Another round of heavy fund selling — tied to recessionary fears — held sway in commodity markets Tuesday.
Corn futures closed mostly 24¢ to 29¢ lower. Soybean futures closed 70¢ to 79¢ lower through Aug ‘23 and then mostly 55¢ to 60¢ lower. Both were also pressured by favorable weather.
Cattle futures were caught in the commodity backwash with Feeder Cattle futures closing an average of $1.49 lower and Live Cattle futures closing an average of $1.65 lower.
Negotiated cash fed cattle trade was at a standstill in all major feeding regions through Tuesday afternoon with too few transactions to trend, according to the Agricultural Marketing Service.
Last week, live prices were $137-138/cwt. in the Southern Plains, $145 in Colorado, $145-$151 in Nebraska and $147-$150 in the western Corn Belt. Dressed prices were $234.
Choice Boxed beef cutout value was 84¢ higher Tuesday afternoon at $264.66/cwt. Select was 60¢ lower at $239.87.
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Major U.S. financial indices closed mixed Tuesday. Support included more durable goods orders and factory orders than expected in May. Also, the U.S. and China held discussions about easing the tariffs on Chinese goods imposed by President Trump. Reducing the tariffs could lower prices on consumer goods. However, the threat of a recession continues. Bloomberg Economics forecasts the odds of a recession in the U.S. at 38% over the next year.
The Dow Jones Industrial Average closed 129 points lower. The S&P 500 closed 6 points higher. The NASDAQ was up 194 points.
West Texas Intermediate Crude Oil futures on the CME closed $8.74 to $8.93 lower through the front six contracts.
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“The general direction of cattle and beef market forecasts for this year has not changed but annual forecasts have been modified by the way the first half of the year has played out, with implications for a significantly different second half of the year,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments.
For instance, Peel explains beef production through the first two quarters was higher year over year but is still expected to be less than last year across the full calendar. Likewise, he points out total cattle slaughter in 2022 is expected to be about 1% less than 2021 but was 1.4% higher through the first six months.
“The increase is due to more female slaughter with total cow and heifer slaughter up 4.5% in the first half of the year,” Peel says. “Thus far, increased female slaughter more than offsets the 1.6% year-over-year decrease in steer and bull slaughter. Total cow slaughter is up 6.1% so far this year with dairy cow slaughter down 3.1% year over year, partially offsetting the 14.6% year-over-year increase in beef cow slaughter. For the remainder of the year, total beef cow slaughter is likely to remain higher year over year by double-digits and total cow slaughter is likely to increase by 5-6% year over year. This means that reduced cattle slaughter will be realized by less steer and heifer slaughter.”
This reality implies reduced feedlot marketing rates, Peel explains.
“Feedlots, as of June 1 had record inventories of cattle on feed, which seems to be at odds with the idea of reduced marketings in the coming months. However, feedlots have been placing larger numbers of lightweight cattle, which leads to more days on feed and slower turnover rates … slower marketing rates,” Peel explains. “Feedlots will work through current inventories in the second half of the year. May placements were down by the largest year-over-year monthly decrease since last September. Smaller placements in the coming months will lead to lower feedlot inventories by the end of the year unless drought forces even larger numbers of cattle into feedlots.”