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Cash And Futures Markets Vie For The Lead

Calves and yearling feeder cattle sold steady to $5/cwt. higher during the short Thanksgiving week. Although trade remained light, cash fed cattle sales also sold in record territory as wholesale beef values inched ahead. Cattle futures ran the opposite direction, though, on light volume and continued concerns about consumer resistance to record retail beef prices.

Wes Ishmael

November 29, 2014

3 Min Read
Cash And Futures Markets Vie For The Lead

Although cash calf and feeder markets were only partially tested during the holiday week, calves and yearlings traded steady to $5/cwt. higher in early-week auctions, according to the Agricultural Marketing Service (AMS) on Friday.

Regionally, steers weighing 600-700 lbs. last week were averaging $81.93/cwt. to $89.18/cwt. more than the same time a year ago. Steers weighing 500-600 lbs. were averaging $91.51/cwt. and $99.56/cwt. more than a year ago in the Southeast and South Central regions, respectively.

Feeder cattle futures ran the opposite direction, though. Week-to-week, they closed an average of $3.81 lower across the board and that was after an average of increase of 72¢ from Wednesday to Friday.

“Feeder-cattle futures extended losses as feedlot margins remain under pressure,” John Otte, Penton market analyst, explained on Wednesday. “Although feed grain prices have fallen to the lowest levels in years, feeder-cattle costs have climbed higher than the ascent in live fed cattle prices, sparking concerns about demand for light-weight animals. If processors are unwilling to pay higher prices for slaughter-ready cattle, feedyard operators have less incentive to bid aggressively for feeder livestock,” he says.

A similar dichotomy existed between the cash fed cattle and futures markets.

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Through Friday afternoon, trade remained more limited for the week than some expected, but prices remained in record territory.

A few sales in Nebraska Friday traded at $170/cwt. on a live basis and at $268 in the beef, but too few to trend. On Wednesday, live prices there were at $170-$173 and dressed prices were at $267. Elsewhere, live sales in Kansas and Colorado traded at $173 on Wednesday.

Likewise, boxed beef cutout values gained for another week.

Week-to-week, Choice boxed beef cutout value was $2.18/cwt. higher at $257.40 Friday afternoon. Select was $3.92 higher at $245.85/cwt.

Live Cattle futures, however, lost ground. Week-to-week, Live Cattle futures closed an average of $1.97 lower through the front four contracts, and then an average of 46¢ lower, except for $1.20 higher at the very back.

Keep in mind, sliding crude oil prices also pressured commodity futures markets and some equity markets this week. Week to-week, crude oil futures (WTI-ICE) were down an average of $6.57 through the front six contracts, closing at less than $70/bbl.

“The overall size of the U.S. herd remains at its smallest in decades and beef-processing companies paid record-high prices for cattle in cash markets the previous week, helping boost futures contracts,” Otte said earlier this week. “However, last week's USDA Cattle on Feed report suggests that a short-term uptick in fed cattle supply lies ahead. Still, beef will remain in tight supply and pricy. Traders are assessing whether consumers are willing to pay more for beef, particularly with chicken production on the rise.”



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