Cattle futures surged higher Monday, supported by Friday’s friendly Cattle on Feed report, which indicated fewer March placements than expected.
At the close and before final settlement, Live Cattle futures were an average of $2.56 higher and Feeder Cattle futures were an average of $3.71 higher.
Negotiated cash fed cattle trade was at a standstill in all major cattle feeding regions through Monday afternoon, according to the Agricultural Marketing Service.
Last week, FOB live prices were steady in the Southern Plains at $182/cwt., mostly $1 lower in Nebraska at mainly $183 and $1 lower in the western Corn Belt at $184. Dressed delivered prices were steady to $1 lower in Nebraska at $292-$293 and $1 lower in the western Corn Belt at $292 in a light test.
The weighted average five-area direct FOB live steer price last week was $1.17 lower at $182.67/cwt. The weighted average dressed delivered steer price was 74¢ lower at $292.35.
Choice boxed beef cutout value was 26¢ higher Monday afternoon at $295.93/cwt. Select was $1.04 higher at $291.87/cwt.
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Major U.S. financial indices closed higher Monday, supported by tech stocks and easing tension in the Middle East.
The Dow Jones Industrial Average closed 253 points higher. The S&P 500 closed 43 points higher. The NASDAQ was up 169 points.
Heading into the close West Texas Intermediate Crude Oil futures on the CME were 12¢ to 32¢ lower through the front six contracts.
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The latest Cattle on Feed report might be pointing toward moderating beef heifer liquidation.
“Heifers made up 38.5% of total feedlot inventories (April 1), down from 39.7% in January,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University. “While the heifer percentage in feedlots remains above the average of the past 10 years, the decline from January to April is an encouraging sign that heifer feeding is perhaps slowing. During rapid herd expansion in 2015-2017, the heifer percentage of feedlot inventories dropped below 34% and averaged below 33% for 10 consecutive quarters. Heifer feeding is expected to decrease significantly more in the coming months.”
Reflecting on Friday’s report in his weekly market comments, Peel also explains stubbornly high feedlot inventories stem more from the slower pace of marketings than placements.
In fact, Peel says monthly average feedlot placements (12-month moving average) in March were the least since April 2017. Total placements during the last six months are 2.3% less than the same period last year.
At the same time, the pace of marketing has declined faster than placements as dwindling numbers of cattle are being fed for longer periods.
“Feedlots have an incentive to keep inventories as close to capacity as possible. One way is to slow down the turnover rate, effectively making fewer cattle turn into larger inventories,” Peel explains. “The result is more days on feed and heavier carcass weights. Steer carcass weights have averaged 25 pounds heavier year over year for the past four weeks, with heifer carcasses over 21 pounds heavier. There are limits to how much feedlots can slow marketings, but feedlots are expected to push carcass weights as far as possible in the coming months. Feedlot inventories are expected to decline in the next few months despite feedlot actions to delay the inevitable.”