Feeder Cattle futures bounced an average of $2.01 higher Wednesday, helped along by lower Corn futures and bullish outside markets. Live Cattle futures closed an average of 53¢ higher.
Corn futures closed mostly 3¢ to 5¢ lower.
Soybean futures closed mostly 3¢ to 5¢ higher, supported by stronger Crude Oil prices.
Negotiated cash fed cattle trade was slow on light demand in the Southern Plains through Wednesday afternoon, according to the Agricultural Marketing Service. Although too few to trend, there were some early live sales in the Texas Panhandle steady at $155/cwt. Prices in Kansas last week were $154-$155.
Elsewhere, trade ranged from inactive on light demand to a standstill. Live prices last week were $157-$158 in Nebraska and $155-$157 in the western Corn Belt. Dressed prices were $245.
Choice Boxed beef cutout value was 14¢ higher Wednesday afternoon at $254.88/cwt. Select was 81¢ lower at $225.01/cwt.
Major U.S. financial indices surged higher Wednesday, apparently mainly fueled by dovish comments from Federal Reserve Chair, Jerome Powell, suggesting the central bank may become less aggressive with interest rate hikes.
“Monetary policy affects the economy and inflation with uncertain lags, and the full effects of our rapid tightening so far are yet to be felt. Thus, it makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down,” Chairman Powell explained in a speech at the Brookings Institution in Washington, D.C. “The time for moderating the pace of rate increases may come as soon as the December meeting.”
The Dow Jones Industrial Average closed 737 points higher. The S&P 500 closed 122 points higher. The NASDAQ was up 484 points.
West Texas Intermediate Crude Oil futures (CME) closed $2.35 to $2.50 higher through the front six contracts.
Although achievable, it’s likely going to be tougher than earlier imagined for cash feeder cattle prices to intersect with current late spring and early summer Feeder Cattle futures prices, says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments.
“The dichotomy of feeder cattle prices lies in the optimism displayed in Feeder Cattle futures prices and the less optimistic CME Feeder Cattle Index,” Griffith explains. “The Feeder Cattle Index price has been stuck in the mid to low $170s for two months while Feeder Cattle futures have the May contract near $190 and the August contract near $200.”
Moreover, Griffith says the general economy and consumers’ ability to purchase beef will play a much larger role in beef and cattle prices than in recent history.
“As interest rates and inflation continue to rage, the quantity of disposable income available for beef purchases is likely to diminish given that income growth has not kept pace with inflation rates,” Griffith explains “The past 15 years have been filled with homeowners refinancing mortgages to reduce their monthly payments and thus result in more disposable income for other goods. However, the current interest rate environment will not provide many opportunities to refinance to reduce the monthly payment. This again begs the question if cattle prices can actually achieve the levels predicted by the futures market. Prices will certainly increase, but they may not reach current expectations.”