Negotiated cash fed cattle trade ranged from a standstill to mostly limited on light demand in all major cattle feeding regions through Wednesday afternoon, according to the Agricultural Marketing Service.
So far this week, live prices in Nebraska are $1-$2 lower than last week at $118/cwt. Dressed prices are $1-$2 lower at $188-$190.
Live prices in the western Corn Belt this week are steady to $2 lower at $118-$119. Dressed prices are steady to $4 lower at $187-$190.
Last week, live prices were at $118-$119 in the Southern Plains and at $119-$120 in Colorado.
Cattle feeders offered 1,906 head (12 lots) in Central Stockyards’ weekly Fed Cattle Exchange auction. Of those, 1,091 head (6 lots) sold for mostly $118.50 to $119/cwt., steady with the previous week’s country trade.
At Sioux Falls Regional in South Dakota, fat steers and heifers sold $3-$5 lower. There were 223 Choice 2-3 steers weighing an average of 1,433 lbs., bringing an average of $115.97/cwt., which was $2-$3 lower than established country trade.
Cattle futures found some footing on Wednesday, helped along by technical support and oversold conditions.
Live Cattle futures closed an average of $1.44 higher.
Feeder Cattle futures closed an average of $1.86 higher.
Choice boxed beef cutout value was $3.56 higher Wednesday afternoon at $304.78/cwt. Select was $2.27 higher at $286.18
Corn futures closed 20¢ to 24¢ higher from near Sep to Jly ‘22, mostly 5¢ to 7¢ higher in other contracts.
Soybean futures closed mostly 15¢ to 19¢ higher, except for 4¢ to 9¢ higher in the front three contracts.
Major U.S. financial indices closed narrowly mixed Wednesday. Support included positive quarterly corporate earnings reports from the likes of GM. Employment data suggested more optimism, as well.
Private sector employment increased by 742,000 jobs from March to April according to the April ADP® National Employment ReportTM. That was more than the trade expected.
The Dow Jones Industrial Average closed 97 points higher. The S&P 500 closed 2 points higher. The NASDAQ was down 51 points.
Declining cattle futures reflect the market realities cash prices first followed, says Stephen Koontz, agricultural economist at Colorado State University, in the latest issue of In the Cattle Markets.
“Optimism from late winter and early spring is being replaced by realism that: it is going to take another two to three months to work through the large front-loaded fed animal inventories; fed animal slaughter is at capacity; costs of gain are now substantially higher than the past several years,” Koontz explains.
As noted recently in Cattle Current, larger than expected ready fed cattle supplies stem from lingering pandemic impacts, as well as the February winter storm that disrupted supply chains. Concurrently, packing capacity remains less than before the pandemic.
“Combined fed steer and heifer slaughter has been just short of 525,000 head per week. It is likely that this is a reasonable maximum that the packing industry can process,” Koontz says. “Packer margins are strong but there is little incentive to pay more for fed cattle when plants are operating six days per week. There is little to no possibility to process more cattle, regardless of the incentive to do so. There are a lot of historical relationships that are irrelevant when the packing industry is essentially at capacity.”
Based on the latest Cattle on Feed report, he says the number of cattle on feed more than 120 days and more than 150 days declined, suggesting some progress in reducing market-ready fed cattle supplies. But, Koontz says supplies will likely be abundant into late summer.
As for increasing feed costs, Koontz points out Corn futures increased $2/bu. from August of last year to mid-January this year and then tacked on another $1.50 since the end of March. He notes the formula cost of gain for fed cattle this summer is well beyond $1/lb.
“If live cattle have little upside and the corn market continues to ration old crop, then it is feeder cattle that have to adjust,” Koontz says.