Cattle futures edged higher Monday as traders adjusted to last week’s strong rally.
Live Cattle futures closed an average of 23¢ higher (5¢ to 40¢) except for unchanged in Feb ’22.
Feeder Cattle futures closed an average of 62¢ higher, except for 30¢ and 38¢ lower at either end of the board.
Grain futures, especially Soybeans added support, under pressure from apparent positioning ahead of Tuesday’s monthly World Agricultural Supply and Demand Estimates.
Negotiated cash fed cattle trade ranged from limited on very light demand to a standstill through Monday afternoon, according to the Agricultural Marketing Service.
Last week, live prices were at $128-$130/cwt. in the Southern Plains and the western Corn Belt; $130 in Nebraska. Dressed prices were $202-$204.
Choice boxed beef cutout value was 89¢ lower Monday afternoon at $288.65/cwt. Select was $1.08 higher at $267.52/cwt.
Major U.S. financial indices closed higher again with the S&P 500 closing above 4,700 for the first time. Corporate earnings and other positive economic data seem to be overriding inflationary concerns for now.
The Dow Jones Industrial Average closed 104 points higher. The S&P 500 closed 4 points higher. The NASDAQ was up 11 points.
“The long-awaited improvement in fed cattle markets appears to have arrived with fed cattle prices jumping roughly $5/cwt. the past two weeks,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments.
He explains the improvements include working through backlogged feedlot placements resulting from supply chain disruptions last year and the Tyson fire in August of 2019.
“Those dynamics pushed the cyclical peak in feedlot production into 2021. The fed cattle market problems are the result of this peak feedlot production constrained by packing industry capacity limitations,” Peel explains. “Long-term reductions in packing industry infrastructure combined with chronic labor limitations, which predate but were made worse by COVID-19, added months to the time needed to improve the fed cattle market situation.”
As the backlog of cattle finally clears, he explains cattle and beef markets will be able to realign and rebalance.
“The industry will be better positioned to capitalize on the optimism that has been building in recent months,” Peel says. “Tighter supply and continued strong demand will take markets to higher levels. Strong wholesale and retail prices have been pulling on the industry most of this year. The trade picture continues to improve with the latest data showing additional growth in beef exports and reduced beef imports. On the supply side, feeder cattle markets, already higher year over year, are increasingly supported by cyclically reduced feeder cattle supplies and poised to benefit even more from higher fed cattle prices.”
Plenty of challenges remain, but mostly from the input side of the equation as feed and fertilizer prices escalate.
“Drought continues to be a major factor in many regions and will not only directly impact producers in those regions but will also determine the trajectory of the industry in the coming years. Higher crop and feed ingredient prices are a particular challenge for feedlots but also for cow-calf and stocker producers, most especially those struggling with drought-reduced feed and forage availability,” Peel says. He adds that pervasive labor issues and supply chain disruptions will continue to impact input and output markets in the coming months.
But, barring any new black swans, fundamentals should be driving cattle prices.