Lean Hog futures continued their recent and aggressive rally Wednesday, providing lift to Cattle futures, especially Feeder Cattle.
Live Cattle futures closed an average 69¢ higher.
Except for unchanged and 52¢ higher in the front two contracts, Feeder Cattle futures closed an average of $1.74 higher.
Stronger futures, continued strength in wholesale beef values and the latest winter storm offer hopes of higher cash fed cattle prices this week; surely no worse than steady.
There were 596 head offered in the weekly Fed Cattle Exchange auction Wednesday; no takers.
Choice 2-4 steers sold mainly steady at the fat auction in Tama, IA: $127.28/cwt. for 150 head weighing an average of 1,406 lbs. At Sioux Falls Regional in South Dakota, Ch 2-4 steers brought $126.00-$127.75.
Corn futures closed mostly fractionally higher.
Soybean futures closed unchanged to 2¢ higher.
Wholesale beef values were weak to lower on light to moderate demand and offerings, according to the Agricultural Marketing Service.
Choice boxed beef cutout value was 66¢ lower Wednesday afternoon at $228.67/cwt. Select was 83¢ lower at $218.63.
Major U.S. financial indices closed mostly lower on Wednesday. Support and pressure (bank stocks) came from the Fed statement, indicating no change for interest rates and emphasizing patience going forward.
“Recent indicators point to slower growth of household spending and business fixed investment in the first quarter,” according to the FOMC statement. “On a 12-month basis, overall inflation has declined, largely as a result of lower energy prices; inflation for items other than food and energy remains near 2%. On balance, market-based measures of inflation compensation have remained low in recent months, and survey-based measures of longer-term inflation expectations are little changed.”
The Dow Jones Industrial Average closed 141 points lower. The S&P 500 closed 8 points lower. The NASDAQ was up 5 points.
“Clearly, the cold wet winter has slowed marketings, extended days on feed, decreased feed conversion, held down slaughter weights, and increased costs of gain,” says Stephen Koontz, agricultural economist at Colorado State University, in the latest issue of In the Cattle Markets. “Information provided by Kansas State University (KSU) and other sources indicates costs of gain are 5¢-7¢/lb. higher than the same month this time last year with very similar feed input costs.”
KSU’s latest estimates—Historical and Projected Kansas Feedlot Net Returns—peg feedlot cost of gain for steers in February at $86.44/cwt.; $91.97 for heifers. For March, it’s $85.80 and $93.39, respectively.
Apparently, slower-paced fed cattle marketing is also building the supply of long-fed cattle.
“April marketings will be an important indicator of the potential strength of the cattle markets through the summer. Weak marketings will suggest a backlog of animals,” Koontz says. As of Feb. 1, he explains the calculated inventory of cattle on feed more than 120 days of 3.99 million head is 12.2% more than the same time last year and 14.1% more than the five-year average.
Of course, carcass weights continue to be lighter year over year, too.
The average dressed steer weight for the week ending Mar. 2 was 9 lbs. less than a year earlier at 874 lbs., according to USDA’s Actual Slaughter Under Federal Inspection report. Dressed heifer weights were 15 lbs. lighter at 813 lbs.