Farmers Report

CROP COMMENTS

Corn, cotton, soybeans, and wheat were up for the week. The July WASDE report was released this week. The national average corn yield was decreased from 181.5 bu/acre to 177.5 bu/acre. The reduction was due to drier conditions
across a wide area of the Corn Belt in May, June, and early July that will likely limit yields in many regions. In spite of
the reduction in yield, production was only increased 55 million bushels from last month due to the incorporation
of the June planted acre estimate of 94.1 million acres. There remains a great deal of uncertainty in the US corn
crop but the current estimated carryover of 2.26 billion bushel, if realized, will provide downward pressure on prices.
Soybean acres planted were adjusted in the July WASDE report, but USDA chose to leave national average soybean
yield at 52 bushels per acre. It is likely that USDA will revise the yield number when their August estimate is released.
One of the key numbers to watch moving forward for soybeans is the export estimate – currently, 1.85 billion bushels, down 125 million from last month. The June Acreage report surprise of 83.5 million acres planted will limit supplies,
particularly if yields are decreased from the current estimate. Additionally, as US prices climb export business will shift to Brazil and potentially lend support to record soybean plantings in South America this fall. For cotton, harvested
acres and national average yield were increased. Cotton planted and harvested acres were estimated at 11.09 and 9.53
million acres, a 14% abandonment rate, down substantially from last year’s 47%. Additional, harvested acres, mostly in Texas, contributed to the national average yield declining from last month by 10 lbs/ acre to 831 lbs/acre. Cotton markets are likely to remain in the well-established range of 77-85 cents into August when additional production information will be known. The USD index achieved its lowest level since April 2022. The index closed at 99.605, down 4.5% from the start of the year. A lower USD dollar increases the competitiveness of US agricultural exports to global markets.

LIVESTOCK COMMENTS

FED CATTLE
Fed cattle trade was not
well established at the
time of this writing. Asking
prices in the South
were $180 to $182 while
bid prices were mainly
$175 to $176.
The 5-area weighted average
prices thru Thursday
were $182.99 live,
up $2.29 compared to
last week and $291.25
dressed, up $1.44 from
a week ago. A year ago,
prices were $142.09 live
and $229.46 dressed.
Finished cattle trade
was slow to develop
this week as packers are
feeling pressure from
both fronts. Wholesale
beef prices are toppling
from their lofty highs
and finished cattle prices
have been holding close
to their record highs.
This margin squeeze has
resulted in packers being
less willing to pay higher
prices. At the same
time, cattle feeders are
holding out for higher
prices, because they are
in fierce competition to
purchase cattle to place
on feed. The cattle feeder
maintains leverage
over the packer given today’s
fundamentals, but
their profit margin may
already be on the path to
erosion. The dynamics
of cattle markets are
changing the risk profile
in the industry, and it
could be detrimental
to many participants.
BEEF CUTOUT
At midday Friday, the
Choice cutout was
$306.14 down $0.77
from Thursday and down
$11.66 from a week ago.
The Select cutout was
$277.80 down $2.38
from Thursday and
down $10.37 from last
week. The Choice Select
spread was $28.34 compared
to $29.63 a week
ago. The wholesale beef
market is about as confusing
as the names used
for meat. For instance,
why is a hamburger
called a “ham” burger?
It does not seem logical
to use the name of a pork
cut for a beef product.
What about chicken fried
steak? Why would a person
relate a beef steak
product with chicken? It
removes logic from the
equation. Another example
is hotdog. I guess
for years many of us
have been eating man’s
best… Moving back to
the wholesale beef price,
the Choice cutout price
has declined nearly $37
per hundredweight the
past four weeks while
the Select cutout price
has declined about $32
per hundredweight over
the same time period.
The price decline is not
an unexpected action.
The unexpected action
was the strong prices in
the middle of June. The
major consequence of
lower wholesale beef
prices is the squeezing
of packer margins. This
means packers will work
harder to push finished
cattle prices lower. Another
key takeaway is
that these prices will not
receive much support
until Labor Day holiday
purchases begin.
OUTLOOK
There are no trends to
report compared to last
week with most auction
markets being closed
last week in observance
of Independence Day.
However, the price of
steers and heifers this
week compared to two
weeks ago were steady
to slightly higher while
slaughter cow and bull
prices were steady compared
to two weeks ago.
The term for cattle prices
that comes to mind most
often now is “silly”. The
prices for nearly every
weight class of calves
and feeder cattle are
simply silly. The buyers
of these cattle recognize
that the sudden ascension
of cattle prices is
not a good thing. They
know they cannot make
any money if they do not
own cattle, but they also
know prices at this level
means they can lose a
lot of money in a short
time. Newton’s third law
states that for every action
there is an equal and
opposite reaction. The
sudden increase in prices
will eventually be met
with a decline in prices.
The unfortunate part of
that statement is that in
the cattle price world
that could result in prices
declining more quickly
than they increased. It
could also result in cattle
prices staying lower for
a longer period of time
than when prices increased,
which is exactly
what was experienced in
the last price cycle. This
should not be met with
fear but with the thought
that managing price risk
has become more important
today than the
past few years as it relates
to the feeder cattle
market. At the same
time, slaughter cow and
bull prices are also holding
pace with other classes
of cattle. Slaughter
cow prices are averaging
between $100 and $110
per hundredweight while
slaughter bull prices are
in the $125 to $135 per
hundredweight range.
These are extraordinary
salvage values for cows
and bulls that are no longer
useful in the breeding
herd. Market prices will
continue to evolve the
next several weeks and
months, but prices moderating
a little bit would
not be a bad thing for the
industry.
FRIDAY’S
FUTURES MARKET
CLOSING PRICES
Friday’s closing prices
were as follows:
Live/fed cattle –August
$180.18 +3.28; October
$182.63 +2.53; June
$185.78 +2.40; Feeder
cattle –August $246.65
+1.65; September
$249.23 +1.90; October
$250.48 +1.90; November
$250.40 +1.98; July
corn closed at $6.00 up 6
cents from Thursday.