Feeder Cattle futures took stepped lower Monday, pressured by sharply higher Corn futures and Friday’s bearish Cattle on Feed report which indicated June feedlot placements were 2.7% more than the previous year and 4.6% more that the average of analyst expectations ahead of the report.
Headlines of Russia bombing Ukrainian ports fueled grain and Soybean futures Monday.
Corn futures closed 27¢ to 33¢ higher through the front five contracts and then 9¢ to 19¢ higher.
KC HRW Wheat closed 46¢ to 58¢ higher through Jly ‘24 and then 32¢ to 40¢ higher.
Soybean futures closed mostly 19¢ to 22¢ higher.
Live Cattle futures faded most of the heat, supported by last week’s stronger cash trade.
Live Cattle futures closed an average of $1.08 higher (32¢ to $1.82 higher), except for an average of $1.24 lower in the front three contracts.
Negotiated cash fed cattle trade was inactive on very light demand in all major cattle feeding regions through Monday afternoon, according to the Agricultural Marketing Service.
Last week, live prices (FOB) were $2 higher in the Southern Plains at $180/cwt., $2 higher in Nebraska at $188 and $3-$4 higher in the western Corn Belt at $188. Dressed prices (FOB) were $3-$5 higher in Nebraska at $295 and steady to $5 higher in the western Corn Belt at $295.
The weighted average five-area fed steer price last week was $1.92 higher at $186.19/cwt. on alive basis. The weighted average dressed fed steer price was $3.38 higher at $294.72.
Choice boxed beef cutout value was $1.42 higher Monday afternoon at $304.16/cwt. Select was 26¢ higher at $276.99/cwt.
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Major U.S. financial indices closed higher Monday, buoyed by energy stocks.
The Dow Jones Industrial Average closed 183 points higher. The S&P 500 closed 18 point higher. The NASDAQ was up 26 points.
West Texas Intermediate Crude Oil futures (CME) closed $1.41 to $1.67 higher through the front six contracts.
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Reflecting on Friday’s semiannual USDA Cattle report, Derrell Peel, Extension Livestock Marketing Specialist at Oklahoma State University notes this is the fifth year of smaller beef cow inventories since the 2018 cyclical peak, with the beef cow herd down 3.0 million head, a five-year decrease of 9.3%.
“Not only did the report show continued cattle liquidation thus far in 2023, but there are also no clear indications that numbers will stabilize and grow anytime soon,” Peel says. “The current inventory of beef replacement heifers is 4.05 million head, lower than the previous cyclical low of 4.2 million head in 2011 and 2012 and is the lowest in 50 years of available July 1 inventory data.”
Moreover, Peel points out the inventory of heifers in feedlots in the July Cattle on Feed report — unchanged from last year —indicates relatively large numbers of heifers continue to be fed for slaughter rather than retained for breeding. He adds that heifers currently represent 39.9% of total feedlot inventories, the highest proportion of heifers in feedlots since 2001.
“The sharp increase in feeder cattle prices this year represents a growing market incentive for the beef cattle industry to transition from liquidation to herd expansion, but it does not appear that the industry is responding yet,” Peel says. “Feeder cattle prices will continue to increase to jumpstart heifer retention, which will lead to even higher prices as feeder supplies are further squeezed with fewer heifers in the feeder cattle supply.”