Cattle futures rallied higher Monday, helped along by sharply lower nearby Corn futures prices, as well as the nascent seasonal increase in wholesale beef prices.
Feeder Cattle futures closed an average of $3.08 higher from $2.07 higher at the back to $4.42 toward the front.
Live Cattle futures closed an average of $1.65 higher, from $1.17 higher in the back contract to $3.02 higher in spot Apr.
Weakness in grain futures was apparently tied to a risk-off mentality across many commodities, including Crude Oil, as well as reports China is releasing some of its state-owned soybean stocks to combat domestic inflation.
Expiring spot Corn futures closed 36¢ lower, but mostly other contracts were mainly 1¢ to 3¢ lower.
Soybean futures closed 7¢ to 8¢ lower.
Negotiated cash fed cattle trade was at a standstill in all major cattle feeding regions through Monday afternoon, according to the Agricultural Marketing Service.
Live prices last week were at $138/cwt. in the Southern Plains and Nebraska and at $138-$140 in the western Corn Belt. Dressed prices were $220 in Nebraska and $219-$222 in the western Corn Belt.
The five-area direct average fed steer price was $2.30 less last week at $138.30/cwt. The average steer price in the beef was $4.50 less at $220.01.
Early chatter anticipated cash fed cattle prices trading steady to a touch higher this week.
Choice Boxed beef cutout value was 80¢ higher Monday afternoon at $255.51/cwt. Select was 83¢ higher at $249.94.
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Major U.S. financial indices closed steady to lower Monday, as investors digested more ceasefire talks between Russia and Ukraine, and awaited the Fed’s interest rate decision this week.
The Dow Jones Industrial Average closed 1 points higher. The S&P 500 closed 31 points lower. The NASDAQ was down 262 points.
West Texas Intermediate Crude Oil futures on the CME closed $4.13 to $6.32 lower in the front six contracts.
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Despite the recent, volatile surge in feed costs, feedlot returns should remain positive for most of this year, according to the Livestock Marketing Information Center (LMIC). Specifically, analysts there peg feedlot breakevens for a steers place at 750 lbs. to be $129-$133/cwt. for cattle already on feed — closeouts now through August — below anticipated fed cattle prices.
“One of the large risks for cattle feeders will be feeder cattle prices moving forward,” say LMIC analysts, in the latest Livestock Monitor. “The LMIC bases its cattle feeding returns on cash prices of raising a 750-lb. steer to slaughter weight. So far, 700-800 lb. steer prices have been limited in their upward mobility. The opposite has been true for lighter weight calves, whose prices across different regions of the country have ranged from $187-230/cwt. for 400-600-lb. animals. At those prices, and current grain prices, putting a 500-lb. animal on feed that was bought north of $185/cwt. would need a breakeven fed cattle price of $160 or higher.”
Noting increased year-over-year January feedlot placements of cattle weighing less than 699 lbs., LMIC analysts explain, “Our assessment is that some of the price increase is linked to the availability of feeder cattle supplies after so many months of strong placements. Additionally, feedlots are flush with cash from the last couple of months of closeouts, and even though it does not appear that these expensive lightweight cattle will be profitable, cattle feeders may be using them for other strategies such as keeping pens full to maintain cash flow.”
Cattle feeding returns were positive for most of the last 12 months, with gains surging to $200 per head in the fourth quarter of last year, according to LMIC. The organization calculated returns at just less than $100 per head in February.
“Returns faded in the last two months due to increasing total costs. Feeder steers were 13% higher at the time of purchase compared to those that came out in November when closeouts were in the black $200 per head,” LMIC analysts explain. “Feed costs have also continued to rise and are expected to do so for the coming months with ongoing concerns in the grain space related to the Ukraine and Russia conflict. For closeouts in February, feed costs increased 7% from November closeouts. In the wake of Ukraine/Russia, the grain markets look to challenge last year’s highs again. This will likely erode some profitability, however closeouts through the next couple of months had lower feeder cattle input costs at time of placement, which should offset some of the rising feed costs for the next four months.”