Chicago corn futures declined Wednesday amid thoughts that planting woes this year were overblown, but they’re still up significantly from two months ago, which could help to keep calves on grass longer, wrote a university Extension economist for the Livestock Marketing Information Center.
Stated another way, lush pasture growth this year from all the rain could allow backgrounders to keep calves on grass longer than normal and pile on extra pounds cheaply since high corn costs already are pressuring feeder cattle prices.
Josh Maples, agricultural economist at Mississippi State University, told Extension agents in this week’s In The Cattle Markets that while corn prices are up because of planting issues, pasture and range conditions generally are in great shape.
It is a rare year in that corn prices are significantly higher while pasture conditions are in better shape than is usually expected this time of year, Maples said. This likely will lead to shifts in how gain is added to feeders this year.
Producers may glance at the lower prices offered and decide to push them a little longer on pasture. This could potentially lead to slower feedlot placements and temper 2019 beef production slightly, he said.
FEEDER FUTURES DOWN
Aug feeder cattle futures prices are down about $25 per cwt from the contract high on April 18. Similar cash-market declines have occurred in most areas, Maples said.
A steady rise to start the year pushed Southern Plains feeder steer prices above year-ago levels where they remained into April. Since then, the trend turned downward, and prices are below a year ago.
Much of the recent declines can be attributed to seasonal patterns, he said. The usual peak in March or April generally is followed by a decline into the summer.
Add in a bearish April Cattle on Feed report, weaker export totals and the corn market rally, and there was not much good news for cattle producers in late April and May.
Large supplies also are a major piece of the market puzzle, he said. US cattle slaughter for the first quarter of 2019 was about 1% above a year ago, but lower cattle dressed weights have helped to moderate beef supplies.
UNCERTAINTY RUNS DEEP
Another big factor this year is uncertainty, Maples said. Perhaps the biggest unknown right now are future corn and feed prices and their ultimate effect on cattle prices.
The USDA last week released its supply and demand estimates, forecasting a 1.4-billion-bushel corn production decline from just a month earlier, he said. This pushes the 2019/20 corn production forecast down to 13.7 billion bushels, which, if realized, would be the lowest since the 2015/16 season.
It is well known that higher corn prices lead to increased feeding costs. The uncertainty about corn supply and prices are negatively affecting cattle prices and could continue to do so for some time.
CATTLE, BEEF RECAP
Cash cattle trading took place last week at $112 to $114 per cwt on a live basis, steady with the previous week’s action, and at $184 to $186 dressed, steady to up $2.
The USDA choice cutout Wednesday was up $1.06 per cwt at $221.59, while select was up $0.44 at $202.24. The choice/select spread widened to $19.35 from $18.73 with 123 loads of fabricated product sold into the spot market.
No contract delivery notices were served for the Jun live cattle futures contract Wednesday.
The CME Feeder Cattle index for the seven days ended Tuesday was $133.02 per cwt, down $0.19 from the previous day. This compares with Wednesday’s Aug contract settlement of $136.52, down $0.72.