Negotiated cash fed cattle trade in Nebraska was slow on light demand through Wednesday afternoon, according to the Agricultural Marketing Service. Compared to the last reported market on Monday, live sales traded $2 lower at $123/cwt. Last week, dressed sales were at $196-$202/cwt.
In the Southern Plains and Western Corn Belt, trade was mostly inactive on light demand. On Tuesday in the Southern Plains, live sales traded mostly at $120/cwt. In the Western Corn Belt, last week live sales traded from $124-$126/cwt. and dressed at $196-$202/cwt.
Cattle futures tried to extend gains early Wednesday but apparently ran out of technical steam.
Feeder Cattle were also pressured by strong gains in Corn futures.
Feeder Cattle futures closed an average of $2 lower (from $1.55 to $2.42).
Live Cattle futures closed an average of 41¢ lower, except for 12¢ higher in the back contract.
Choice boxed beef cutout value was 46¢ lower Wednesday afternoon at $272.88/cwt. Select was $2.99 lower at $253.75/cwt.
Front-month grain futures continued higher with a hotter, drier forecast and reports of storm-damaged beans in some areas of the Corn Belt.
Corn futures closed 15¢ to 18¢ higher through new-crop contracts and then mostly unchanged to fractionally higher.
Soybean futures closed 29¢ to 38¢ higher through the front six contracts and then mostly 20¢ to 25¢ higher.
Major U.S. financial indices closed narrowly mixed on Wednesday.
Support included testimony from Federal Reserve Chair Jerome Powell to the U.S. House Committee on Financial Services. He stressed the Fed remained committed to maintaining the federal funds rate near zero and the current level of asset purchases until the Fed’s long-term goal of inflation exceeding 2% for some time.
“Inflation has increased notably and will likely remain elevated in coming months before moderating. Inflation is being temporarily boosted by base effects, as the sharp pandemic-related price declines from last spring drop out of the 12-month calculation,” Powell explained. “In addition, strong demand in sectors where production bottlenecks or other supply constraints have limited production has led to especially rapid price increases for some goods and services, which should partially reverse as the effects of the bottlenecks unwind. Prices for services that were hard hit by the pandemic have also jumped in recent months as demand for these services has surged with the reopening of the economy.”
The Dow Jones Industrial Average closed 44 points higher. The S&P 500 closed 5 points higher. The NASDAQ closed 33 points lower.
Despite increased beef cow slaughter this year, less dairy cow slaughter and beef imports are helping maintain cull cow prices at higher levels, according to James Mitchell, Extension livestock economist with the University of Arkansas.
“Southern Plains slaughter cow prices have averaged 8.1% above 2020 and 14.7% above 2019 prices,” Mitchell says, in the most recent issue of In the Cattle Markets. “In 2021, dairy cow slaughter has averaged 0.9% below 2020 slaughter and 3.7% lower than 2019 slaughter. USDA forecasts beef imports to be down 10% this year.”
“Cull beef cows contribute to ground beef production as a source of 90% lean trimmings, blended with 50% lean trimmings to make the majority of our ground beef and hamburger,” Mitchell explains. “The other two sources of lean trimmings are dairy cows and lean beef imports. For context, in 2019 and 2020, cull beef and dairy cows represented 28.4% and 27.6% of total U.S. beef trim supplies, respectively. Fed cattle trimmings are the main source of 50% lean trim. In 2020, fed trim accounted for 41.3% of total U.S. supplies.”
Lean trim and ground beef prices are also underpinning cull cow prices, Mitchell says.
“Fresh 90% lean trimmings have averaged 4% below 2020 prices but 11% higher than 2019 prices, Mitchell explains. “BLS data through May 2021 shows that ground beef prices have averaged $4.04/lb. or 0.5% higher than 2020. Lean ground beef prices have averaged 1.6% and 9.9% above 2020 and 2019 prices, respectively. The only way to have higher prices with larger supplies of cull cows and lean trimmings is with strong ground beef demand.”