Cattle markets on Tuesday continued to retrace some of last week’s steep losses.
Although negotiated cash fed cattle trade remained undeveloped through Tuesday afternoon, prices for the week were looking higher. Through Monday, though a light test, the 5-area direct steer price average was $109/cwt. on a live basis. Chatter also continued that less negotiated trade the last couple of weeks mean packers need to renew inventory.
Oversold conditions and continued erosion in Corn futures helped Cattle futures close higher.
Live Cattle futures closed an average of $1.49 higher through the front three contracts, and then an average of 42¢ higher.
Feeder Cattle futures closed an average of 64¢ higher, except for 12¢ lower in the back contract.
Wholesale beef values were higher on Choice and firm on Select with moderate to fairly good demand and light offerings, according to the Agricultural Marketing Service.
Choice boxed beef cutout value was $2.57 higher Tuesday afternoon at $241.70/cwt. Select was 25¢ lower at $214.27.
Despite softer week-to-week corn condition, Corn futures closed 4¢ to 5¢ lower through Jul ’20 and then fractionally mixed to 2¢ lower.
Soybean futures closed mostly fractionally mixed to 1¢ higher.
Major U.S. financial indices closed lower Tuesday, with traders apparently taking profits from gains in the previous several sessions, perhaps prompted by lower Treasury yield rates.
The Dow Jones Industrial Average closed 173 points lower. The S&P 500 closed 23 points lower. The NASDAQ was down 54 points.
As market reaction to the Tyson fire captures a lion’s share of attention, Elliott Dennis, Extension livestock economist at the University of Nebraska-Lincoln suggests it be considered within the context of the macro economy that already enveloped cattle markets.
“Chinese trade issues continued to weigh on the agriculture markets,” Dennis explains, in the latest issue of In the Cattle Markets. “Effects were seen in corn and soybeans, spilling over into the cattle markets. The markets avoided a selloff when President Trump delayed tariffs on Beijing until December. Cattle markets saw a response with Chinese purchases towards the end of this past week. In absence of China, several negotiated trade deals have yet to be ratified by Congress. Combined, this has weighed down the domestic market.”
Next, Dennis points to worries about global economic growth and the impact on beef demand. For instance, faltering manufacturing and company profits in the second quarter, as well as last week’s yield curve inversion heighten concerns about domestic economic recession.
“The beef market will need to find additional homes for the beef on the market,” Dennis says. “More beef on the domestic markets will further depress prices. While beef was doing a decent job at finding international homes, this trend will need to continue and, in some cases, increase. While domestic demand has been strong, there is greater uncertainty whether consumers will continue to have increasing disposable income in the future, due to inflation. If inflation spills into the consumer goods market, then this could further depress derived demand prices.”