Cattle futures bounced around last week, but never outran the shadow of the unexpectedly large March feedlot placements suggested by the latest Cattle on Feed report that came out the previous Friday.
Sagging wholesale beef values and worries that elevated retail beef prices are beginning to chip at demand added pressure to Live Cattle futures, which closed an average of $2.90 lower week to week on Friday. They closed an average of 84¢ lower on Friday, except for $3.40 higher in expiring Apr.
Choice boxed beef cutout value was $7.13 lower week to week on Friday at $260.78/cwt. Select was $6.80 lower at $247.97.
However, negotiated cash fed cattle prices were steady to higher amid snugger supplies before the anticipated summer bulge.
Negotiated cash fed cattle trade ranged from mostly inactive on very light demand to limited with light demand, with too few transactions too trend, according to the Agricultural Marketing Service.
Live prices last week were steady in the Southern Plains at $140/cwt.; steady to $1 higher in the Northern Plains at $144-$146 and in the Western Corn Belt at $145-$147. Dressed prices were $2 higher at $232.
Through Thursday, the weighted average direct fed steer price was 31¢ higher on a live basis at $143.31/cwt. The average steer price in the beef was 42¢ higher at $232.32.
Estimated total cattle slaughter last week of 656,000 head was 9,000 head fewer than the previous week but 3,000 head more than the same week last year. Year-to-date total estimated cattle slaughter of 11.01 million head is 51,000 head more than the same time last year. Total estimated year-to-date beef production through last week was 9.20 billion lbs., which was 706,000 lbs. more (+0.77 %) than a year earlier.
Feeder cattle futures closed an average of $1.87 lower on Friday and an average of $7.73 lower week to week, as Corn futures gained an average of 25.6¢ in the front six contracts during the same time.
******************************
Major U.S. financial indices tumbled Friday, led by tech stocks and growing uncertainty about domestic and global economic growth, challenged by high inflation and COVID hotspots.
The Dow Jones Industrial Average closed 939 points lower. The S&P 500 closed 155 points lower. The NASDAQ was down 536 points.
******************************
“The main conclusion is that there is no relationship between price discovery and the volume of negotiated cash trade. There is no clear overall problem that price discovery is somehow deficient in regional fed cattle markets. Mandating cash trade does not address a price discovery problem that is observed today or since the beginning of Livestock Mandatory Reporting.”
That was one of the insights Stephen Koontz, agricultural economist at Colorado State University provided in testimony during last week’s Senate hearing to review the Cattle Price Discovery and Transparency Act of 2022, and the Meat and Poultry Special Investigator Act of 2022.
Koontz’s insights are based on a bevy of research during his career exploring cash price discovery in cattle markets.
“It is also important to recognize what price discovery is not – price discovery is not higher prices,” Koontz explained. “Price discovery is the market moving quickly and clearly to the appropriate price level. At times this is a lower fed cattle price and other times a higher price. It is a common misconception that better price discovery implies better prices for the individual contemplating the issue. And there is no scientific evidence that improved price discovery has value not already revealed in price nor will improve prices to producers.”
On the other hand, mandating minimum levels of regional cash fed cattle trade, thereby reducing the use of alternative marketing arrangements, would come at a heavy cost, likely borne mostly by cow-calf producers.
“Mandating minimum cash trade is substantially costly. Costs are at least hundreds of millions of dollars and more likely billions of dollars. These costs will be leveled on cow‐calf producers nationwide and consumers of beef both domestically and internationally,” Koontz explained. “Primary research which discovered these costs is almost 20 years old – but the economic concepts are foundational and the costs today are likely substantially higher. There is no research which can attribute higher cattle prices to mandated cash trade. Likewise, my preliminary work has revealed to me that price discovery is not improved with mandated cash trade. The price discovery we currently have in regional fed cattle markets is not deficient. And the cost‐benefit of mandated cash trade is clear.”