Cattle futures continued to crawl mostly higher Wednesday.
Live Cattle futures closed an average of 44¢ higher, except for 42¢ lower in spot Feb.
Feeder Cattle futures closed an average of 45¢ higher, except for an average of 20¢ lower in two contracts.
Negotiated cash fed cattle trade ranged from a standstill in the South to mostly inactive on light demand in the North, with too few transactions to trend, through Wednesday afternoon, according to the Agricultural Marketing Service.
Last week, FOB live prices were $180/cwt. in the Southern Plains, $181 in Nebraska and $180 in the western Corn Belt. Dressed delivered prices were mostly $287 in Nebraska and $285 in the western Corn Belt.
Choice boxed beef cutout value was 43¢ higher Wednesday afternoon at $297.80/cwt. Select was $3.36 lower at $284.46/cwt.
Corn futures closed mostly 3¢ to 7¢ lower.
KC HRW Wheat futures closed mostly 3¢ to 4¢ lower.
Soybean futures closed 8¢ to 18¢ lower.
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Major U.S. financial indices closed little changed Wednesday.
The Dow Jones Industrial Average closed 48 points higher. The S&P 500 closed 6 points higher. The NASDAQ was down 49 points.
West Texas Intermediate Crude Oil futures (CME) closed 38¢ to 87¢ higher through the front six contracts.
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Although he says forage supplies, calf prices and production costs are the primary determinants of herd expansion, Kenny Burdine, Extension livestock economist the University of Kentucky also notes interest rates also play a role.
“The expansion decision is really a tradeoff,” Burdine says, in the recent issue of Cattle Market Notes Weekly. “A cow-calf producer choosing to expand makes a short-term investment (heifer retention or breeding stock purchase) in hopes of seeing higher profit levels in the future. Any time a short-term / long-term discussion is had, interest rates and inflation are likely to enter the conversation.”
When it comes to interest rates, Burdine explains the obvious impact is the interest cost or opportunity cost associated with buying or retaining more females. Less obvious, he says, is the time value of money.
“Money in the present is always preferred over money in the future and interest rates largely determine how significant that preference is,” Burdine says. “When a producer retains a heifer for replacement purposes, he/she forgoes her value as a calf (present) in order to see increased revenues from the sale of her calves after she enters the herd (future). The preference for money now, from the sale of the weaned heifer, is greater when interest rates are higher. At the same time, the real value of those future calves is lower due to higher interest rates. An economist might say those future returns are ‘more heavily discounted’ in a higher interest rate environment. This combination results in less desire to hold heifers for development purposes, and I think we are seeing some impact from this today.”