Negotiated cash fed cattle trade ranged from slow with moderate demand to mostly inactive on light demand through Friday afternoon with too few transactions to trend, according to the Agricultural marketing Service.
For the week, live prices were $5-$9 higher in the Texas Panhandle at $175-$180/cwt., $7-$9 higher in Kansas at $178-$180, $3-$6 higher in Nebraska at $183-$188 and $3-$5 higher in the western Corn Belt at $185-$187. Dressed prices were $5-$6 higher in Nebraska at $285-$292 and $3-$7 higher in the western Corn Belt at $288-$292.
Through Thursday, the five-area direct weighted average fed steer price was $3.64 higher week to week at $181.35. The weighted average dressed steer price was $5.30 higher at $289.66.
Choice boxed beef cutout value was $3.49 higher Friday afternoon at $309.93/cwt. Select was $4.61 higher at $290.93/cwt.
Week to week on Friday, Feeder Cattle futures closed an average of $8.32 higher and Live Cattle futures closed an average of $6.12 higher. On Friday, Live Cattle futures closed an average of 31¢ higher and Feeder Cattle futures closed an average of 25¢ higher.
Grain and soybean futures caught a gear higher Friday, with the latest U.S. drought monitor showing expanding dryness in the Corn Belt. It indicates 34% of U.S. corn and 28% of soybean production was affected by drought June 1.
Corn futures closed mostly 10¢ to 16¢ higher through Jly ‘24 and then 2¢ to 5¢ higher.
Soybean futures closed mostly 12¢ to 18¢ higher.
KC HRW Wheat closed 7¢ to 9¢ higher.
Major U.S. financial indices surged higher Friday, fueled by Senate passage of the Debt Ceiling bill, as well as a stronger jobs report than anticipated.
Total non-farm payroll employment increased by 339,000 in May, according to the U.S. Bureau of Labor Statistics. The unemployment rate rose by 0.3% to 3.7%. Average hourly earnings for all employees on private non-farm payrolls in May rose by 11¢ cents to $33.44. Over the past 12 months, average hourly earnings have increased by 4.3%.
The Dow Jones Industrial Average closed 701 points higher. The S&P 500 closed 61 points higher. The NASDAQ was up 139 points.
West Texas Intermediate Crude Oil futures (CME) closed $1.48 to $1.64 higher through the front six contracts.
As welcome as significantly higher cattle prices are to producers, Andrew P. Griffith, agricultural economist at the University of Tennessee cautions the economic incentive for rapid herd expansion could add to eventual downside price pain.
“There is no reason to say the prices represented on the futures market are not attainable. However, if cash prices reach such a level in today’s economic environment, it will likely do more harm to cattle industry participants than good over the next five to eight years,” Griffith says, in his weekly market comments. “The concern here is some repeat performance of 2016 through 2018 following the strong prices in 2014 and 2015.”
It was a classic example of feast or famine.
“There is no way to predict what cattle prices will look like in five years, but the price levels being anticipated the next 12 months scream and shout herd expansion at as fast of a rate as possible,” Griffith says. He explains a moderate pace of herd expansion would support stronger prices for a longer period, whereas rapid expansion sets the stage for a steep price decline.
In the meantime, Griffith notes narrowing to negative packer margins amid high fed cattle prices likely point to increased sector consolidation.
“The packers this will be toughest on are the smaller operations and the new operations that are trying to pay down loans,” Griffith says. “The large and established packers can deal with negative margins a little longer than those who are highly leveraged. Red margins are nothing new in the packing industry, but they are something new to many of the operations that have opened the past couple of years. Beef packers will be competing for a relatively small number of cattle the next couple of years, which could lead to buyouts, consolidation, or straight-out closures … This type of price environment will lead to changes in the cattle industry. What those changes are and how they impact the industry will only be revealed with time.”