Cattle futures borrowed support from limit up moves in Lean Hog futures and stronger wholesale beef values to rebound and close higher on Tuesday.
Live Cattle futures closed an average of $1.28 higher (92¢ to $1.47 higher).
Feeder Cattle futures closed an average of $2.28 higher ($1.85 to $2.70 higher).
Choice boxed beef cutout value was 65¢ higher Tuesday afternoon at $197.87/cwt. Select was 74¢ higher at $189.02.
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Major U.S. financial indices closed higher again on Tuesday, extending the recent rally, tied in part to betting on lower corporate rates in the tax reform proposal currently under consideration.
The Dow Jones Industrial Average closed 84 points higher. The S&P 500 closed 5 points higher. The NASDAQ closed 15 points higher.
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“A strong rally in Feeder Cattle futures since late August offers improved winter stocker profit potential,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “At current levels, March Feeder futures would allow a 750 lb. steer to be priced at roughly $150/cwt. in Oklahoma. A 475 lb. steer at today’s prices, would have a March 1 breakeven of $130-$137/cwt. at 750 lbs. depending on pasture and other costs. Such opportunities to price in winter stocker margins are rare and generally fleeting.”
Currently, Peel explains the strength of current prices for spring Feeder Cattle contracts is difficult to justify from a fundamental perspective.
“Producers should act promptly if these futures price levels are attractive,” Peel says. “Remember that futures have been notoriously volatile in recent years and Feeder futures can move $11.25/cwt. in two days of limit moves. While no major cattle market weakness is foreseeable at this time, general expectations are for modestly lower cattle prices in 2018 on continued growth in cattle supplies and beef production. There is clearly more downside risk than upside potential from current levels.”
Incidentally, contrary to early promise, Peel says wheat pasture planting in Oklahoma is behind the average pace due to dry topsoil conditions last month and the continued threat of army worms.