Currently, corn, soybeans and wheat futures are off substantially from their May highs, presenting cattle feeders with improved feeding margins, said Stephen Koontz, agricultural economist at Colorado State University, in a Livestock Marketing Information Center letter called In The Cattle Markets.
Those changes all occurred well ahead of the USDA Acreage report due out at the end of this month, Koontz said. National and regional forage prices have softened somewhat with the first cuttings, but these markets made their down move last year.
DROUGHT NOW IN THE MARKET
The futures market is communicating that drought and other production risks are substantially mitigated, or at least that is what the funds think, he said.
The National Weather Service is going to be an issue this year, but primarily for producers, Koontz said. There will be disruptions to the movement of cattle. There will be increased costs of mitigation and control. And, it will be much in the news.
But, there likely will not be much of a broad market-level effect, and this is especially the case for the supply side, he said.
On the other hand, a greater than 10% reduction in feed grain costs for the new crop can relax cattle feeding margins that were very tight, Koontz said. If grain prices stay soft or if cattle feeders take advantage of the opportunity to price currently cheap inputs, then the subsequent demand for feeder cattle and calves should be strong.
The corn price, in isolation, has the ability to reduce costs of gain, and with lower-cost other feeds, then the costs of gain will remain modest compared with the past five years, he said. But, these price changes don’t affect feed in the bunk but rather have the potential to affect costs of gain into 2027 and the value of this year’s calves.
2027
Speaking of 2027, the futures price declines of corn, meal, and wheat were not limited to 2026 contracts, Koontz said. Deferred contracts moved down as well.
The closing price for Dec 2027 on June 12 was $4.68 a bushel, and this is the price level where the market stopped after moving down for four and a half weeks, he said. This level seems at odds with what the fertilizer and fuel markets are doing.
But it also is an opportunity for folks who feed animals, Koontz said. It is worth remembering that feed costs that benefit cattle feeders also benefit producers feeding hogs, poultry and dairy cattle.
It is also worth remembering that the USDA NASS Acreage report is to be released on June 30 at noon ET. Some portion of the recent grain price moves is because of speculator selling of long positions.
The questions remain as to the risks associated with planted acres and yields for numerous crops, and have the risks really dissipated, he asked.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $256.28 per cwt to $264.00, compared with last week’s range of $256.19 to $257.34 per cwt. FOB dressed steers and heifers went for $401.64 per cwt to $410.90, compared with $401.57 to $405.30.
The USDA choice cutout Wednesday was down $1.37 per cwt at $398.94 while select was off $2.92 at $378.14. The choice/select spread widened to $20.80, from $19.25 with 83 loads of fabricated product and 15 loads of trimmings and grinds sold into the spot market.
The USDA-listed the weighted average wholesale price for fresh 90% lean beef as $466.43 per cwt, and 50% beef was $181.84.
The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $1.23 to $1.43 a bushel over the Jul corn contract, which settled at $4.07 a bushel, down $0.02 3/4.
No live cattle contracts were tendered for delivery Wednesday.
The CME Feeder Cattle Index for the seven days ended Tuesday was $375.83 per cwt, up $2.83. This compares with Wednesday’s Aug contract settlement of $372.92, up $4.77.