Although still largely undeveloped through Wednesday afternoon, negotiated cash fed cattle trade appears steady to weaker than last week.
For instance, slaughter steers and heifers sold fully $1 lower at Sioux Falls Regional in South Dakota on Wednesday. There were 337 Choice 2-3 steers weighing an average of 1,433 lbs. that brought an average of $108.01/cwt.
A day earlier, negotiated trade in the western Corn Belt was at $109 on a live basis, which was $1 less than the previous week. Although too few to trend, there were some dressed sales in the region on Wednesday at $173. Dressed prices last week were $174-$178.
Also, there were 734 head offered in the weekly Fed Cattle Exchange auction—432 head (two lots of Nebraska heifers) sold for $106/cwt. for delivery at 1-17 days. Negotiated live prices in Nebraska last week were at $107-$108.
Despite early support from higher outside markets, Cattle futures continued mostly lower Wednesday amid light trade; extremely light trade in Feeder Cattle. Pressure included the early tone of the cash fed cattle market, as well as the overall decline in wholesale beef values that continue to adjust toward pre-fire levels.
Except for 20¢ higher in the back contract, 32¢ higher in almost spent Aug and unchanged in away Oct, Live Cattle futures closed an average of 50¢ lower.
Other than 20¢ higher in soon to expire Aug, Feeder Cattle futures closed an average of 87¢ lower.
Wholesale beef values were lower on Choice and higher on Select with light to moderate demand and light offerings, according to the Agricultural Marketing Service.
Choice boxed beef cutout value was $3.80 lower Wednesday afternoon at $232.96/cwt. Select was $1.10 higher at $211.81.
Corn futures closed 3¢ to 5¢ higher through Jul ’20 and then mostly fractionally lower.
Soybean futures closed 4¢ to 6¢ higher.
Major U.S. financial indices closed higher Wednesday, recovering ground lost in the previous session. Support included the increase in crude oil prices, tied to a significantly steeper decline in U.S. crude oil inventories than expected.
The Dow Jones Industrial Average closed 258 points higher. The S&P 500 closed 18 points higher. The NASDAQ was up 29 points.
“As part of our continued efforts to monitor the impact of the fire at the beef processing facility in Holcomb, KS, I have directed USDA’s Packers and Stockyards Division to launch an investigation into recent beef pricing margins to determine if there is any evidence of price manipulation, collusion, restrictions of competition or other unfair practices,” said U.S. Secretary of Agriculture Sonny Perdue, in a statement yesterday. If any unfair practices are detected, we will take quick enforcement action. USDA remains in close communication with plant management and other stakeholders to understand the fire’s impact to industry.”
Jennifer Houston, president of the National Cattlemen’s Beef Association says the announcement demonstrates the government’s understanding that the fire placed extreme strain on the cattle industry.
“We encourage USDA to look at all aspects of the beef supply chain and to utilize internal and external expertise in this investigation,” Houston adds. “We believe it adds transparency that will help build confidence in the markets among cattlemen and women.”
“Cattle producers have sound reason to question market events that transpired after the Holcomb fire,” says Bobby Simpson, president of the Missouri Cattlemen’s Association (MCA). “While a sharp decrease in slaughter capacity was anticipated, slaughter actually increased some 9,000 head from the week prior to the fire. Further, most expected this market disruption to cause uncertainty, but few could believe in one week fed cattle prices would drop 5% and Choice boxes would spike 9% while total slaughter increased. All the while, prices for feeder calves plummeted. The financial woes do not reside within one segment of the industry. It impacts the entire chain and causes lending institutions a high level of uncertainty as equity dwindles across the board.
“There is no harm in conducting an investigation to ensure integrity of the markets and to respond to the justified concerns of thousands of U.S. cattle producers. In fact, it’s simply the right thing to do. No matter the result of the investigation, good can come from better understanding what took place and how to best mitigate future disruptions.”
Certainly, punishment is due to anyone found guilty of the actions Perdue mentioned. If no wrongdoing is found, however, then hopefully the investigation will appease those who believe something other than market forces were at work, propelling wholesale beef value so high, while fed cattle prices took a step back.