Cattle futures closed mostly lower Wednesday, under pressure from higher grain futures prices, but they retained the majority of the previous day’s gains.
Feeder Cattle futures closed an average of 92¢ lower (50¢ to $1.32 lower), giving back about a third of what was gained in the previous session.
Live Cattle futures closed an average of 47¢ lower, except for an average of 6¢ higher in three contracts.
Rising Grain futures prices on the day were likely due in part to Russia’s continued bombardment on Ukraine, despite optimism surrounding ceasefire talks a day earlier.
Corn futures closed mostly 3¢ to 5¢ higher, except for 11¢ higher in the front two contracts.
Soybean futures closed mostly 13¢ to 21¢ higher.
Negotiated cash fed cattle trade was moderate on moderate demand in the Southern Plains through Wednesday afternoon at steady money of $138/cwt., according to the Agricultural Marketing Service.
Elsewhere, trade ranged from slow on light demand to limited on light demand with too few transactions to trend. There were a few early live trades in Nebraska at $138-$140. Live prices there last week were $138; $221 in the beef. Live and dressed prices in the western Corn Belt last week were $138-$142 and 221-$225, respectively.
Choice Boxed beef cutout value was $2.04 higher Wednesday afternoon at $266.54/cwt. Select was $2.62 higher at $257.46.
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Major U.S. financial indices softened Wednesday, pressured by tech stocks and another day of higher oil prices. West Texas Intermediate Crude Oil futures (CME) closed $3.43 to $3.67 higher in the front six contracts.
The Dow Jones Industrial Average closed 65 points lower. The S&P 500 closed 29 points lower. The NASDAQ was down 177 points.
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Depending on your particular leanings, details released earlier this week regarding a previously announced modification to the Cattle Price Discovery and Transparency Act does little to appease opponents or proponents.
For those opposed, regional mandates remain, dictating specific levels of cash trade, thereby also dictating how many cattle producers can market by various means.
On the other hand, those in favor of mandates likely are disappointed at the relatively innocuous penalty proposed for packers who violate the mandated cash minimum.
According to Senator Deb Fischer’s (R-Neb.) office, who introduced the modified bill with fellow Senators, Chuck Grassley (R-Iowa), Jon Tester (D-Mont.) and Ron Wyden (D-Ore.), the updated bill would:
Require the Secretary of Agriculture to establish five to seven regions encompassing the continental U.S. and then establish minimum levels of fed cattle purchases made through approved pricing mechanisms. Approved pricing mechanisms are fed cattle purchases made through negotiated cash, negotiated grid, at a stockyard, and through trading systems that multiple buyers and sellers regularly can make and accept bids.
Establish a maximum penalty for covered packers of $90,000 for mandatory minimum violations. Covered packers are defined as those packers that during the immediately preceding five years have slaughtered five percent or more of the number of fed cattle nationally.
The bill also includes provisions to create a publicly available library of marketing contracts, mandating box beef reporting to ensure transparency, expediting the reporting of cattle carcass weights, and requiring a packer to report the number of cattle scheduled to be delivered for slaughter each day for the next 14 days. The contract library would be permanently authorized and specify key details about the contents that must be included in the library like the duration of the contract and provisions in the contract that may impact price such as schedules, premiums and discounts, and transportation arrangements.
As debate continues, surely all on both sides recognize price improvements and narrowing packer margins as cattle markets continue to rebalance and normalize following the extreme shocks of the past few years. Markets reacted as economics expected them to during the shocks and are now in the aftermath.
“Supply and demand has already driven the cattle markets back into balance without the radical government interference and convoluted mandates called for in the latest draft of the Grassley-Fischer bill. “Make no mistake, the bill still contains government mandates directing how producers market their cattle,”says Meat Institute President and CEO Julie Anna Potts. “If this bill becomes law, there will be cattle producers who want alternative marketing arrangements but will instead be forced to sell on the cash-market, and the industry will turn back time to the days of commodity cattle, or worse, to government-controlled markets.”
Potts shared an observation made by Stephen Koontz, agricultural economist at Colorado State University, during the recent American Farm Bureau Federation Annual Convention: “Mandated cash trade is not going to get you better price discovery. It’s going to put a $50 cost on calves impacted.” Ultimately, the cost likely would be borne by cow-calf producers.