Cattle futures reversed direction to the upside Monday, despite sharply lower outside markets and grain market strength tied to Russia’s attack on Ukraine. Positioning and bottom-picking likely explain much of the move, while underscoring the unaltered, positive supply fundamentals.
Feeder Cattle futures closed an average $1.86 higher ($1.12 to $2.55 higher).
Live Cattle futures closed average $1.44 higher (50¢ to $2.15 higher).
Negotiated cash fed cattle trade ranged from a standstill to mostly inactive on very light demand in all major cattle feeding regions through Monday afternoon, according to the Agricultural Marketing Service.
Live prices last week were at $140/cwt. in the Southern Plains and Nebraska; $142 in the western Corn Belt. Dressed prices were at $224-$225.
Wholesale beef prices added support with Choice Boxed beef cutout value 38¢ higher Monday afternoon at $254.71/cwt. and Select $1.81 higher at $250.22.
Wheat futures continued to lead Corn futures mostly higher Monday. Kansas City Wheat futures were mostly 39¢ to 85¢ higher Monday, as rationing continues due to the war in Eastern Europe
Corn futures closed 9¢ to 18¢ higher, except for 3¢ and 7¢ lower in the front two contracts.
Soybean futures closed mostly 10¢ to 14¢ lower.
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Major U.S. financial indices closed sharply lower Monday, pressured by Russia’s war on Ukraine and worries about the impact on domestic and global economic growth.
The Down Jones Industrial Average closed 797 points lower. The S&P 500 closed 127 points lower. The NASDAQ was down 482 points.
West Texas Intermediate Crude Oil Futures (CME) were up another $2.96 to $3.72 through the front six contracts.
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Derrell Peel, Extension livestock marketing specialist at Oklahoma State University provides perspective about the market impacts stemming from Russia’s attack on Ukraine, in his weekly market comments.
“Both Ukraine and Russia are major grain producing and exporting countries. With the reality of current disruptions of grain movement from the Black Sea region and the uncertainty of what could happen, crop prices have soared, pushing high feed prices much higher,” Peel explains. “Just a few more weeks will determine whether crop planting in the Ukraine will be possible. All crop markets are higher, but the uncertainty is focused on the near term, pushing old crop futures higher relative to new crop contracts in the fall.”
Peel also points out Russia is a major oil producing and oil exporting country. Potential disruptions to global energy markets are contributing to sharply higher energy prices.
“Russia is also a major producer and exporter of fertilizer. These will add to inflationary pressures for production costs and are a threat to beef demand as higher gas prices directly impact consumers,” he says.
Then, there’s the domestic drought.
“In just a few weeks, the drought will begin to impact forage production and producers will face rapidly worsening production conditions and additional management and marketing challenges,” Peel says. “The supply fundamentals of the industry will continue to be supportive with cattle numbers decreasing and beef production declining this year. Beef demand has been strong up to this point, but clearly, there are more concerns about demand and input prices going forward. A war situation like this has no analog in recent history and there is no way to anticipate when or even if the situation will stabilize in the foreseeable future.”