Sharply higher nearby Lean Hog futures and firming wholesale beef values provided support for Cattle futures early in Tuesday’s session. By the end, though, Feeder Cattle closed lower, while Live Cattle mostly eked out minimal gains.
After 72¢ and 10¢ lower in the front two contracts, Live Cattle futures closed an average of 12¢ higher, except for 45¢ lower in away Oct.
Feeder Cattle futures closed an average of 54¢ lower (15¢ to $1.05 lower).
Choice boxed beef cutout value was $1.10 higher Tuesday afternoon at $192.45/cwt. Select was 18¢ lower at $190.47.
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Major U.S. financial indices closed sharply lower on Tuesday, apparently pressured most by weekend news that North Korea successfully tested a hydrogen bomb.
The Dow Jones Industrial Average closed 234 points lower. The S&P 500 closed 18 points lower. The NASDAQ closed 59 points lower.
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Besides Midwestern farmer-feeders filling yards as a corn marketing alternative, lousy wheat prices and bountiful prospects for wheat pasture could add support to calf prices.
In Oklahoma, for example, Derrell Peel, Extension livestock marketing specialist at Oklahoma State University explains most of the state received about double the average precipitation in August, along with below-normal temperatures, enabling earlier wheat sowing.
“Early planted wheat, along with other forages may add 30 or more days to the front end of winter grazing,” Peel says. “At the same time, expectations for 2018 wheat prices are dismal enough that some producers are beginning fall grazing with an intent or high likelihood of grazing out wheat next spring. A full graze-out adds another 75 or so days to the winter dual-purpose grazing period. Together, these conditions suggest the possibility of 220 or more days of grazing compared to a more typical 120 day winter grazing period.”
Such a lengthy grazing opportunity also means some stocker operators will be looking for two turns on wheat rather than one.
“Two sets of stockers allow producers to consider a wider range of purchase weights and perhaps avoid demand bunched around lightweight stockers,” Peel explains. “It is common in the fall to see prices for typical stocker sizes (400-525 lbs.) to be high relative to heavier stockers (550-650 lbs.). Current prices for stocker cattle suggest that a wide range of purchase weights (400-650 lbs.) all offer roughly the same value of gain and similar potential for returns.”