Negotiated cash fed cattle trade was at a standstill in the Southern Plains and Northern Plains through Monday afternoon. Elsewhere, it was mostly inactive on very light demand with too few transactions to trend, according to the Agricultural Marketing Service (AMS).
Last week, live prices were $1 higher in the Southern Plains at $115/cwt., $2 higher in the Northern Plains at mostly $116 and $1-$2 higher in the western Corn Belt at $115-$117. Dressed trade was $3-$5 higher at $185.
The five-area direct average steer price last week was $115.38/cwt. on a live basis, which was $1.14 higher than the previous week. The five-area direct average steer price in the beef was $184.66,which was $2.98 higher.
Cattle futures bounced higher Monday, amid active trade, extending last week’s gains, with ongoing support from higher wholesale beef values, last week’s stronger cash prices and softer Corn futures.
Live Cattle futures closed an average of 61¢ higher, except for unchanged and 5¢ lower in the back two contracts.
Feeder Cattle futures closed an average of $1.28 higher, from 15¢ higher toward the back to $2.32 higher toward the front.
The CME Feeder Cattle Index was $2.10 higher at $138.85.
Choice boxed beef cutout value was $1.87 higher Monday afternoon at $239.53/cwt. Select was $4.73 higher at $232.50.
Corn futures closed 2¢ to 5¢ lower.
Soybean futures closed 1¢ to 2¢ lower, except for 5¢ to 7¢ lower in the front three contracts.
Major U.S. financial indices closed narrowly mixed to lower Monday, following strong pressure early in the session from bank stocks. According to various reports, the pressure stemmed from the forced liquidation of more than $20 billion by a hedge fund that got caught upside down in bad bets and margin calls; ripple effects ensued.
The Dow Jones Industrial Average closed 98 points higher. The S&P 500 closed 3 points lower. The NASDAQ was down 79 points.
“As April arrives, the current drought situation looms larger and potential impacts on cattle markets are increasing with each passing week,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “The latest Drought Monitor shows that 43.55% of the continental U.S. is in some degree of drought (D1-D4), including 18.06% in Extreme and Exceptional drought (D3-D4). Additionally, another 20.66% of the country is abnormally dry (D0), which means that only 35.79% of the U.S. is free of drought conditions. At the beginning of March one year ago, over 76% of the U.S. was drought free.”
The current drought, which began to advance a year ago, has progressed more rapidly than any drought in more than 20 years, Peel says. He adds an aggregate annual index of drought conditions is currently at the highest level (worst drought) since 2014.
So far, Peel notes the most significant drought impacts appear to be in Colorado, where the beef cow inventory declined by 112,000 head (-14.5%) year over year Jan. 1 and replacement heifers declined by 16.1%.
“Drought conditions plagued much of the desert southwest in 2020 but cow herd liquidation in Nevada, New Mexico and Utah totaled just 34,000 head. As bad as they were, these cowherd losses were not enough to cause significant general cattle market impacts. Significantly higher hay prices were noted in 2020 in the western drought region,” Peel says. “If a drought is severe enough, over a big enough region, and lasts long enough, broader market values may be affected resulting in lower prices for cattle and higher prices for feeds and other inputs. This can result in additional challenges for drought impacted producers, as well as impacts on producers outside the drought region.”
Moreover, odds favor La Niña conditions into the summer, according to Art Douglas, professor emeritus at Creighton University and long-time CattleFax meteorologist. He forecasts the Southwest U.S. will be warmer than normal, and the western half of the country will be relatively dry. Dry conditions in the Rockies will eventually extend into the central Corn Belt, he says, causing concerns for corn and soybean growers.
“Arguably the most concerning areas now are North and South Dakota and Texas. Persistence or expansion of drought in these areas (which have large beef cattle numbers), in conjunction with ongoing drought in Rocky Mountain and desert southwest regions could result in levels of herd liquidation/movement that broadly impact cattle markets,” Peel says. “If the drought preempts spring forage growth in these regions, market impacts could develop rapidly in the next three to five months. Conditions in the coming weeks may have significant cattle market impacts on producers in drought regions, producers in regions where drought is or could develop, as well as producers outside of drought areas.”