Slightly lower nearby Corn futures prices helped Feeder Cattle futures recover some lost ground Wednesday, closing an average of 86¢ higher, except for 55¢ lower in the back contract.
Corn futures closed unchanged to 3¢ lower through July ’23 and then fractionally higher to 2¢ higher.
Soybean futures closed mostly 6¢ to 12¢ lower.
Live Cattle futures closed an average of 57¢ higher (17¢ to $1.05 higher), supported by recently blooming wholesale beef prices.
However, Choice Boxed beef cutout value was 49¢ lower Wednesday afternoon at $271.04/cwt. Select was $1.85 lower at $261.05.
Negotiated cash fed cattle trade ranged from inactive on light demand to limited on light demand with too few transactions to trend, according to the Agricultural Marketing Service.
So far this week, prices are generally steady on a live basis at $138/cwt. in the Southern Plains and Colorado, $138-$140 in Nebraska and $140 in the western Corn Belt. Dressed prices are steady at $222.
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Major U.S. financial indices closed lower Wednesday, apparently due at least in part to the Fed’s recent hawkish comments regarding inflation and interest rates.
The Dow Jones Industrial Average closed 144 points lower. The S&P 500 closed 43 points lower. The NASDAQ was down 315 points.
CME Crude Oil futures on the CME were $3.90 to $5.73 lower through the front six contracts.
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“Cattle feeders who use distiller’s grains, primarily in the wet form, are closely watching ethanol production numbers, given the potential for ethanol plant slowdowns,” says Elliott Dennis, Extension livestock economist at the University of Nebraska-Lincoln. “Over the past two years, distiller’s grain prices (as a percentage of corn price on a dry matter basis) have been very volatile due to both more movement in the corn market and ethanol idling.”
In the latest issue of In the Cattle Markets, Dennis explains current weekly ethanol production is near pre-COVID levels, even with higher corn prices.
“Since oil and ethanol are highly correlated, one would expect ethanol plants to continue to be profitable even at higher corn prices. However, Iowa State University Ethanol Profitability Tracker indicates the relative price increase in ethanol ($/gal.) have not been sufficiently high compared to the cost of corn ($/bu.). Net returns are calculated to be -$0.28/gal. of ethanol, its lowest level since last winter in the last run-up in grain prices,” according to Dennis.
Dennis points out distillers’ grains generally are fed up to a 40% inclusion but the level and type of distiller’s grain used can vary, given local availability. Obviously, he explains increasing prices for corn and distillers grains increase feedlot cost of gain.
Prior to USDA’s cattle-bearish Prospective Plantings report, Dennis notes CME Live Cattle futures were trending higher. “Since the release, Live Cattle prices have eroded between $2-4/cwt. with larger declines occurring in more nearby months. This is further narrowing profit margins,” he says.