Cattle futures softened Monday amid likely profit taking and month-end positioning. Although some would say they started the week in oversold territory in need of technical correction, the fundamental pathway continues clear.
Feeder Cattle futures closed an average of 91¢ lower, from $1.42 lower at the front to 22¢ lower at the back.
The CME Feeder Cattle Index was $3.34 higher at $161.29/cwt.
Live Cattle futures closed an average of $1.25 lower, from 55¢ lower toward the back to $1.90 lower near the front of the board.
Negotiated cash fed cattle trade was mostly inactive on very light demand through Monday afternoon, according to the Agricultural Marketing Service.
Last week, live prices were $7 higher in the Southern Plains at $140/cwt., $3-$6 higher in Nebraska at $136-$140, $5-$8 higher in Colorado at $140 and $3-$6 higher in the western Corn Belt at $135-$140. Dressed trade was $7 higher in Nebraska at $217 and $3-$7 higher in the western Corn Belt at $213-$217.
Recent trade volume and delivery patterns suggest cash prices this week have the potential to gain more.
Choice boxed beef cutout value was $2.43 lower Monday afternoon at $277.58/cwt. Select was 26¢ lower at $262.02/cwt.
Corn futures closed mostly 5¢ to 9¢ lower.
Soybean futures closed 9¢ to 11¢ lower.
Major U.S. financial indices pared sharp losses from the previous session on Monday as traders and everyone else tried to sort out the potential impact of the new COVID variant announced last week.
The Dow Jones Industrial Average closed 236 points higher. The S&P 500 closed 60 points higher. The NASDAQ was up 291 points.
West Texas Intermediate Crude Oil futures on the CME rebounded $1.80 to $1.89 through the front six contracts.
“As 2021 winds to a close, cattle markets seem to finally be able to move out from under the specter of the pandemic impacts that began 18 months ago…The recent breakout of fed cattle markets, after struggling under the weight of beef packer capacity constraints, clears the way for cattle markets to move forward with the optimism that has been building in the industry in recent months,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments.
Peel adds that plenty of challenges remain, including COVID uncertainty and economic ripple effects, higher input costs and drought. But, he explains, market fundamentals continue to improve.
“The beef cow herd has been declining since 2019 and declined even faster in 2021. It will decline again in 2022 and likely in 2023,” Peel says. “However, strong domestic beef demand bolstered by even stronger demand and potential in international markets suggests that cyclical expansion could resume in the not-to-distant future. Exactly what the future path will be remains to be determined but producers should consider strategic and tactical plans for industry outcomes.”
With that in mind, Peel suggests winter is an appropriate time for producers to consider both animal and forage production and management plans for the coming year.
“Once calf marketing is complete and herd culling decisions are implemented, a relative down-time is ideal for a bit of review of the past year and planning for next year with a series of questions,” Peel says. “What are the conditions of pastures and rangeland going into the next growing season; should grazing plans or stocking rates be adjusted? Were production and reproductive rates and weaning weights as expected? What is the current body condition of the cows? What is the herd health status? Are upcoming herd nutritional needs evaluated and matched with feed and supplement resources? Planning now can help manage costs and production next year.”
Bottom line, Peel says relative market stability offers producers the opportunity to play offense rather than defense for the first time in a long while, if they’re prepared to do so.