Negotiated cash fed cattle trade got underway in earnest on Wednesday with cattle feeders apparently content with last week’s sizable jump in prices. Live sales were $1 lower than last week at $124/cwt. in the Southern Plains and Colorado. Live trade in Nebraska was $1-$3 lower at $122-$124, while dressed sales held steady at $192.
Likewise, the average weighted price was $124 at the weekly Fed Cattle Exchange auction on Wednesday. The price was for 465 head sold out of 982 head offered for delivery at 1-9 days. There was a PO at $123 and no sales for another 209 head offered for 1017-day delivery.
Despite resurgent wholesale beef values and promising fundamentals, Cattle futures closed sharply lower on Wednesday with apparent long liquidation and technical selling.
Live Cattle futures closed an average of $1.20 lower ($1.00 to $1.80 lower).
Feeder Cattle futures closed an average of $2.97 lower ($2.55 to $3.00 lower).
Choice boxed beef cutout value was 49¢ higher Wednesday afternoon at $213.13/cwt. Select was $1.13 higher at $198.89.
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Major U.S. financial churned sideways on Wednesday but to the upside. That was despite some fretting that key Republican losses in this week’s election could make tax reform tougher sledding.
The Dow Jones Industrial Average closed 6 points higher. The S&P 500 closed 3 points higher. The NASDAQ closed 21 points higher.
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Plenty of factors contribute to the current sustained strength of calf, feeder and fed cattle markets. There’s the much publicized, ongoing aggressive marketing of feedlots that continues to suppress carcass weights and mute the impact of increasing cattle numbers. There are the apparently significant profits of beef packers encouraging them to kill more cattle than less. More than anything, though, it is demand that continues to underpin higher prices.
“Feeder cattle prices the past three months have slowly and methodically made gains, which bode well for a sustained feeder cattle market,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “The anomaly in the feeder cattle market was that finished cattle prices softened much of that time. Thus, the first 10 or 11 weeks of stronger feeder cattle prices were not driven by the live cattle market indicating significantly higher prices. However, the strength in the market the past two weeks has largely been due to feeder cattle markets chasing the live cattle market run to the upside. The strong finished cattle market provides support for continued strength in the feeder cattle market moving forward. If the live cattle market makes a turn to the downside then feeder cattle will quickly and drastically follow. The calf market has also been supported by the strength in downstream markets. However, the normal seasonal tendency for calf prices to soften during the fall months is equally fighting the upward price movement, which has left calf prices fairly steady the past several weeks.”
Griffith points out that fed cattle prices in recent weeks are receiving support from increasing wholesale beef values as retailers and food service operators begin stocking up for holiday shoppers.
“The demand leading up to the holiday season is generally for higher quality beef and primarily middle meats,” Griffith explains. “The demand for higher quality beef will result in the Choice Select spread continuing to widen the next few weeks. Additionally, this means, the Choice boxed beef price will be supported primarily by middle meats the next month or so before winter purchases begin dominating the market. Once the winter purchases take over then the Choice Select spread will begin narrowing and could narrow to near zero in January or February. Packers will be more concerned with maintaining positive margins than anything else.”