Cattle futures traded either side of steady on Tuesday, awaiting further direction from the cash market.
Live Cattle futures closed narrowly mixed but mostly marginally higher, from an average of 8¢ lower to an average of 11¢ higher.
Feeder Cattle futures closed narrowly mixed, from 17¢ lower to 22¢ higher.
Currently strong market fundamentals should grow more positive when Tyson reopens the Kansas plant that was shuttered by fire in August. During a Tuesday conference call to share the company’s fourth-quarter fiscal results, Noel White, Tyson CEO said the company expects to have the plant fully operational within 60 days, and potentially sooner.
Wholesale beef values were higher on Choice and sharply higher on Select with moderate to good demand and light to moderate offerings, according to the Agricultural Marketing Service.
Choice boxed beef cutout value was $1.91 higher Tuesday afternoon at $240.50/cwt.—the highest since June of 2017. Select was $2.54 higher at $216.23.
Corn futures closed 3¢ to 4¢ higher through Jly ’20 and then mostly 1¢ higher.
Soybean futures closed fractionally mixed to 1¢ lower.
Major U.S. financial indices mainly edged higher on Tuesday, supported once again by positive quarterly corporate earnings.
The Dow Jones Industrial Average closed unchanged. The S&P 500 closed 4 points higher. The NASDAQ was up 21 points.
Increased uncertainty and price pressure from the Tyson plant fire may have helped encourage some cow-calf producers to begin herd liquidation, says Elliott Dennis, livestock marketing economist at the University of Nebraska-Lincoln.
To illustrate the market uncertainty leading into the fire, Dennis uses the example of a cow-calf producer in the Northern Plains, who calves in March or April and then sells weaned calves in October. At calving time, Dennis points out Feeder Cattle futures for Oct were around $157. After higher Corn futures rose in response to late and poor planting conditions, and applied price pressure to Feeder Cattle, he explains the October Feeder Cattle contract fluctuated between $132 and $145 in June, July and August, before sinking to $127, in the wake of the Tyson plant fire. By expiration, the contract was back up $145.
“How risk averse producers were likely determined price risk management used and ultimately gross revenue received for sold calves,” Dennis says, in the latest issue of In the Cattle Markets. He adds that cow-calf producers could respond to the increased market volatility by selling cows and exiting the market or by retaining beef cows for breeding.
Although the number of beef cows bred and the number of heifers retained for breeding this year won’t be known until the Jan. 1 USDA Cattle report, Dennis says cow slaughter provides some indication of producer response.
Beef cow slaughter numbers this year tracked close to last year’s pace through much this year. However, Dennis says, USDA’s Cow Slaughter Under Federal Inspection reports suggest a large beef cow sell-off since the week of September 14. He adds that beef cow slaughter numbers are on an upward trend and show no sign of slowing down.
Besides the fire, Dennis explains cow slaughter likely increased, due to skyrocketing prices for 90% lean beef, tighter hay supplies borne by the wet spring and summer, and the slow recovery of cash prices.
“In the short term, this reduction in beef cows affects the number of calves born next year, and feeder cattle available to enter feedlots,” Dennis says. “In the long term, it could ultimately signal that the industry is beginning to enter a contraction phase of the cattle cycle.”