Cattle Current Daily—Sept. 1, 2021

Cattle Current Daily—Sept. 1, 2021

Negotiated cash fed cattle trade was at a standstill in all major regions through Tuesday afternoon, according to the Agricultural Marketing Service.

Last week, live prices were at $122-$123/cwt. in the Southern Plains at $123/cwt. Live and dressed sales were at $128 and $202-$208, respectively, in Nebraska and the western Corn Belt.

Cattle futures declined Tuesday with follow-through pressure tied to concerns about recently slower packer production, post Labor Day demand and declining wholesale beef prices. Month-end position squaring was also a factor.

Feeder Cattle futures closed an average of 72¢ lower (7¢ to $1.20), except for 7¢ higher in May.

Live Cattle futures closed an average of 76¢ lower (10¢ to $1.43 lower). 

Through midday today, though, Cattle futures were rebounding some, helped along by further declines in Grain futures.

Choice boxed beef cutout value was 67¢ lower Tuesday afternoon at $342.11/cwt. Select was 52¢ lower at $312.03/cwt.

Corn and Soybean futures closed lower with continued pressure from uncertainty surrounding the impact of Hurricane Ida.

Corn futures closed down mostly 5¢ to 8¢.

Soybean futures closed mostly 4¢ to 10¢ lower through new-crop contracts, and then mostly 2¢ to 3¢ higher.

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Major U.S. financial indices softened Tuesday, pressured in part by weaker consumer confidence. The Conference Board Consumer Confidence Index® declined to 113.8 in August from 125.1 in July.

“Consumer confidence retreated in August to its lowest level since February 2021 (95.2),” says Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “Concerns about the Delta variant—and, to a lesser degree, rising gas and food prices—resulted in a less favorable view of current economic conditions and short-term growth prospects. Spending intentions for homes, autos, and major appliances all cooled somewhat; however, the percentage of consumers intending to take a vacation in the next six months continued to climb. While the resurgence of COVID-19 and inflation concerns have dampened confidence, it is too soon to conclude this decline will result in consumers significantly curtailing their spending in the months ahead.”

The Dow Jones Industrial Average closed 39 points lower. The S&P 500 closed 6 points lower. The NASDAQ was down 7 points.

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How many beef cows are going to town due to drought is a popular current wonderment, one with no easy answer, says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments.

“We do know is that beef cow slaughter is up 8.7% year over year through mid-August. If we assume the current level of year-over-year increase continues for the remainder of the year, it implies an annual beef cow slaughter of 3.55 million head. That would be a net culling rate of 11.4%, the highest beef herd culling rate since 2011,” Peel says. “The average culling rate the past two years, since the cyclical peak in 2019, has been 10.25%. Over the past 35 years, across cycles of expansion and liquidation, the average herd culling rate has been 9.65% annually.

“However, because the drought started so early in the year (carried over from last year), it is likely that beef cow slaughter was shifted earlier in the year. Producers likely have already culled cows that would have been culled later in the year anyway. I doubt that the 8.7% year-over-year beef cow slaughter rate will persist for the remainder of the year. Nevertheless, the drought continues unabated and cow slaughter rates will likely remain strong.”

Further, Peel says heifer retention levels remain unclear.

 “The January Cattle report showed that beef replacement heifers were 18.7% of the cow herd, a level that would support stable herd inventories,” Peel explains. “The total number of beef replacement heifers (which includes heifer calves and coming first calf heifers) and the subset of heifers calving in 2021 were both fractionally higher year over year in the January numbers. No doubt, producers in drought areas have had to adjust replacement heifer numbers along with cows. Some heifer calves that were indicated as replacements in January likely were shifted into feedlots. It is not clear how many.”

Heifer slaughter is 1.4% higher so far this year, but Peel points out last year’s slaughter levels were skewed by Covid disruptions.

“Finally, there is the question of how producers not in drought areas have responded in 2021,” Peel says. “Forage conditions have been good in some regions and it is not clear if producers may be holding more cows and heifers to offset some of the drought region impacts. In short, we don’t know what would have happened in the absence of the drought and we don’t know for sure how the remainder of the year will finish. After playing with lots of numbers and assumptions, my best guess at this point is that the drought has added one-half to one percent of additional beef herd liquidation this year.”

2021-09-01T12:49:56-06:00

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