Negotiated cash fed cattle trade was mostly inactive on light demand in the Southern Plains through Wednesday afternoon, according to the Agricultural Marketing Service. In Nebraska and the Western Corn Belt, trading was limited on light to moderate demand. A few live sales in Nebraska traded at $126 and a few dressed at $197.
Choice boxed beef cutout value was $3.70 lower Wednesday afternoon at $312.05/cwt. Select was $4.34 lower at $275.41.
Cattle futures softened Wednesday, pressured by crumbling Lean Hog futures, the lack of cash direction and perhaps some early positioning ahead of Friday’s monthly Cattle on Feed report.
Live Cattle futures closed an average of 89¢ lower, from 30¢ to $1.40 lower.
Feeder Cattle futures closed an average of $2.11 lower, from $1.85 to $2.65 lower.
Corn futures closed mostly 1¢ to 3¢ lower through new-crop contracts, and then mostly fractionally higher to 2¢ higher.
Soybean futures closed 1¢ to 9¢ lower through the front five contracts and then mostly 6¢ to 10¢ higher.
Major U.S. financial indices traded narrowly on Wednesday as investors continue to evaluate the strength of the economy.
The Dow Jones Industrial Average closed 71 points lower. The S&P 500 closed 5 points lower. The NASDAQ was up 18 points.
Arguably, the root cause of much of the current debate surrounding the lack of producer leverage in recent and current markets — compounded by several black swan events — revolves around available packing capacity, relative to cattle supplies.
That was one of the issues discussed in Wednesday’s U.S. Agriculture Committee hearing: Examining Markets, Transparency, and Prices from Cattle Producer to Consumer. Dustin Aherin, RaboResearch animal protein analyst was one of five expert witnesses invited to testify. As part of his testimony, Aherin explained plans for new and expanded packing facilities announced in recent months could add about 8,000 head per day daily fed cattle capacity and 2,000 head of non-fed daily capacity over the next five years.
“Even before the extremes of 2020, recent margins suggest that there is opportunity to add packing capacity. However, that opportunity does not come without significant risk,” Aherin explained. “First, the upfront cost of a new or expanded plant is extremely expensive. Industry sources estimate that a new plant costs $100 to $120 million (USD) for every 1,000 head of daily capacity. Increasing construction costs over the past year likely put current costs near or even above the high end of that estimate. Then, a new endeavor must meet regulatory requirements, build a labor force, and keep enough cash on hand to absorb losses. It’s not just about building facilities, it’s about building a business model.”