Watch Feeder Cattle Markets For Direction

Going into the end of the year, it will be important for cow/calf producers and backgrounders to pay attention to feeder cattle market direction, said Andrew Griffith, agricultural economist at the University of Tennessee in a market letter.

Price action the last week of December can point to action in January, Griffith said.

 

PRICES STEADY TO HIGHER

 

Based on weekly auction market averages reported by the USDA, steer prices last week were steady to $2 higher compared with the previous week while heifer prices were unevenly steady compared with the previous week, he said.  Slaughter cow prices were steady to $2 lower than the weighted average price from a week earlier, while bull prices were steady to $1 lower compared with the previous week.

Using last week’s trends could be problematic in that prices were mixed across auction markets, Griffith said.  Some early week auction prices were rather soft compared with auctions in the middle of the week.

That softness in Monday auctions likely was a holdover from the continued decline in futures the previous week while the stronger prices as the week continued were consistent with the follow-through on the futures market as it strengthened through the week, he said.

 

PRICE DIRECTION

 

The stronger prices to finish the week is important from the standpoint there is only one more week of livestock auctions before the end of the week, and the direction of the market to finish the year will point toward how the new year will begin, Griffith said.  Thus, if there is follow through next week in the cash markets, that will bode well for higher cattle prices in January.

That statement certainly does not account for what feeder cattle futures do during the two weeks that many auctions will be closed, he said.  However, cash prices have not consistently followed futures through 2023 so the cash market will be a better indicator of what the start of January will look like.

Given the rapid decline in feeder cattle futures since the middle of September, the market is ready for a correction of some sort on the futures market side, Griffith said.  Prices may not challenge previous contract highs for a while, but the market will offer producers an opportunity to hedge cattle for summer and fall of 2024 moving through the next several months.

The market to keep an eye on is the female market, Griffith said.  The thought here is that bred female prices will escalate in the spring if forage production gets off to a good start and will continue to increase if forage production persists through summer.

 

CATTLE, BEEF RECAP

 

The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $163.80 per cwt to $171.51, compared with last week’s range of $165.82 to $173.08 per cwt.  FOB dressed steers, and heifers went for $266.81 per cwt to $271.15, compared with $268.50 to $27.

The USDA choice cutout Thursday was up $2.00 per cwt at $291.13 while select was off $0.33 at $261.27.  The choice/select spread widened to $29.86 from $27.53 with 135 loads of fabricated product and 32 loads of trimmings and grinds sold into the spot market.

The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $1.28 to $1.38 a bushel over the Mar corn contract, which settled at $4.72 1/2 a bushel, up $0.02 3/4.

No delivery intentions were posted for Dec live cattle Thursday.

The CME Feeder Cattle Index for the seven days ended Wednesday was $219.80 per cwt, down $0.51.  This compares with Thursday’s Jan contract settlement of $221.70, down $2.35.