Cattle futures and cash markets have been pummeled by a barrage of politics as bearish market reactions piled up under a slew of political statements and proposals, that left traders and producers running for the sidelines.
Oklahoma State University Extension Livestock Marketing Specialist, Derrell Peel, it a letter called Cow-Calf Corner, also said, “It’s important to remember that cattle market fundamentals have not changed…it’s the same supply and demand conditions that existed…weeks ago.”
POLITICAL TALK HAS HOLES
Political talk has included more beef imports from Argentina (largely irrelevant as an import source and with no expected effects on US beef prices) as well as a possible reduction in Brazil tariffs…which could affect processing beef supplies slightly, Peel said.
Lack of data because of the government shutdown makes it hard to say how much the August tariffs on Brazil decreased beef imports and therefore how much removing/reducing them might increase beef imports, he said. In any event it would be a return to market conditions that existed through July, including record-high lean trimmings prices.
Beef imports from Argentina and Brazil will have no effect on US steak prices, Peel said.
The USDA offered a wide range of proposals to “fortify the American beef industry,” which included laundry list of things including regulatory changes, access to federal grazing lands, and packing infrastructure, he said. None of these will change the supply and demand conditions of cattle and beef production – or beef prices – in the short run nor change the multi-year timeline for the industry to rebuild.
Will the Mexican border reopen for cattle imports? Who knows? Peel asked. Even if it does, it will not change feeder cattle supplies much for several months.
CHINA TRADE WAR
Also, there is the rumor of a thaw in the trade war with China, Peel said. It’s not clear if this would include reopening the Chinese market to US beef, which has been devastated recently.
Record-high cattle and beef prices have largely masked the effects of the loss of beef export markets to China, he said. The latest available trade data for July showed that China accounted for 1.2% of beef exports compared to one year ago when beef exports to China represented 15.3% of monthly exports.
If beef exports to China resume it will support US cattle and beef prices, he said.
Ultimately, it’s impossible to say what the effects of all the political talk on cattle markets, but they will be marginal and do not change the underlying market fundamentals, Peel said. With less agitation, cattle markets will bounce back quickly, and markets will guide production decisions.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $230.73 per cwt to $237.00, compared with last week’s range of $230.08 to $238.48 per cwt. FOB dressed steers and heifers went for $364.34 per cwt to $369.99, compared with $363.43 to $373.39.
The USDA choice cutout Tuesday was up $1.90 per cwt at $379.22 while select was up $0.38 at $360.08. The choice/select spread widened to $19.14 from $17.62 with 103 loads of fabricated product and 19 loads of trimmings and grinds sold into the spot market.
The USDA-listed the weighted average wholesale price for fresh 90% lean beef as $404.92 per cwt, and 50% beef was $181.20.
The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $1.05 to $1.20 a bushel over the Dec corn contract, which settled at $4.32, up $0.02 1/4.
The CME Feeder Cattle Index for the seven days ended Monday was $342.76 per cwt, down $1.61. This compares with Tuesday’s Nov contract settlement of $337.67, up $2.02.