Cattle futures took a strong step higher Tuesday, buoyed by the outlook for steady to higher cash prices, as well as strong exports indicated in the weekly boxed beef report.
Live Cattle futures closed an average of 89¢ higher, from 12¢ higher at the back to $1.47 higher toward the front.
Feeder Cattle futures closed an average of $1.70 higher, from 80¢ higher at the back to $2.67 higher toward the front.
Choice boxed beef cutout value was 56¢ lower Tuesday afternoon at $217.16/cwt. Select was 57¢ higher at $206.99.
Corn futures closed 1¢ to 2¢ lower.
Soybean futures closed 2¢ to 3¢ lower through May ’21 and then mostly fractionally higher to 1¢ higher.
Major U.S. financial indices closed lower with most of the pressure appearing to stem from worries about resurgent coronavirus and prolonged impact on the economy. Potentially, there was also some positioning ahead of Tuesday night’s presidential debate.
The Dow Jones Industrial Average closed 131 points lower. The S&P 500 closed 16 points lower. The NASDAQ closed 32 points lower.
Last week, Sen. Deb Fischer (R-Neb.), a member of the Senate Agriculture Committee, introduced the Cattle Market Transparency Act of 2020.
Among other things, according to Sen. Fischer’s office, the legislation would:
“Establish regional mandatory minimum thresholds of negotiated cash trades to enable price discovery in cattle marketing regions.
“Require USDA to create and maintain a library of marketing contracts between packers and producers, and require packers to supply this information to USDA.
“Make clear that all information should be reported in a manner that ensures confidentiality…
“Mandate that a packer report the number of cattle scheduled to be delivered for slaughter each day for the next 14 days. This requirement already exists for the swine industry.”
Many of those mirror suggestions made in USDA’s Boxed Beef and Fed Cattle Price Spread Investigation Report, published July 22. That report was the result of USDA’s investigation into cattle market volatility in the wake of the pandemic and last summer’s Tyson plant fire in Kansas.
“Sen. Fischer’s bill explores many avenues to improve transparency in the cattle markets,” according to a statement from the National Cattlemens Beef Association (NCBA). “The creation of a cattle contracts library and clarification of confidentiality rules will provide crucial data to cattle producers as they seek to make informed marketing decisions. However, our policy dictates that the voluntary framework we are developing be allowed the opportunity to succeed or fail before we can lend our support to regional mandatory minimums for negotiated trade.”
NCBA’s 46 state affiliate organizations unanimously adopted a fed cattle price discovery policy at their 2020 Summer Business Meeting, directing NCBA to pursue a voluntary approach to price discovery that includes triggers established by a working group of producer members which, if tripped due to a lack of regionally sufficient negotiated trade, would prompt NCBA to seek legislative or regulatory solutions—such as those outlined in Sen. Fischer’s bill.
Similarly, striving for voluntary solutions to increased cash cattle trade is supported by the recent report from the American Farm Bureau Federation’s (AFBF) Cattle Market Working Group, which also examines cattle market volatility in the wake of the pandemic and last summer’s Tyson plant fire in Kansas.
“A key point to remember when discussing the optimal level of negotiated transactions is that PRICE DISCOVERY is not the same as PRICE DETERMINATION,” according to the AFBF report. “While enhanced price discovery is a good thing, it does not necessarily mean it will result in higher prices (as many proponents of minimum thresholds contend). Mandatory minimum negotiated trade could potentially inhibit a producer’s ability to enter into AMAs (alternative marketing arrangements), which are typically a premium paid above market value. Current AFBF policy does not endorse a mandatory minimum negotiated trade.”