Negotiated cash fed cattle prices started the week’s trade on a mixed basis Wednesday. Live trades were unevenly steady in Texas at $110-$112/cwt. on moderate trade and light to moderate demand, according to the Agricultural Marketing Service. There were a few early trades in Kansas at $110, but too few to trend. Prices in the Southern Plains last week were at $111.
Live trade in Nebraska was steady to $1 lower at $110 on light to moderate trade and demand. There were a few dressed trades at $172-$174, but too few to trend; $174 last week. Trade in the western Corn Belt last week was at $109-$110 on a live basis and at $172-$174 in the beef.
Cattle futures mostly eked out gains on Wednesday, despite a pullback in Choice boxed beef value and stronger front-month Corn futures.
Live Cattle futures closed an average of 22¢ higher.
Feeder Cattle futures closed an average of 18¢ higher except for 5¢ lower in the back two contracts.
Choice boxed beef cutout value was $2.51 lower Wednesday afternoon at $240.89/cwt. Select was 13¢ lower at $222.95.
Corn futures closed 2¢ to 4¢ higher through Sep ’21 and then mostly fractionally higher to 1¢ higher.
Soybean futures closed 7¢ to 9¢ lower through Sep ’21 and then 3¢ to 5¢ lower.
Major U.S. financial indices closed narrowly mixed Wednesday as investors awaited more clarity about the next round of federal economic stimulus and approval of COVID-19 vaccines.
The Dow Jones Industrial Average closed 59 points higher. The S&P 500 closed 6 points higher. The NASDAQ was down 5 points.
In October, the National Cattlemen’s Beef Association (NCBA) introduced what’s being termed the 75-percent rule in order to voluntarily ensure cash fed cattle trade is adequate for robust cash price discovery each week. That was in response to several bills introduced to Congress that would mandate minimum levels of weekly cash trade.
A Voluntary Framework to Achieve Robust Price Discovery in the Fed Cattle Market relies on what is termed robust cash trade volume for each of four regions, utilizing price discovery research from Stephen Koontz, agricultural economist at Colorado State University.
In order to comply with the framework, at least 75% of these robust trade levels must be achieved in each of four regions no fewer than 75% of the weeks in each quarter. The framework also outlines minimum levels of weekly regional participation from the four major packers. The framework is supposed to go into effect Jan. 1, 2021.
You can find details outlined in the Oct. 21 Cattle Current here.
“The question is whether this policy meets the objective to increase the level of negotiated trade and cattle price transparency,” says Elliott Dennis, Extension livestock economist at the University of Nebraska-Lincoln, in the latest issue of In the Cattle Markets. “In other words, if this policy were historically in place, how likely would have minor (major) triggers occurred?”
Dennis used public data published weekly and available through USDA-AMS from 2013-2020, in order to find an answer.
“The industry’s 75 percent-rule was developed in response to proposed legislation to solve potential concerns about thinness in negotiated trade across different regions,” Dennis explains. “The current concern surrounding thinness in negotiated trade has more to do with lower cash prices received by producers due to the Holcomb Fire and COVID-19 pandemic. Changes to the federal law or industry policy would not have effectively raised producer prices received for cattle. Further, if this policy would have been implemented before either the Holcomb Fire or COVID-19 it would not have changed packing plants’ ability to process cattle (supply from feedlots) or lack of foodservice’s demand for beef.”
There are lots more to Dennis’ findings than space allows for here. You can find complete details here.
“This policy, in its current form and from the four cattle feeding regions perspective, is not likely to significantly improve the level of negotiated trade nor cattle market transparency. Since it does not change the supply of fed cattle nor the demand for wholesale beef, it is also not likely to increase the cash price received by producers,” Dennis emphasizes. “Anytime a policy is implemented, whether industry prompted or legislatively enacted, there is a potential for creating increased costs and reducing profitability for the entire beef complex. For example, to avert potential legislation, packers and feedlots could change cattle marketing behavior from profit-maximizing to negative policy aversion, creating inefficiencies in the beef complex. Consistent with the economic theory of derived demand, these additional costs, spurred on by potential policies, are likely to predominately be carried by the cow-calf industry.”