Negotiated cash fed cattle trade was limited on light demand in Kansas, Nebraska and the western Corn Belt through Thursday afternoon, according to the Agricultural Marketing Service. Elsewhere, trade was mostly inactive on very light demand.
So far this week, live trade is $1 higher in Kansas at $119-$120/cwt., 50¢ to $1 higher in the Texas Panhandle at $119.00 to $119.50, steady to $1 higher in Nebraska at $120 and unevenly steady in the western Corn Belt at $118-$120. Dressed trade is steady to $1 higher in Nebraska at $191.
Live Cattle futures plunged Thursday. Besides the break in Lean Hog futures, likely explanations for the reversal include sluggish cattle slaughter due in part to pandemic safety measures, but also reports that labor availability is adding constraint. Achieving feedlot currentness becomes more challenged.
Live Cattle futures closed an average of $2.40 lower ($1.95 lower at the back to $3.00 lower in spot Jun).
That was too much for Feeder Cattle to withstand, despite the sharp selloff in Corn.
Feeder Cattle futures closed an average of 48¢ lower (2¢ to 87¢ lower), except for 70¢ higher in spot May.
Choice boxed beef cutout value was $1.70 higher Thursday afternoon at $316.78/cwt. Select was $1.25 lower at $295.91
The average dressed steer weighing for the week ending May 1 was 891 lbs., which was 5 lbs. lighter than the previous week and 2 lbs. lighter than last year, according to USDA’s Actual Slaughter Under Federal Inspection report. The average dressed heifer weight of 824 lbs. was 1 lb. lighter than the previous week and 2 lbs. lighter than the same week last year.
Improved weather conditions, including moisture in the Corn Belt forecast, and the previous day’s World Agricultural Supply and Demand Estimates applied heavy pressure to grain futures Thursday.
Corn futures closed 33¢ to 40¢ lower through Jly ‘22 and then mostly 22¢ lower.
Soybean futures closed 45¢ to 58¢ lower through Jan ‘22, then mostly 15¢ to 29¢ lower.
Major U.S. financial indices bounced back from the previous day’s selloff, supported by new recommendations from the Centers for Disease Control and Prevention that those fully vaccinated against COVID-19 can resume pre-pandemic activities including doing away with masks and social distancing.
The Dow Jones Industrial Average closed 433 points higher. The S&P 500 closed 49 points higher. The NASDAQ was up 93 points.
Geography will help determine price impacts from potential partial beef cow herd liquidation due to drought, says Elliott Dennis, Extension livestock economist at the University of Nebraska-Lincoln. He points out drought impacts are currently most severe in the Mountain region and parts of the Northern Plains.
Using data from USDA’s Economic Research Service, Dennis says average grazed pasture acres per beef cow is 55.56 acres in the Mountain Region, 19.17 acres in the Southern Plains, 16.49 acres in the Pacific region and 13.78 acres in the Northern Plains. Those are the nation’s lowest stocking rates and where the most beef cows exist.
“Under a situation of worsening drought, more feeder cattle will enter feedlots earlier than expected lowering feeder cattle prices,” Dennis explains, in the latest issue of In the Cattle Markets. “Areas with lower stocking rates are likely areas that are at more risk to adverse weather conditions since they rely upon either seasonal or harvested feed resources to sustain a beef cow herd. Further, in the absence of seasonal forage, there are not large amounts of crop residues or protein concentrates from ethanol plants to supplement the lack of forage.”
If producers in the Mountain and Pacific regions are forced to liquidate, then Dennis explains feedlots in the Northern Plains and Southern Plains will likely be able to buy feeder cattle cheaper, decreasing demand for calves in the Southeast and Appalachia regions.
On the other hand, Dennis says cull cow prices are more likely to decrease in the Mountain and Northern Plains regions because those prices are generally assumed to be regional.
“A drought scenario combined with elevated corn and soybean prices is a worst-case scenario,” Dennis says. “With elevated feed costs, feedlots would have further incentives to delay feeder cattle placements, especially lighter feeder cattle, since the cost of gain would be too high. This would put further downward pressure on feeder cattle prices. Risk management in the form of USDA-RMA Livestock Risk Protection or CME futures and options can help mitigate some of these potential downward price movements and likely merit a closer look by producers this production year.”