Grain and Soybean futures pressed higher Monday with support from higher crude oil prices and the lingering Russian war on Ukraine.
Corn futures closed 12¢ to 18¢ higher through Sep ‘23 and then mostly 6¢ to 8¢ higher.
Soybean futures closed mostly 20¢ to 24¢ higher.
Loftier grain futures helped pressure Feeder Cattle futures an average of $1.12 lower, while the upturn on wholesale beef prices helped Live Cattle to a mixed close, from 36¢ lower across the front half to an average of 28¢ higher.
Negotiated cash fed cattle trade ranged from inactive on very light demand to a standstill through Monday afternoon with too few transactions to trend, according to the Agricultural Marketing Service.
Live prices last week were at $138/cwt. in the Southern Plains and Nebraska and at $140 in the western Corn Belt. Dressed prices were at $221 in Nebraska at $222 and in the western Corn Belt.
The five-area direct average steer price last week was 80¢ higher at $139.10/cwt. The average steer price in the beef was $1.57 higher at $221.68.
Choice Boxed beef cutout value was 34¢ higher Monday afternoon at $258.50/cwt. Select was $1.85 higher at $252.50.
******************************
Major U.S. financial indices pivoted Monday to close lower, following Federal Reserve Chair, Jerome Powell’s hawkish inflation comments at the 38th Annual Economic Policy Conference of the National Association for Business Economics.
“We will take the necessary steps to ensure a return to price stability. In particular, if we conclude that it is appropriate to move more aggressively by raising the federal funds rate by more than 25 basis points at a meeting or meetings, we will do so. And if we determine that we need to tighten beyond common measures of neutral and into a more restrictive stance, we will do that as well,” Powell explained. “…“The median projection that accompanied last week’s 25 basis point rate increase shows the federal funds rate at 1.9% by the end of this year and rising above its estimated longer-run normal value in 2023. The latest FOMC statement also indicates that the Committee expects to begin reducing the size of our balance sheet at a coming meeting. I believe that these policy actions and those to come will help bring inflation down near 2% over the next three years.”
The Dow Jones Industrial Average closed 201 points lower. The S&P 500 closed 1 point lower. The NASDAQ was down 55 points.
West Texas Intermediate Crude Oil futures on the CME closed $4.75 to $7.42 higher in the front six contracts.
******************************
“The pre-war (Russia-Ukraine) highs in February may be the seasonal spring peak in calf and stocker prices, although another run at spring peaks could happen in the next month. Moreover, a strong uptrend in feeder prices is reflected in Feeder futures prices at this time, which may offset typical seasonal patterns,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University.
In his weekly market comments, Peel explains the value of stocker gain appears to have decreased significantly since last fall, but current prices don’t reflect the unfolding transition in feeder cattle markets.
“The current price for August Feeder futures is about $181/cwt., compared to about $158/cwt. for nearby March. The August futures price would suggest an Oklahoma cash price for 800-lb. steers of $179-$180/cwt. in August, well above the current price of $159/cwt. In that case, the value of 300 lbs. of gain from April to August is roughly $1.45/lb.,” according to Peel.
By way of contrast, he says the value of adding 300 lbs. to a 5-weight steer in November was $1.24/lb., roughly in line with increased cost of feedlot gain last year. However, current Oklahoma auction prices suggest the value of stocker gain is about $0.73/lb., for putting 300 lbs. on a 500-lb. steer.
“Running the current August Feeder futures price for 800 lb. steers though a feedlot budget finishing in January 2023 results in a fed breakeven price of $162-$165/cwt., depending on the feedlot cost of gain. Current Live futures for February 2023 are at roughly $153/cwt. These discrepancies suggest that more transition is yet to come,” Peel says. “Either the Feeder futures are too high or the Live futures are too low, or perhaps some of both. The take-home message is that imbalances in feeder markets, and between feeder and fed markets, likely mean more transition as markets rebalance. Markets are volatile and likely to remain so. Cattle producers at all levels may see opportunities to price cattle or lock in margins but markets are expected to continue to be very dynamic and such opportunities may be fleeting.”
See Peel’s overview of the market situation here.