Negotiated cash fed cattle prices took on a firmer feel Wednesday.
There were 1,229 head offered in the weekly Fed Cattle Exchange auction. Of those, 281 head—two lots in the Southern Plains—sold for a weighted average price of $101.13/cwt., for delivery at 1-9 days. That’s $1-$2 more than negotiated trade in the region last week.
Slaughter steers and heifers sold $3-$5 higher at Sioux Falls Regional in South Dakota. Choice 2-3 steers (319 head) averaged $103.40. Country trade in the region last week was at $101-$102.
Likewise, steers and heifers sold $4-$5 higher at the fat auction in Tama, IA. Choice 2-4 steers (197 head) averaged $107.54.
That helped Cattle futures close higher, despite continued erosion in wholesale beef values.
Except for an average of 10¢ lower in the back two contracts, Live Cattle futures closed an average of 59¢ higher.
Feeder Cattle futures closed an average of 76¢ higher.
Wholesale beef values were lower on light demand and heavy offerings, according to the Agricultural Marketing Service.
Choice boxed beef cutout value was $1.53 lower Wednesday afternoon at $218.24/cwt. Select was $1.94 lower at $191.97.
Corn futures closed 2¢ to 3¢ higher through the front three contracts and then mostly fractionally higher.
Soybean futures closed mostly 4¢ lower.
Major U.S. financial indices closed little changed on Wednesday. There was pressure earlier in the session, tied to the Fed meeting. Investors got the widely anticipated rate cut (down 25 basis points) but no confirmation that the central bank plans any more cuts this year.
“In light of the implications of global developments for the economic outlook as well as muted inflation pressures, the Committee decided to lower the target range for the federal funds rate to 1.75- 2.00%,” according to a statement from the FOMC. “This action supports the Committee’s view that sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2% objective are the most likely outcomes, but uncertainties about this outlook remain.”
The Dow Jones Industrial Average closed 36 points higher. The S&P 500 closed 1 point higher. The NASDAQ was down 8 points.
USDA expects lingering effects from the Tyson fire to keep pressure on feeder cattle prices, at least through the first part of next year.
“The shift in demand for fed cattle has put considerable pressure on feeder steer prices. Weakness in fed cattle prices will likely affect feedlots’ pricing of feeder cattle,” say analysts with USDA’s Economic Research Service (ERS), in the monthly Livestock, Dairy and Poultry Outlook released yesterday. “On Sept. 9 at the Oklahoma National Stockyards, sales of feeder steers weighing 750-800 lbs. were reported at $134.80/cwt., down about $6 from the week before the fire. Based on recent price data, the third-quarter 2019 feeder steer price was lowered by $4 to $138/cwt. Because of the expected continuation of weaker fed cattle prices and a slower pace of marketing, the 2019 fourth-quarter feeder steer price forecast was lowered $5 from the prior month to $133. The impact of lower fed cattle prices is likely to carry into 2020. The price forecasts for feeder steer prices in the first and second quarter of 2020 were reduced by $5 to $135 and $140, respectively. As a result, the 2020 annual price forecast for feeder steers was $140.50 per cwt.”
As for the weaker fed cattle prices driving the pressure, ERS analysts point out the average 5-area direct fed steer price last week of $110.07/cwt. was almost 11% less than the week of the fire. Expected fed steer price for the third quarter was reduced by $3 to $107/cwt.
“With the expected return of the Holcomb plant in first-quarter 2020, the additional capacity would suggest some price support for fed cattle in early 2020. However, to the extent feedlots may have held cattle over from fourth-quarter 2019 into early 2020, increased availability of cattle may mitigate some of the upward pressure on prices from increased packer demand,” ERS analysts explain. “Accordingly, the first and second-quarter price forecasts for 2020 were reduced by $5 to $119 and $117, respectively. As a result, the 2020 annual price forecast for fed steers was lower by $4 to $115 per cwt.”