Cattle futures gapped lower on the open Monday, pressured by Friday’s Cattle on Feed report and Headlines about a human case of New World screwworm being confirmed in the U.S. (see below). However, Cattle futures recovered much of the lost ground by the end of the session.
Toward the close, Live cattle futures were narrowly mixed, from an average of 63¢ lower in four contracts to an average of 61¢ higher.
Feeder Cattle futures were an average of 79¢ lower, except for $1.05 higher in spot Aug.
Negotiated cash fed cattle trade was mostly inactive on moderate demand in in all major cattle feeding regions through Monday afternoon, according to the Agricultural Marketing Service.
Last week, FOB live prices were mostly $5 higher in the Southern Plains at $240/cwt., steady to $2 higher in Nebraska at $245 and steady to $5 higher in the western Corn Belt at $245. Dressed delivered prices were $5-$7 higher in Nebraska at $385-$392 and $5 higher in the western Corn Belt at $385-$390 in a light test.
The weighted average five-area direct FOB live fed steer price last week was $2.24 higher at $244.25. The weighted average dressed delivered fed steer price was $3.39 higher at $386.17.
Choice boxed beef cutout value was 58¢ higher Monday afternoon at $408.49. Select was $1.72 higher at $385.38.
Turning to the grain complex, Grain Corn and Soybean futures were mixed on Monday.
Toward the close and through Jly contracts,
Corn futures were 1¢ higher. Kansas City Wheat futures were fractionally lower to 2¢ higher. Soybean futures were mostly 3¢ to 11¢ lower with some likely profit taking.
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Major U.S. financial indices closed lower Monday.
The Dow Jones Industrial Average closed 349 points lower. The S&P 500 closed 27 points lower. The NASDAQ was down 47 points.
Through mid-afternoon, West Texas Intermediate Crude Oil futures (CME) were 86¢ to $1.03 higher through the front six contracts.
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Cattle futures plunged on the open Monday, pressured by more feedlot placements than expected in Friday’s Cattle on Feed report, and especially due to the knee-jerk reaction to news that New World screwworm (NWS) had been confirmed in a U.S. citizen, who had been traveling in South America. As mentioned, futures recovered much of the lost ground by the end of the session.
“I think the main reason why the market response was limited is that there really isn’t a fundamental market implication of this announcement based on current information,” explains Kenny Burdine, Extension livestock economist at the University of Kentucky in Cattle Market Notes weekly. “Since this was a human case, and NWS has not yet been found in livestock, there is no expected supply impact. A demand response also seems unlikely, although both of those things could change if more is learned in the coming days. The announcement does serve as a clear reminder that NWS is a threat to the livestock sector and animal health officials will continue to monitor the herd and release sterile male flies in Mexico.”
As for more feedlot placements than expected, Burdine explains the 6.1% year-over-year decline was within the range of pre-report estimates.
“In truth, placements have been difficult to predict since late last year when Mexican feeder cattle imports were first halted. Over the last three months (May-July), feedlot placements have been down by 7.3%, and they are down 5.2% year-to-date.” Burdine says.
Moreover, Derrell Peel, Extension livestock marketing specialist at Oklahoma State University explains the higher placement number in July likely reflects early marketing of some calves as producers seek to exploit current prices. In Oklahoma, for instance, he says feeder cattle volumes at auction were 27.2% more year over year in the past six weeks
“Higher than expected placements occurred despite the lack of Mexican cattle imports,” Peel adds. “Texas placements were down 25% percent year over year … Total feedlot placements in July were down 104,000 head, meaning that the decrease in Texas accounts for over 91% of the total decline in monthly placements.”