Feeder Cattle futures surged higher Wednesday, buoyed by early-week cash strength and sharply lower grain futures prices. Live Cattle followed along to a lesser degree.
Feeder Cattle futures closed an average of $2.42 higher, from $1.22 higher at the back to $3.45 higher toward the front.
Live Cattle futures closed an average of 50¢ higher.
Grain and soybean futures wilted beneath the weight of paltry U.S. export inspections, the high U.S. dollar and rains in South America.
Corn futures closed 11¢ to 16¢ lower through Jly ‘24 and then mostly 6¢ lower.
Soybean futures closed 6¢ to 9¢ lower through Nov ‘23 and then mostly 2¢ to 4¢ lower.
Negotiated cash fed cattle trade ranged from light on light to moderate demand in the western Corn Belt to inactive on light demand, with too few transactions to trend, according to the Agricultural Marketing Service.
Last week, live prices were $157/cwt. in the Southern Plains, $158 in Nebraska and $157-$160 in the western Corn Belt. Dressed prices were $250-$252.
Choice boxed beef cutout value was $4.05 lower Wednesday afternoon at $282.89/cwt. Select was $1.77 higher at $256.40/cwt.
Major U.S. financial indices closed higher Wednesday, amid mixed economic news.
The Dow Jones Industrial Average closed 133 points higher. The S&P 500 closed 28 points higher. The NASDAQ was up 71 points.
West Texas Intermediate Crude Oil futures (CME) closed $3.51 to $4.09 lower through the front six contracts, pressured by worries about economic contraction in China.
Although cash calf and feeder cattle markets were thinly traded over the holidays, Stephen Koontz, agricultural economist at Colorado State University points out prices for 400-500 lb. calves in the Southern Plains increased from less than $200/cwt. in October to about $230 in December.
“Many of the market watchers that I talk with had anticipated a strong counter-seasonal market but not of this magnitude,” Koontz explains, in the most recent issue of In the Cattle Markets. “While calf prices have rallied and cow prices have been strong through the fall, there are certainly warning signs in the system.”
“Likewise, beef primal prices have showed good seasonal demand but not the quantum improvements of the prior years,” Koontz says. “Higher fed cattle prices and flat boxed beef values have resulted in packer margins being squeezed. The live-to-cutout spread was about $250 per head in November and there’s no post-COVID packer that I know of that can make money with that margin.”
In terms of technicals, Koontz explains cattle chart patterns are persistent.
“There are long-term uptrends in place and resistance planes are being broken as most contracts push into life-of-contract highs,” Koontz says. “But the cattle markets do not chart like the corn or soybean markets. Cattle do not jump to new higher levels. Rather, there are persistence moves higher with periods of sharp down moves. Live Cattle contracts have trends in place and have broken resistance – these are buy signals. Feeder Cattle look similar, but it will be interesting to see contracts test life-of-contract highs from last August.”