The early-day rebound in equity markets, as well as positive supply fundamentals helped Cattle futures regain some recently lost ground Wednesday.
Feeder Cattle futures closed an average of $1.39 higher (97¢ higher at the front to $1.77 higher at the back of the board).
Live Cattle futures closed an average of 74¢ higher, from 12¢ higher in spot Dec to $1.12 higher.
Corn futures closed 3¢ to 5¢ higher in the front three contracts and then mostly 1¢ to 2¢ higher.
Soybean futures closed 5¢ to 11¢ higher through Jan ’23 and then mostly 1¢ to 3¢ higher.
Negotiated cash fed cattle trade ranged from mostly inactive on very light demand to a standstill through Wednesday afternoon, according to the Agricultural Marketing Service.
Last week, live prices were at $140/cwt. in the Southern Plains, $136-$140 in Nebraska, $140 in Colorado and $135-$140 in the western Corn Belt. Dressed trade was at $217 in Nebraska and at $213-$217 in the western Corn Belt.
Choice boxed beef cutout value was $1.46 lower Wednesday afternoon at $270.22/cwt. Select was $2.32 lower at $257.97/cwt.
Major U.S. financial indices started Wednesday’s session paring losses, but announcement of the first confirmed case of the new COVID variant (Omicron) in the U.S. took them sharply lower by the end of the day.
Positive news helping bolster stocks prior to the announcement included more jobs than expected in the ADP National Employment Report. Private sector employment increased by 540,000 from October to November.
The Dow Jones Industrial Average closed 461 points lower. The S&P 500 closed 53 points lower. The NASDAQ was down 283 points.
Global economic recovery is continuing but its momentum has eased and is becoming increasingly imbalanced according to the latest Economic Outlook from the Organization for Economic Cooperation and Development (OECD).
“The strong rebound we have seen is now easing and supply bottlenecks, rising inflation, and the continuing impact of the pandemic are clouding the horizon,” says OECD Secretary-General Mathias Cormann. “The risks and uncertainties are large, as is being seen with the emergence of the Omicron variant, aggravating the imbalances and threatening the recovery. Keeping the recovery strong and on track will entail addressing a number of imbalances, but above all it will mean managing the health crisis through better international coordination, improving health systems and massively stepping up vaccination programs worldwide.”
OECD projects real global GDP growth at 5.6% this year, 4.5% next year and 3.2% in 2023.
For the U.S., OECD projects real GDP at 5.6% this year, 3.7% next year and 2.4% in 2023.
Among the key points in the OECD Economic Outlook:
Surging demand for goods since economies reopened, and the failure of supply to keep pace, generated bottlenecks in production chains. Labor shortages, pandemic-related closures, rising energy and commodity prices, and a scarcity of some key materials are all holding back growth and adding to cost pressures. Inflation has increased significantly in some regions.
Alongside cost pressures from manufacturing supply bottlenecks and food price increases, imbalances in the energy market are a key factor driving up inflation in all economies. Gas prices have risen sharply, notably in Europe, and risks are high, with storage levels around 28% lower than they would normally be at this time of the year. Rising food and energy costs are inevitably hitting low-income households the hardest.
Inflationary pressures are proving stronger and more persistent than expected a few months ago. Consumer price inflation in the OECD is now projected to start fading in 2022, before moderating as key bottlenecks ease, capacity expands, more people return to the labor force and demand rebalances. The Outlook underlines the risk that continued supply disruptions, perhaps associated with further waves of COVID-19 infections, may result in longer and higher inflationary pressure.
Another risk, exposed by the emergence of the Omicron variant in recent days, is a worsening health situation due to COVID-19 resulting in further restrictions that would jeopardize the recovery. Ensuring improved access to vaccines for all must be an urgent policy priority, according to the report. A faster, better coordinated, worldwide vaccine roll-out is not only essential for saving lives and preventing the emergence of new variants, but would also help tackle some of the bottlenecks undermining the strength of the recovery by allowing factories, ports and borders to re-open fully.
A potential sharp slowdown in China, if activity in the property market declined abruptly amid concerns about the financial soundness of some of the largest real estate developers, could also disrupt the global recovery. The impact of such a slowdown would spread rapidly to other countries, particularly if it generated uncertainty in global financial markets and added to the current bottlenecks in supply.