Cattle futures rallied Monday, helped along by lower Corn futures, oversold conditions, expanding open interest and opening the books on a new month.
Feeder Cattle futures closed an average of $5.04 higher.
Live Cattle futures closed an average of $1.67 higher (97¢ higher toward the back to $2.55 higher in new spot Jun).
Negotiated cash fed cattle trade was at a standstill in all major cattle feeding regions through Monday afternoon, according to the Agricultural Marketing Service.
Last week, live prices were steady in the Southern Plains at $140/cwt, $2 higher in Colorado at $145-$147, steady to $2 higher in Nebraska at $146 and steady to $1 higher in the western Corn Belt at $145-$147. Dressed prices were $2 higher at $232.
Choice Boxed beef cutout value was $1.77 higher Monday afternoon at $262.55/cwt. Select was 26¢ higher at $248.23.
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Grain futures tumbled to start the week, pressured by needed moisture in the Corn Belt, although it could further delay planting. As of May 1, according to USDA’s latest Crop Progress report, 14% of corn was planted, which was 28% less than last year and 19% less than average.
Corn futures closed mostly 7¢ to 10¢ lower.
Soybean futures closed 22¢ to 39¢ lower in the front six contracts and then mostly15¢ to 19¢ lower. Eight percent of soybeans were in the ground, which was 14% less than last year and 5% less than the average.
National pasture and range conditions are beginning the season in expectedly tough shape with 18% rated as Good (17%) or Excellent (1%) compared to 22% a year earlier. Conversely, 56% was rated as Poor (27%) or Very Poor (29%), compared to 47% a year earlier.
Also of note, 27% of winter wheat was rated in Good (24%) or Excellent (3%) condition, compared to 48% a year earlier. 42% was rated Poor (21%) or Very Poor (22%) compared to 19% at the same time last year.
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Major U.S. financial indices closed higher Monday, finding some firmness following the previous session’s massive downturn, but amid volatile two-sided trading as investors try to peg value.
The Dow Jones Industrial Average closed 84 points higher. The S&P 500 closed 23 points higher. The NASDAQ was up 201 points.
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“Through mid-April, beef cow slaughter was up 16.9% year over year; a surprisingly strong rate of cow slaughter for this time of year,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “This likely reflects continuing drought impacts carried over from last year, combined with very strong cull cow prices and limited forage prospects going forward. The fast pace of cow slaughter thus far implies the likelihood of significant beef cow herd liquidation in 2022.”
Peel explains the current pace of beef cow slaughter suggests an annual beef herd culling rate of 13.8%, a record in data back to 1986. Culling at that level suggests the beef cow inventory would likely decrease by 4% year over year and decline below 29 million head Jan. 1, 2023. That would be the largest annual beef cow herd decrease since the mid-1980s.
However, Peel says it’s unlikely the pace of culling so far this year will continue throughout 2022.
By way of comparison, he explains if beef cow slaughter averaged 9% more year over year — the same as last year and unlikely at this point — it would imply an annual culling rate of just less than 13%, still a record. The 2023 beef cow herd would be roughly 29.2 million head, down about 3% year over year.
On the other hand, if beef cow slaughter ended up 13% more year over year, net beef herd culling would be more than 13%, resulting in a Jan. 1 beef cow inventory of approximately 29.0 million head (3.5% less year over year).
“Dramatic and immediate improvement in drought conditions could allow the industry to avoid these rather dire results,” Peel says. “The next few months will likely have impacts on the cattle industry for several years. Drought conditions that result in the levels of liquidation described above would also prevent retention of replacement heifers. This implies that, if conditions do not improve until late this year or into next year, better conditions in 2023 would, at best, allow the industry to stabilize inventories and lay the groundwork to begin recovery in 2024 at the earliest.”