Negotiated cash fed cattle trade was mostly inactive on very light demand in the western Corn Belt through Monday afternoon. Elsewhere, trade was at a standstill, according to the Agricultural Marketing Service.
Live prices last week were at $117.50-$119.00/cwt. in the Texas Panhandle, $119 in Kansas, $118 in Nebraska and $117-$119 in the western Corn Belt. Dressed prices were $187-$190.
Rain in the Corn Belt pressured Corn futures Monday, opening the gate for Cattle futures to trade higher and begin taking a swipe at extremely oversold conditions.
Live Cattle futures closed an average of $1.03 higher, an average of $1.46 higher across the front half of the board and then an average of 61¢ higher, except unchanged in the back contract.
Feeder Cattle futures closed an average of $3.36 higher ($2.35 higher toward the back to $4.42 higher toward the front).
Choice boxed beef cutout value was $3.23 higher at $309.11/cwt. Select was $3.49 higher at $293.76.
Corn futures closed 20¢ to 27¢ lower through Jly ‘22, and then mostly 4¢ to 9¢ lower.
Soybean futures closed mostly 8¢ to 9¢ lower, but as much as 19¢ lower.
Major U.S. financial indices closed lower Monday, pressured by a selloff in big tech stocks.
The Dow Jones Industrial Average closed 34 points lower. The S&P 500 was down 34 points. The NASDAQ was down 350 points.
“It now appears that it will take the remainder of the second quarter and likely much of the third quarter of the year to move the fed cattle industry into tighter numbers and relieve the capacity constraints that are limiting the fed cattle market,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University.
In his weekly market comments, Peel provides insight to U.S. beef packing capacity over time. In the 1980’s, when much of the current capacity was constructed, he explains cattle inventories averaged 15% more than in the last decade and there was surplus capacity. That fueled closing some plants like the Tyson plant at Emporia, KS in 2008 and the Cargill plant at Plainview, TX in 2013. Before that, ConAgra never replaced its facility that burned at Garden City, KS in 2000.
“The cyclical expansion in cattle numbers from 2014 to 2019 has now pushed cattle slaughter beyond packing industry capacity,” Peel says. “It is estimated that annual average slaughter has exceeded capacity since 2016. Although cattle numbers peaked cyclically in 2019, feedlot production is just now at a peak in early 2021, partly as a result of pandemic delays in 2020.”
Saturday harvests are used to bridge some of the gap. For instance, Saturday slaughter accounted for 2.7% of weekly slaughter in 2012 and 7.3% in 2007, according to Peel. Saturdays accounted for more than 9% of weekly slaughter in 2019 and 2020; 10% so far this year.
“Slaughter needs will be seasonally larger in the coming weeks and it will be difficult for feedlots to get more current. It will be challenging to maintain, let alone push Saturday slaughter in the coming weeks,” Peel says.