This week will have two major video sales going on simultaneously following two weeks of USDA reporting that has everyone on point. It shouldn’t come as any surprise, as this spring has created scenarios that have added to market volatility across all markets.
All spring during the bull sale run, I kept hearing Joe Goggins’ speech that circled around cattle numbers. He’d repeat in various forms, “It will be those with inventory that will reap rewards!” I couldn’t agree more, but while his statements were cattle driven, after the recent crop report, it will be anyone with inventory in ag.
The June 23 Cattle on Feed report didn’t have any earth-shattering news other than driving trends further into what we’ve already been talking about for months. Tighter supplies with lighter cattle are being sent to feed, which has already started to decrease carcass weights. For me, the overall takeaway was maintaining the smaller supply of 3% down from a year ago. This will be watched heavily with each report to see if changes are coming in our markets. We will see how the replacement female market responds after a calf crop is sold in this market. Currently, year-to-date feeder cattle contracts have surged by over 35% while live cattle contracts have gone up by 11%.
As mentioned in previous columns, higher inputs and a higher interest rate is going to drive more heifers to market. Debt load and a smaller calf crop will have ranchers needing to sell deeper into inventory than I’m sure they had hoped to.
Much more surprising news came out of the crop report posted June 30. USDA is reporting that corn acreage is up 6% over last year’s data while soybean acreage is down 5%. Additionally, wheat acreage was up 9% while cotton was down a massive 19%! This had the markets in full movement mode.
As you can imagine, corn and wheat dropped drastically while soybeans and cotton surged. Wheat has been extremely more volatile than any other crop with the Russia and Ukraine conflict over the past year. In fact, according to data published by MarketWatch, corn is down 27.3% on the year and wheat is down 19%, so this latest report didn’t help an already-hurting situation with both crops.
Here’s the craziness in this situation surrounding corn: USDA noted that this crop with be the third largest planted acreage since 1944. However, when you compare this data with the progress and condition report and you see the current year displays the poorest crop condition in the last five years, but a substantial margin, corn is becoming a wildcard in our cattle markets.
An unseasonably cooler spring with added moisture and late planting could all culminate into an unpredictable future report. A lot of farmers are talking about the lower-than-normal quality stand they are seeing. The question that will need to be answered is if the added acreage will make up a lower yielding crop nationwide.
A farmer I spoke to recently said it will take two inches of rain per week to rebound his crop. While the West is in a good moisture situation, much of the Midwest could definitely use a drink from a pasture and cattle standpoint. Over the last few weeks, I’ve traveled to a lot of the western U.S. Range conditions still look fantastic in many parts of the West. We have, however, seen the first signs of fire season getting started.
What I can tell you is that I don’t own a single commodity contract right now and I wish those that do all the best!
In the meantime, for those of us on the cattle side, please tune into Western Video Market’s annual July sale held in Reno, NV, and Superior Livestock Auction’s “Week in the Rockies” Sale in Steamboat Springs, CO. These sales will be firing away with cattle from across the country. There will be undoubtedly some new records set and it should be an awesome week to report on in next week’s column. — LOGAN IPSEN
