So far this week, negotiated cash fed cattle trade is steady to $1 lower on a live basis in Nebraska and the western Corn Belt at $107-$108/cwt., according to the Agricultural Marketing Service. Dressed sales are $1 lower in Nebraska at $169. Live sales in the Southern Plains are $1 lower at $108.
Cattle futures continued to weaken on Thursday, especially Feeder Cattle, as grain prices continued to strengthen.
Live Cattle futures closed an average of 58¢ lower.
Feeder Cattle futures closed an average of $1.17 lower (82¢ to $1.52 lower), except for 55¢ and 15¢ higher in the front two contracts.
Choice boxed beef cutout value was 60¢ lower Thursday afternoon at $210.54/cwt. Select was $2.38 lower at $196.89.
Corn futures closed 3¢ to 7¢ higher through the front four contracts and then mostly fractionally higher to 1¢ higher.
Soybean futures closed 3¢ to 6¢ higher through Mar ’21 and then mostly 1¢ to 2¢ lower.
Major U.S. financial indices softened Thursday. Pressure included resurgent COVID cases in Europe prompting renewed pandemic restrictions in some countries.
Also, weekly initial unemployment insurance claims of 898,000 reported by the U.S. Department of Labor was 53,000 more than the previous week and less robust than the trade expected.
The Dow Jones Industrial Average closed 19 points lower. The S&P 500 closed 5 points lower. The NASDAQ was down 54 points.
“The current concern surrounding Alternative Marketing Arrangements (AMA e.g. formula/grid pricing) has more to do with lower cash prices received by producers due to market reactions to major market disruptions than the role of AMA’s role in thinly traded markets,” says Elliott Dennis, Extension livestock economist at the University of Nebraska-Lincoln, in the latest issue of In the Cattle Markets.
Dennis discusses the motivation behind recent legislative proposals that would mandate minimum levels of weekly cash trade.
“While both bills would bring increased negotiated cash price discovery and transparency in the feedlot-packer market interface, neither are likely to increase the cash price received by producers since they do not fundamentally change the supply of fed cattle nor the demand for wholesale beef,” Dennis explains. “Further, it is unlikely that if these bills were implemented prior to either the Holcomb Fire or COVID-19 it would have prevented the backlog in cattle, nor affected the demand for wholesale beef. If implemented, these policies would create additional transparency but potentially create increased costs and reduce profitability for the entire beef complex. Consistent with the economic theory of derived demand, the additional costs of these policies are likely to predominately be carried by the cow-calf industry.”
Although there are regional differences and periods when bid-the-grid selling increased, Dennis says there has been little overall average change in the percentage of negotiated cash sales since the beginning of the year.