-related costs will affect the producer share of consumer meat expenditures,” say FAPRI analysts.

The outlook for U.S. beef exports to China and other markets remains positive, due to strong demand coupled with limited supplies among other major exporters.

2021-03-18T19:53:43-05:00

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