Volatility continued Tuesday, but Cattle futures managed to extend gains amid two-sided trading, supported by an initial drop in Corn futures and eventually higher outside markets.
Feeder Cattle futures closed an average $1.07 higher (65¢ to $1.40 higher), except for 57¢ lower in spot Mar.
Live Cattle futures closed average 79¢ higher (17¢ higher at the back to $1.57 higher toward the front), except for unchanged in away Jun.
Negotiated cash fed cattle trade was slow on light demand in the Southern Plains through Tuesday afternoon, according to the Agricultural Marketing Service. Live prices were $2 lower in a light test at $138/cwt.
Trade was limited on light demand in Nebraska. Live price so far this week are $2 lower at $138. Dressed prices last week were $224-$225.
In the western Corn Belt, trade was mostly inactive on light demand. Live prices last week were $142 and dressed prices were $224-$225.
Choice Boxed beef cutout value was $2.27 lower Tuesday afternoon at $252.44/cwt. Select was $5.28 lower at $244.94.
Wheat futures tapped the brakes Tuesday, helping Corn to a narrowly mixed close.
Corn futures closed mixed, mostly 1¢ lower to 1¢ higher.
Soybean futures closed 14¢ to 30¢ higher through Jan ‘23 and then mostly 1¢ lower to 2¢ higher.
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Major U.S. financial indices closed lower Tuesday, after trading higher earlier, in another volatile session driven by Russia’s war on Ukraine, worries about the economic impact and inflation.
The Dow Jones Industrial Average closed 184 points lower. The S&P 500 closed 30 points lower. The NASDAQ was down 35 points.
West Texas Intermediate Crude Oil Futures (CME) were up another $1.91 to $4.30 through the front six contracts with spot Mar closing at 123.70.
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Lighter-weight feedlot placements in recent months, and the incentive to place more at light weights, will likely widen the Choice-Select spread this summer, according to Brenda Boetel, Extension livestock economist at the University of Wisconsin-River Falls.
In the latest issue of In the Cattle Markets (ICM) from the Livestock Information Center, she explains the Choice-Select spread is typically narrowest January to March as the demand for Choice middle meats is the least of the year, while Choice supply is usually most plentiful. The spread usually widens heading into summer as the Choice supply declines, due to harvesting lighter-weight cattle, while grilling demand for Choice middle meats increases.
Although the highest percentage of cattle placed on feed at weights lighter than 700 lbs. usually occurs in November, Elliott Dennis, Extension livestock economist at the University of Nebraska-Lincoln pointed out in the previous ICM that feedlots want to place lighter cattle currently, amid higher feed prices, due to cattle performance and ultimately total feed consumed. He ran the numbers and concluded, “…assuming Average Daily Gain and Average Feed Conversion are constant, the only way to reduce total feed costs would be to reduce harvest weights.” And cattle placed at lighter weights tend to finish at lighter weights.
“This has two broad industry implications for the quantity and quality of beef production,” Dennis explained. “First, total quantity of beef production will likely decrease, putting upward pressure on boxed beef and thus retail beef prices in deferred months. Second, smaller carcass weights are associated with more cattle grading USDA Select. As more cattle grade USDA Select, the Choice-Select
spread will widen providing incentives to feed cattle longer to heavier harvest weights.”
The Choice-Select spread was almost $4.50/cwt. wider than the 2019-2021 average when the year began, according to Boetel.
“Seasonally, the Choice-Select spread will widen until late June/early July due to the supply/demand considerations for Choice and for Select beef,” Boetel explains. “However, given the higher percentage of lightweight cattle placed on feed since November, as compared to the 2019-2021 average lightweight percentage placed on feed, the Choice-Select spread will likely widen more than average. How wide the spread becomes is dependent on corn prices when cattle are placed, the percentage of cattle grading Choice, total amount of beef production, as well as beef demand.
“If we hold all those factors affecting Choice-Select spread at a constant level and allow only the percentage of beef grading Choice to change, the impact of a 1% change in cattle grading Choice, can have almost a 9% change in the spread. This means that since the average 2016-2020 spread was as wide as $22.45 in June, a decrease of 1% in Choice graded beef could widen that spread by another $2, providing some incentives to feed cattle longer and to heavier weights.”