Cattle futures closed lower Tuesday, with little in the way of fundamental news and perhaps some technical pressure.
Live Cattle futures closed an average of 39¢ lower.
Feeder Cattle futures closed an average of 58¢ lower.
Grain markets continued to decline Tuesday, with positive crop weather news and the stronger U.S. dollar.
Corn futures closed 3¢ to 5¢ lower though Jul ’20 and then fractionally lower to 1¢ lower.
Soybean futures closed mostly 10¢ to 14¢ lower.
Wholesale beef values were steady to weak on light to moderate demand and moderate offerings, according to the Agricultural Marketing Service.
Choice boxed beef cutout value was 34¢ lower Tuesday afternoon at $212.93/cwt. Select was 5¢ lower at $189.16.
Major U.S. financial indices edged lower Tuesday, although the nascent quarterly earnings season is mostly positive thus far.
The Dow Jones Industrial Average closed 23 points lower. The S&P 500 closed 10 points lower. The NASDAQ was down 35 points.
“Feeder cattle prices are determined by several factors, with feed price and fed cattle price having the greatest impact,” explains Brenda Boetel, Extension agricultural economist at the University of Wisconsin-River Falls, in the latest issue of In the Cattle Markets. “Corn price has typically had an inverse relationship to both fed and feeder cattle prices. This means, as the price of corn increases, the price of feeder cattle decreases. This assumes that all other factors have remained constant, including other feeding costs, as well as fed cattle price.”
As corn price increases, the price premium declines for lighter feeder cattle weights versus heavier ones. Spun differently, the price slide narrows as corn price moves higher.
“This isn’t a new finding. What is new is that the decrease in these beef steer price differentials is at an increasing rate as weight increases, i.e., the premiums for lightweight cattle will decrease faster than has historically been found in economic studies,” Boetel says.
That was among the conclusions drawn from research conducted by Boetel last year with Lee Schultz, a peer at Iowa State University and with Kevin Dhuyvetter, cattle technical consultant with Elanco Animal Health. The study—in the Western Economics Forum—included 66,640 head of beef feeder steers and 59,005 head of dairy feeders.
“Although cattle producers can’t affect the corn price, understanding how changing corn price affects price slides can aid in management and marketing decisions,” Boetel says.