Despite indications to the contrary earlier in the week, cash fed cattle prices surged higher on Friday, surprising some, but speaking to how snug supplies are in some regions, how current feedlots are and apparently how much packers want to keep running hard after the holidays.
Through the afternoon, AMS was reporting live trade $1-$2 higher than the previous week in the Southern Plains and Nebraska at $118-$119/cwt. Late in the day, though various sources were reporting live prices as high as $120 and dressed up to $190.
Feeder Cattle futures surged higher on Friday amid oversold conditions and the continued hefty gap with cash trade. That and hints of high cash bids helped lift Live Cattle.
Live Cattle futures closed an average of $1.34 higher (55¢ to $2.62 higher in spot Dec).
Feeder Cattle futures closed an average of $1.27 higher (80¢ to $1.60 higher).
Choice boxed beef cutout value was 83¢ higher on Friday afternoon at $201.87/cwt. Select was 44¢ lower at $183.25.
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Major U.S. financial indices closed at record-high levels on Friday, buoyed by increasing expectations that Congress will accomplish tax reform, given agreement on a Conference bill between the House and Senate; the vote is scheduled for this week.
The Dow Jones Industrial Average closed 143 points higher. The S&P 500 closed 23 points higher. The NASDAQ closed 80 points higher.
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The same mild winter that’s so far helping stretch feed supplies and cattle performance is also growing drought conditions.
“The South, Midwest and High Plains have areas of short-term and long-term extreme drought,” say analysts with USDA’s Agricultural marketing Service (AMS), referencing the latest Drought Monitor. “The top 15 states in beef cow numbers all have some type of drought intensity and impact.”
Andrew P. Griffith, agricultural economist at the University of Tennessee, explains, in his weekly market comments, “The drought situation that has overcome much of cow-calf and stocker grazing country is forcing producers into tough situations.
“Many stocker cattle are purchased based on currently available forage and expected forage. The currently available forage is beginning to wane and the expectation of forage is near zero if precipitation does not fall in the near term. This will continue to result in softer calf prices as feedlots fill pens with cattle that may have to come off winter annuals earlier than expected. Similarly, many of the stocker producers in the Southern Plains will not be active in purchasing calves due to reduced forage production… A good rain or two could alleviate much of the distress.”
Moreover, AMS analysts say, “When the cattle inventory report comes out in late January 2018, the number of beef cows in the main cattle states will be watched by analysts to see if producers are continuing to increase cow herds when facing these drought conditions in such a widespread area.”