Cattle futures extended gains from the previous session on Monday with a feeling of confidence, despite more negative rhetoric from the White House, aimed at beef packers this time (see below).
Toward the close, Live Cattle futures were an average of $7.02 higher. Feeder Cattle futures were limit-up $9.250, except for $2.80 higher in the back contract.
Negotiated cash fed cattle trade was mostly inactive on light demand in all cattle feeding regions through Monday afternoon, according to the Agricultural Marketing Service.
Last week, FOB live prices were $3-$4/cwt. lower in the Texas Panhandle at mostly $232, $5 lower in Kansas at $230-$232, mostly steady to $2 lower in Nebraska at mainly $230 and mostly $2 lower in the western Corn Belt at mainly $228. Dressed delivered prices were steady to $1 lower in Nebraska at $357-$360 and steady to $3 lower in the western Corn Belt at $355-$360.
The five-area direct weighted average FOB live fed steer price last week was $2.16 lower at $228.70. The weighted average dressed-delivered fed steer price was 21¢ lower at $358.33.
Choice boxed beef cutout value was 92¢ higher Monday afternoon at $377.32/cwt. Select was $1.39 lower at $359.70.
Grain and Soybean futures were higher Monday, with some likely early positioning tied to the monthly World Agricultural Supply and Demand Estimates that are supposed to be published Friday, in spite of the government shutdown.
Toward the close and through Jly contracts,
Corn futures were 2¢ higher. KC HRW Wheat futures were 7¢ to 8¢ higher. Soybean futures were 10¢ to 14¢ higher.
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Major U.S. financial indices closed sharply higher Monday, buoyed by signs the government shutdown might be nearing an end.
The Dow Jones Industrial Average closed 381 points higher. The S&P 500 closed 103 points higher. The NASDAQ was up 522 points.
Though mid-afternoon, West Texas Intermediate Crude Oil futures (CME) were 35¢ to 42¢ higher through the front six contracts.
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Cattle futures rallied higher Monday, despite President Trump’s latest social media shotgun salvo, aimed at beef prices and blasted in a Truth Social post last Friday. In it, he accuses meat packers of collusion, price fixing and other sundry crimes, and he demands immediate investigation from the Department of Justice.
Essential as beef packers are to the cattle business, it likely always will be difficult to find a cattle producer sympathizing with them. However, even the most devout packer detractor might find it difficult to explain why packer margins have been in the red for so long if they wielded the power suggested.
Using history, facts and a bevy of credible research over decades, it’s even tougher to argue consumer beef prices wouldn’t be higher than they are currently, and producer prices wouldn’t be lower, if not for the efficiencies yielded by the modern-day packing infrastructure, warts, concentration and all.
“Concentration in any industry leads to the potential for market power. The ability of concentrated firms to utilize market power depends on controlling supply,” explains Derrell Peel, Extension livestock marketing specialist, in his weekly market comments. “Large firms do not control demand and can only influence price by controlling supply relative to demand. Beef packers’ ability to manipulate cattle or beef prices is severely limited, owing to the fact that they do not control supply … packers do not own cows. Packers inevitably purchase and process all available cattle at any point in time – whether too many or not enough cattle. The current situation is way not enough cattle and packers can’t change that. If there were more cattle to process, they would, and beef prices would decrease.”
More specifically, Peel shares a summary of related research from just a few years ago.
“Agricultural economists recognize the potential for market power to be expressed in highly concentrated industries. The cattle and beef industry, and the beef packing industry in particular, has been researched in multiple studies to understand the impacts of market concentration,” according to the summary. “The evidence shows: 1) market power does negatively impact fed cattle prices, but the impact is small; and 2) the cost savings due to size economies are at least 10 times greater than the negative market power impacts. Cattle producers and beef consumers receive net benefits from the cost efficiencies of the current market structure in the form of higher cattle prices and lower beef prices than would exist in a less efficient industry.”
Those are facts.
“Though the outcome of current political actions is uncertain, the potential for long-term harm to the industry is substantial,” Peel says. “Anytime politics trumps economics, the strong supply and demand fundamentals that have determined the outlook for the industry to this point become irrelevant. Expectations for prices and production going forward are now completely clouded, therefore, all bets are off.”