Cattle futures stepped higher Tuesday, helped along by follow-through support from the friendly Cattle on Feed report, as well as early indications of cash prices pushing past steady this week and wholesale beef prices turn seasonally higher.
Feeder Cattle futures closed an average of $1.33 higher (35¢ to $2.05 higher).
Those gains came despite Corn futures closing mostly 3¢ to 5¢ higher.
Soybean futures closed mostly fractionally higher to 2¢ higher.
Live Cattle futures closed an average of $1.48 higher.
Negotiated cash fed cattle trade was slow on light demand in the Texas Panhandle through Tuesday afternoon, according to the Agricultural Marketing Service. Prices were mainly steady with last week at $124/cwt., but a few traded $1 higher at $125.
Elsewhere, trade ranged from mostly inactive on light demand to a standstill with too few transactions to trend.
Last week, live prices were $124 in Kansas and $124-$125 in Nebraska and the western Corn Belt. Dressed prices were $196.
Choice boxed beef cutout value was $1.72 higher at $284.76/cwt. Select was 65¢ lower at $262.54.
Major U.S. financial indices edged higher Tuesday, fueled once again by strong corporate quarterly earnings reports. Consumer confidence added luster.
The Conference Board Consumer Confidence Index® increased to 113.8 in October from 109.8 in September.
“Consumer confidence improved in October, reversing a three-month downward trend as concerns about the spread of the Delta variant eased,” says Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “While short-term inflation concerns rose to a 13-year high, the impact on confidence was muted. The proportion of consumers planning to purchase homes, automobiles, and major appliances all increased in October—a sign that consumer spending will continue to support economic growth through the final months of 2021. Likewise, nearly half of respondents (47.6%) said they intend to take a vacation within the next six months—the highest level since February 2020, a reflection of the ongoing resurgence in consumers’ willingness to travel and spend on in-person services.”
The Dow Jones Industrial Average closed 15 points higher. The S&P 500 closed 8 points higher. The NASDAQ was up 9 points.
“While the incentives to retain cattle and put on additional weight appear to be present this year in some locations, producers must calculate their operations’ value and cost of gain to determine if it is a correct decision,” says Elliott Dennis, Extension livestock economist at the University of Nebraska-Lincoln. “Using some form of risk management could be appropriate given the assumptions about volatility and price certainty.”
In the latest issue of In the Cattle Markets from the Livestock Marketing Information Center, Dennis explains feed costs and beef demand are two factors that could take the shine of what currently appear to be price trends conducive for cow-calf producers to retain cattle for longer this fall.
Although projected corn production is more than expected just a couple of months ago, the forecast season-average price of $5.45/bu. is significantly higher than last year, as are other feeds. Drought raised the price floor beneath forage and hay prices. Odds favor La Nina conditions through the winter, which point to similar temperature and moisture conditions as last year.
“If this weather forecast materializes, then the price for grass and hay will continue to rise, pasture rental rates adjust higher and likely continue the cow herd liquidation this has persisted over the last three years,” Dennis says. “…Some feeding regions are coming off two years of drought conditions and many producers have already sold off both feeder cattle and parts of the cow herd.”
As for beef demand, Dennis says there are early indications that higher beef prices are creating consumer reluctance to continue buying at the same pace.
“Beef exports have started to slow from their record-setting pace and as of yet, there are few advanced purchases for beef into 2022. This is one indication that the export markets have started to potentially move away from higher-priced U.S. beef,” Dennis explains. “In the domestic market, advanced purchases of wholesale beef from retail stores have also started to slow, indicating that perhaps domestic retailers are more willing to live in the cash market and then adjust featured products in the short run. This is perhaps one of the first signs that the price of beef is just too high for retailers to take any longer.”