Another round of long liquidation and technical selling rattled Cattle futures on Friday, fueled along by the surprising downturn in cash fed cattle prices that were mostly steady to $1-$2 lower on a live basis $121-$123/cwt. Dressed trade was steady to $1 lower at $193-$195.
Other than 80¢ lower in the back contract, Live Cattle futures closed an average of $2.17 lower ($1.77 to $3.00 lower).
Feeder Cattle futures closed an average of $2.95 lower ($2.40 to $3.57 lower).
Packers also benefited from increasing wholesale beef values. Choice boxed beef cutout value was 84¢ higher on Friday afternoon at $209.51/cwt. Select was $1.46 higher at $202.32.
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Major U.S. financial indices surged higher again on Friday. That was despite a less bullish U.S. jobs report than expected; also less bullish than the December ADP National Employment Report® released a day earlier.
Total nonfarm payroll employment increased by 148,000 in December, and the unemployment rate was unchanged at 4.1%, according to the U.S. Bureau of Labor Statistics. Employment gains came in health care, construction and manufacturing.
The Dow Jones Industrial Average closed 200 points higher. The S&P 500 closed 19 points higher. The NASDAQ closed 58 points higher.
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“Producers should continue to keep an eye on feeder cattle basis the next several weeks and see if it maintains its strength,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “The wide basis continues to point to a discrepancy between what traders believe cattle prices are going to do and what cattle feeders think they will do in coming months.”
Griffith notes that the basis between the CME Feeder Cattle Index and spot Feeder Cattle continues to be historically strong at more than $6.
Price strength through the fourth quarter suggests continued strength through the first quarter, Griffith says.
“This statement should not be taken as prices increasing but prices holding steady the next several weeks,” Griffith says. “It may be difficult for prices to increase given the number of cattle on feed. Placements of cattle into feedlots the next few months will provide a better picture for the outlook of prices moving forward.”