Cattle markets were slippery at best last week as volatile swings in equity markets—tied to escalating treasury yields and interest rates—compounded commodity market uncertainty.
For perspective, compared to two weeks earlier on Friday: The Dow Jones Industrial Average closed about 2000 points lower; the NASDAQ was down 511 points; the S&P 500 was 202 points lower. But they were up and down that much again.
Rather than hinting at some sort of catastrophic collapse in equities, odds favor the recent volatility being part of a long-expected market correction.
Calves and Feeders
When all was said and done, steers and heifers traded from $1 lower to $4/cwt. higher, according to the Agricultural Marketing Service (AMS).
“Even though horrible weather conditions were realized in many places, the demand for quality stock was not diminished one iota,” AMS analysts said.
All the while, expanding drought conditions continued to alter production and marketing decisions.
“Late summer and fall pasture growth was diminished with the lack of rainfall in the major cow-calf states and hay stocks are being consumed steadily as winter rolls on,” AMS analysts say. “Quite a lot of hay from Nebraska is being trucked to out-of-state feedlots and dairies. Some ranchers are loading up on hay, especially alfalfa hay to supplement cows and heifers after calving. Some cattlemen are having to supplement cows on cornstalks as most are under snow and cows are having a hard time rummaging up a enough mega calories to keep them going when the temperatures get in the teens and below.
Feeder Cattle futures closed an average of $3.08 lower week to week on Friday ($1.82 to $4.72 lower in spot Mar).
“The futures market has started to price in a more seasonal price trend the first three quarters of the year, but it currently has a fourth quarter price that is stronger than the seasonal tendency,” explains Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “Most Feeder Cattle contracts are within $10/cwt. of their contract high which occurred in early November 2017.”
Although there is potential for the market to move higher, Griffith suggests now may be the time to offset price risk for cattle that will be marketed in the second half of the year, especially in the fourth quarter.
Fed Cattle
Negotiated cash fed cattle trade remained stalled through late Friday afternoon, although fundamentals continued to suggest steady money at the worst. The previous week prices were at mostly $126/cwt. on a live basis; steady in the beef at $200.
Griffith notes that Through Thursday April (Live Cattle) was trading at more than a $2.50 discount to February and June was trading with more than an $8 discount to April.
“These steep discounts on the futures market should keep cattle moving through the pens and to packers, which should keep cattle weights manageable,” Griffith says.
After 32¢ lower in spot Feb, Live Cattle futures closed an average of $1.74 lower week to week on Friday (90¢ lower at the back of the board to $2.57 lower in near Apr).
Wholesale Beef Values
Choice boxed beef cutout value was $2.58 lower week to week on Friday at $206.52; Select was 71¢ lower at $202.74.
“Light boxed beef movement has allowed packers to keep wholesale beef prices elevated the first six weeks of the year, but a more seasonal tone came into the Thursday and Friday market,” Griffith explains. “February beef demand is always weak relative to most other months and that weakness is beginning to show up in wholesale beef prices.”
Friday to Friday Change*
Weekly Auction Receipts
|
Receipts Feb. 09 |
Auction (head) (Change) |
Direct (head) (Change) |
Video/net (head) (Change) |
Total (head) (Change) |
|
224,300 (-57,900) |
57,700 (+14,100) |
26,500 (+25,500) |
308,500 (-18,400) |
CME Feeder Index
| CME Feeder Index | Feb. 08 | Change |
| $147.59 | – 0.44 |
*Thursday-to Thursday for CME Feeder Index
Cash Stocker and Feeder
North Central
| Steers-Cash | Feb. 09 | Change |
| 600-700 lbs. | $170.51 | – $1.01 |
| 700-800 lbs. | $155.25 | – $0.73 |
| 800-900 lbs. | $146.15 | – $1.04 |
South Central
| Steers-Cash | Feb. 09 | Change |
| 500-600 lbs. | $174.26 | + $0.96 |
| 600-700 lbs. | $160.27 | + $1.50 |
| 700-800 lbs. | $149.30 | + $1.34 |
| 800-900 lbs. | $141.45 | – $0.59 |
Southeast
| Steers-Cash | Feb. 09 | Change |
| 400-500 lbs. | $173.03 | + $1.72 |
| 500-600 lbs. | $162.37 | + $3.30 |
| 600-700 lbs. | $148.84 | + $1.53 |
(AMS National Weekly Feeder & Stocker Cattle Summary)
Wholesale Beef Value
| Boxed Beef (p.m.) | Feb. 09 ($/cwt) | Change |
| Choice | $206.52 | – $2.58 |
| Select | $202.74 | – $0.71 |
| Ch-Se Spread | $3.78 | – $1.87 |
Futures
| Feeder Cattle | Feb. 09 | Change |
| Mar | $146.200 | – $4.725 |
| Apr | $147.750 | – $4.025 |
| May | $148.325 | – $3.450 |
| Aug | $151.000 | – $3.075 |
| Sep | $151.425 | – $2.500 |
| Oct | $151.875 | – $1.825 |
| Nov | $151.475 | – $1.875 |
| Jan ’19 | $147.150 | – $3.175 |
| Live Cattle | Feb. 09 | Change |
| Feb | $126.525 | – $0.325 |
| Apr | $123.625 | – $2.500 |
| Jun | $115.425 | – $2.575 |
| Aug | $112.825 | – $2.150 |
| Oct | $114.600 | – $2.075 |
| Dec | $116.650 | – $1.525 |
| Feb ’19 | $117.250 | – $1.250 |
| Apr | $117.400 | – $0.975 |
| Jun | $111.100 | – $0.900 |
| Corn futures | Feb. 09 | Change |
| Mar | $3.620 | + $0.006 |
| May | $3.696 | + $0.002 |
| Jul | $3.774 | + $0.002 |
| Sep | $3.842 | – $0.002 |
| Dec | $3.922 | – $0.002 |
| Mar ’19 | $4.000 | – $0.004 |
| Oil CME-WTI | Feb. 09 | Change |
| Mar | $59.20 | – $6.25 |
| Apr | $58.99 | – $6.08 |
| May | $58.67 | – $5.94 |
| Jun | $58.32 | – $5.79 |
| Jul | $57.90 | – $5.65 |
| Aug | $57.45 | – $5.50 |
Equities
| Equity Indexes | Feb. 09 | Change |
| Dow Industrial Average | 24190.90 | – 1330.06 |
| NASDAQ | 6874.49 | – 366.00 |
| S&P 500 | 2619.55 | – 142.58 |
| Dollar (DXY) | 90.35 | + 1.16 |