Last week’s stouter packing pace and higher cash prices helped Cattle futures edge higher Monday.
Feeder Cattle futures closed an average 57¢ higher except for unchanged in the back contract.
Live Cattle futures closed an average of 28¢ higher except for unchanged in Dec.
Negotiated cash fed cattle trade was at a standstill in all major feeding regions through Monday afternoon, according to the Agricultural Marketing Service.
Last week, live prices were at $140/cwt. in the Southern Plains and Nebraska; $140-$142 in the western Corn Belt. Dressed trade was at $224.
The five-area direct weighted average steer price last week was 72¢ higher than the previous week at $140.48/cwt. on a live basis. The average steer price in the beef was $2.25 higher at $224.04.
Choice Boxed beef cutout value was 56¢ lower Monday afternoon at $273.96/cwt. Select was 92¢ higher at $268.75.
Corn futures closed mostly 3¢ to 5¢ higher.
Soybean futures closed mostly 1¢ to 13¢ lower through near Nov and then mostly 2¢ to 4¢ higher.
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Major U.S. financial indices continued lower Monday amid continued jitters about steeper inflation and tensions between Russia and Ukraine.
The Dow Jones Industrial Average closed 171 points lower. The S&P 500 closed 16 points lower. The NASDAQ was fractionally lower.
Crude Oil futures (WTI-CME) were $1.08 to $2.36 higher through the front six contracts.
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“Significant drought in 2022 will have more noticeable impacts on cow markets, will change the timing of feeder cattle and ultimately feedlot production, and will have more implications for the industry in subsequent years,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University. “There is potential for the drought to push cattle inventories significantly lower than planned and set up a market reaction similar to 2014-15 in the next couple of years.”
In his weekly market comments, Peel explains the Climate Prediction Center’s drought outlook suggests drought may persist in regions of the west and northern plains that have been in drought, although there has been some improvement in the Northwest. As well, developing drought in the Southern Plains could expand to the Central Plains.
“Widespread drought in 2022 could result in much more pronounced cow herd liquidation and relocation than previously and the scenario will be all about what we have to do,” Peel says. “There will be little flexibility in regions that were in drought in 2020 and 2021. For example, Dec. 1 hay stocks in the four-state region of Montana, Wyoming, North and South Dakota were down 40.2% year over year. By April or May this predominantly spring-born calving region could be faced with significant additional liquidation of cows or cow-calf pairs on top of the 8.0% herd liquidation in this region since 2020. This region represents 15.1% of the national beef cow herd.”
Drought has gripped the four-state region of Colorado, New Mexico, Arizona and Utah since 2020, as well with 11.6% beef cow herd liquidation in the past two years, according to Peel. He adds the region represents 5.3% of the nation’s beef cow herd and could see additional liquidation if drought persists this year.
“Drought has expanded sharply in Texas and Oklahoma over the winter; a region that has seen just 1.1% herd liquidation since 2020,” Peel says. “Much of that was general cyclical liquidation rather than drought induced. Dec. 1 hay stocks in these two states were up 18.7% year over year. The Southern Plains region should emerge from winter with a bit more flexibility, and with more fall calving, might not face critical herd liquidation and de-stocking decisions as quickly as some other regions. Nevertheless, cow culling could accelerate sharply in the region by mid-summer. These two states represent 21.9% of the total beef cow herd.”
Finally, Peel says beef cow numbers declined 3.3% the past two years in Kansas and Nebraska, where 10.8% of the beef cow herd exists and where drought impacts have been marginal so far. Although Dec. hay stocks were 4.9% higher in the region year over year, should drought develop significantly, he says it would likely prompt significant herd liquidation in the Central Plains by the summer.
“Drought in all of the above regions could impact over 53% of the total beef cow herd…roughly 16 million cows,” Peel says.