Cattle futures mostly eased lower in light trade Thursday as traders awaited more concrete direction from the packing pace.
Feeder Cattle futures closed an average of 82¢ lower except for 20¢ higher in expiring Jan.
Live Cattle futures closed an average of 43¢ lower, except for 20¢ higher in the back contract.
Negotiated cash fed cattle trade was limited on light demand through Thursday afternoon, according to the Agricultural Marketing Service.
So far for the week, live prices are steady in the Texas Panhandle at $137/cwt., $1 lower in Kansas at $136, steady to $1 lower in Nebraska at $137 and steady in the western Corn Belt at $137-$139. Dressed trade is steady at $218.
Choice Boxed beef cutout value was 35¢ lower Thursday afternoon at $289.11/cwt. Select was 62¢ lower at $279.10.
The average dressed steer weight the week ending Jan. 15 was 922 lbs., according to the latest weekly Actual Slaughter Under Federal Inspection report. That was 6 lbs. lighter than the previous week and 3 lbs. lighter than the previous year. The average dressed heifer weight of 851 lbs. was the same as a week earlier and 1 lb. heavier than the same time last year.
Net U.S. beef export sales for 2022 totaled 14,300 metric tons the week ending Jan. 20, according to the weekly U.S. Export Sales report. Sales were primarily for South Korea, Japan, Mexico, China, and Indonesia.
Grain exports helped underpin prices.
Net U.S. corn export sales (2021-22) were 29% more than the previous week and 84% more than the prior four-week average.
Net U.S. soybean export sales were up 53% from the previous week and 77% from the prior four-week average.
Net U.S. wheat export sales were 78% higher than the previous week and up noticeably from the prior four-week average.
Corn futures closed mostly 3¢ to 6¢ lower.
Soybean futures closed 2¢ to 8¢ higher through Jan ‘23 and then mostly 1¢ lower.
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Major U.S. financial indices drifted lower Thursday, as investors pondered a tighter-fisted Fed and despite stronger quarterly economic growth than expected.
“Real gross domestic product (GDP) increased at an annual rate of 6.9% in the fourth quarter of 2021, following an increase of 2.3% in the third quarter,” according to the U.S. Commerce Department. “The acceleration in the fourth quarter was led by an upturn in exports as well as accelerations in inventory investment and consumer spending.”
The Dow Jones Industrial Average closed 7 points lower. The S&P 500 closed 23 points lower. The NASDAQ was down 189 points.
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A Congressional bill intended to increase transparency in the beef supply chain may hinder pricing innovations that have contributed to beef demand growth over the last 20 years and translate into lower prices for cattle producers, according to a recent analysis by the Fryar Price Risk Management Center of Excellence at the University of Arkansas (UA).
Specifically, researchers analyzed the Cattle Price Discovery and Transparency Act (CPDTA), which was introduced in March last year and then subsequently re-introduced in the U.S. House and Senate last fall.
The bill includes elements widely supported by cattle producers, such as increasing the level of price reporting and creating a publicly available library of marketing contracts between packers and producers. However, the bill also mandates minimum levels of negotiated cash fed cattle trade, an element that continues to divide the industry.
Cash cattle trade lessened over time as cattle feeders and packers increased the use of Alternative Marketing Agreements (AMAs), which enable further differentiation and value segregation of beef carcasses. AMAs enable paying more for cattle that produce beef of higher value to the consumer — clearer pricing signals. At the same time, AMA participants reduce transaction costs and price risk.
For comparison, the analysis explains negotiated cash fed cattle trade usually revolves around a single price paid for all cattle in a pen. That means the average price discounts cattle of higher value and rewards cattle below the pen average.
“By privileging an average pricing system in the sector, the legislation makes it less likely that innovations such as AMAs will be pursued. Innovations that might further reduce transactions costs and/or support further production changes to more closely align the beef end product with consumer tastes and preferences could be beneficial to maintaining and even growing beef demand in the future,”
says John Anderson, director of the Fryar Price Risk Management Center of Excellence. He coauthored the analysis report.
“If AMA use in the Southern Plains is restricted, the most likely immediate outcome is that transaction costs … between feeders and packers will likely go up,” Anderson says. “The lion’s share of this increase will most likely be borne by cow/calf and stocker producers in the form of lower feeder cattle prices.”
On a related note, the American Farm Bureau Federation (AFBF) recently revised policy, no longer supporting mandated levels of cash fed cattle trade.
“We support the majority of this legislation (CPDTA), but we cannot support mandatory cash sales,” says AFBF President Zippy Duvall. “We are committed to working with the sponsors of the bill to make revisions to ensure it aligns with the priorities outlined by our membership.”