Negotiated cash fed cattle trade and demand ranged from inactive on very light demand to a standstill through Monday afternoon, according to the Agricultural Marketing Service.
Last week, FOB live prices were $1-$2 higher in the Southern Plains at $180/cwt. Live-delivered prices in Kansas were $184.00-$185.50. Live FOB prices were $2 higher in Nebraska at $188 and $1-$3 high in the western Corn Belt at $188. Dressed-delivered prices were $1-$3 higher at $295 in a light test.
The five-area direct weighted average steer price was $1.89 higher last week on a live basis at $186.70/cwt. The weighted average fed steer price in the beef was $1.51 higher at $295.14.
Even so, Cattle futures closed lower Monday on potential profit taking and retrenching.
Live Cattle futures an average of 96¢ lower (55¢ lower at the back to $1.20 lower in spot Aug).
Feeder Cattle futures closed an average of $2.27 lower.
Choice boxed beef cutout value was 30¢ lower Monday afternoon at $301.49/cwt. Select was $1.47 lower at $275.01/cwt.
Turning to the grain complex, Corn and Soybean futures closed lower Monday on positive weekend rains.
Corn futures closed 1¢ to 2¢ lower through Jly ‘24 and then mostly 1¢ to 2¢ higher.
Soybean futures closed 24¢ to 38¢ lower through Aug ‘24 and then mostly 8¢ to 15¢ lower.
However, KC HRW Wheat closed mostly 10¢ to 11¢ higher.
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Major U.S. financial indices closed higher Monday, supported by positive corporate earnings reports from the likes of Berkshire Hathaway.
The Dow Jones Industrial Average closed 407 points higher. The S&P 500 closed 40 points higher. The NASDAQ was up 85 points.
West Texas Intermediate Crude Oil futures (CME) closed 57¢ to 88¢ lower through the front six contracts.
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Despite price levels offering the economic incentive, national herd expansion has yet to lift off. More specifically, Derrell Peel, Extension livestock marketing specialist at Oklahoma State University explains in his weekly market comments that rebuilding is slower than what occurred following the 2011-13 drought that shoved cattle numbers to a cyclical low in 2014.
“Continuing Drought is still an issue in significant regions of cattle country,” Peel says. “While drought is not likely causing a great deal of additional herd liquidation from a broader market perspective, it surely is preventing herd expansion in those drought-stricken areas.”
Moreover, he explains areas already emerged from drought need two to three years to heal and also to replenish hay supplies.
Similarly, Peel says, “Many cattle operations have suffered from considerable financial stress from drought and high input costs. The short-run need to realize immediate returns from higher cattle prices may be causing continued heifer and cull cow sales for now.”
Next, Peel cites the uncertainty surrounding input costs.
“Record hay prices and elevated supplemental feed costs have had a huge impact in drought regions. Record or near-record high fertilizer, chemical and fuel costs have been a significant challenge for producers, especially in regions of introduced pastures,” Peel says. “Though some input prices have moderated in 2023, input price uncertainty has producers reacting cautiously to higher cattle prices.”
Plus, he points to significantly higher interest cost and a much slower economy than existed during the previous herd expansion.
Perhaps a less obvious reason for expansion reluctance is producer expectations.
“Until enough cow-calf producers anticipate enough returns for a long enough period of time, herd expansion will be tempered,” Peel says. “In the meantime, cattle supplies will continue to tighten. Market prices for calves and feeder cattle will continue to increase as the market provides more price incentives that will eventually strengthen producer expectations and jump-start herd expansion. That process is likely to begin in earnest in the remainder of 2023 and into 2024.”