Negotiated cash fed cattle trade remained largely undeveloped through Thursday afternoon, based on USDA reports. There was some early dressed trade in Nebraska at $181-$182/cwt., which was $1-$2 higher than last week. Although too few to trend, there were also some dressed sales in the western Corn Belt at $181-$182 and some live at $114.
Continued higher wholesale beef values, the positive outlook for cash prices and higher outside markets helped lift Cattle futures Thursday.
Except for unchanged in spot Dec, Live Cattle futures closed an average of 42¢ higher.
Except for 2¢ lower in spot Nov, Feeder Cattle futures closed an average of 96¢ higher (40¢ to $1.52 higher).
Wholesale beef values were higher on moderate to fairly good demand and moderate offerings, according to the Agricultural Marketing Service.
Choice boxed beef cutout value was $1.15 higher Thursday afternoon at $238.29/cwt. Select was $1.49 higher at $213.02.
Grain futures were mixed as traders positioned themselves ahead of Friday’s monthly World Agricultural Supply and Demand Estimates.
Corn futures closed 2¢ to 4¢ lower through Sep ’20 and then mostly 1¢ lower.
Soybean futures closed 7¢ to 10¢ higher through Aug ’20 and then mostly 2¢ to 5¢ higher.
Major U.S. financial indices climbed on Thursday, with reports that the U.S. and China are making progress on a trade deal, including agreement to roll back some existing tariffs if and when a deal is struck.
The Dow Jones Industrial Average closed 182 points higher. The S&P 500 closed 8 points higher. The NASDAQ was up 23 points.
“Fed cattle, feeder cattle, and calf cash prices have all been stronger than expected through this fall. Live Cattle and Feeder Cattle futures contract prices have also shaken off the pessimism of abundant supplies, compounded by the unexpected closure of the Tyson beef plant in southwest Kansas,” says Stephen Koontz, agricultural economist at Colorado State University, in the latest issue of In the Cattle Markets.
He explains part of the support comes from the supply side, including the lighter year-over-year carcass weights for much of the year, as well as packers running substantial Saturday kills for a long while.
“What is being discussed less is the strong retailer and, by definition, consumer effects,” Koontz says. “Packers margins have been very strong in August and September, and likely October, approaching $500 per head. These are the live-to-wholesale beef price spreads. This value is much higher than other months and much higher than prior year highs. This is, of course, due in part to the plant closure. But it is interesting that the live-to-retail price spread has moved little in these same two months. The live-to-retail spread is up less than 2-3%. The retailer margin or the wholesale-to-retail spread has declined sharply. Again, the live-to-wholesale spread is up, the live-to-retail spread is even, so it is the retailer that has taken a chunk out of their margin.”
Koontz also points to the current Choice-Select spread of more than $25/cwt. compared to what’s typically about $10 this time of year.
“It is clear the retailer has helped the cattle market turn the corner on any pessimism from summer supplies and slaughter disruption. And, there does not appear to be any pushback from the consumer,” Koontz says.