Feeder Cattle futures rallied sharply higher on Tuesday, fueled by oversold conditions, declining corn prices and apparent short covering. Live Cattle followed along with less conviction.
Choice boxed beef cutout value was 34¢ lower Tuesday afternoon at $205.41/cwt. Select was 45¢ higher at $198.29.
Except for 45¢ higher at the back, Live Cattle futures closed an average of 99¢ higher (75¢ to $1.22 higher).
Feeder Cattle futures closed an average of $2.72 higher ($2.27 to $3.00 higher).
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Major U.S. financial indices closed decisively higher on Tuesday, supported by continued strong quarterly earnings reports.
The Dow Jones Industrial Average closed up 72 points. The S&P 500 closed 6 points higher. The NASDAQ closed 14 points higher.
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“…the question being asked by most in the industry is if the increased placements (Cattle on Feed report, Jul. 21) are from pulling cattle out of the country early or if there were that many additional cattle out there,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. The recent Cattle on Feed report indicated that June feedlot placements were 16% more than the previous year, which was 10% more than analysts expected.
“The most likely scenario is that there are a few more cattle and some cattle were pulled forward,” Griffith says. “The feeder cattle market will likely bounce back from the bearish news and continue to trade in a steady range that the market has been in for the past three months or so. Producers are still encouraged to use price risk management strategies if deemed necessary.”
On the other end of the scale, Griffith says cattle feeders continue to be profitable on a cash to cash basis, although fed cattle prices last week were 19% less than the spring top.
“The higher feeder cattle prices paid in the spring will put pressure on cattle feeders if the fed market does not turn in the coming weeks,” Griffith says. “If $117/cwt. (last week’s price) is the low, then the seasonal would push live cattle over $130 during the holidays, but this may be a tough target to hit.”