Cattle futures surged higher on Thursday—led by Live Cattle—amid short covering, technical buying and the notion that cash fed cattle prices for the week will be firm to a touch higher.
Live Cattle futures closed an average of $1.87 higher ($1.62 to $2.25 higher).
Feeder Cattle futures closed an average of $3.62 higher ($2.90 to $4.42 higher).
Choice boxed beef cutout value was 59¢ lower Thursday afternoon at $212.48/cwt. Select was 6¢ higher at $200.67.
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On Wall Street Thursday, Major U.S. financial indices ricocheted back the other way from the previous session, closing sharply higher, with a strong start to quarterly earnings and President Trump taking some edge off his rhetoric from the previous day regarding a potential attack on Syria.
The Dow Jones Industrial Average closed 293 points higher. The S&P 500 closed 21 points higher. The NASDAQ closed 71 points higher.
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USDA’s General Accounting Office, this week, released the results of its investigation into the price behavior of fed cattle prices from 2013 to 2016.
That investigation was launched at the behest of some in the industry convinced there had to be some reason, other than market forces, for the sudden decline of prices in the fall of 2015.
You might recall that prices that year continued historically high, buoyed by still-tight cattle supplies from the multi-year widespread drought, as well as nascent herd expansion. Some chinks were starting to show up in the armor of the extraordinary price run, though, including China’s currency devaluation that summer which rocked export markets, on top of a glut of international animal protein supplies. Cattle feeders were bleeding red ink, on a cash to cash basis at least, with pricey cattle in their yards and the fed market starting to turn south as domestic demand sputtered with price-weary consumers. So, they held cattle, adding more pounds to get as much as possible out of each head and delaying the need to pay for still high-priced replacements. Carcass weights increased and marketing fell behind, way behind, markets sank.
Rather than the popular bogymen posited by folks calling for the GAO investigation, specters like packer collusion and cattle and beef imports to the U.S., by and large, fundamentals did a swell job of explaining the situation.
That’s also the bottom line of the GAO report, which attributes the price behavior to supply and demand factors, including the drought that affected cattle and feed prices.
“GAO’s analysis of cattle market data from the U.S. Department of Agriculture also indicated that competition levels among packers that slaughter and process fed cattle did not appear to affect the national price changes in the fed cattle market in 2015 but that areas of the country with less competition among packers had lower cattle prices,” according to the report.
So, again, no surprises.