In The Cattle Markets

US - A weekly review of the cattle market by Tim Petry, Livestock Economist, North Dakota State University Extension Service.
calendar icon 10 June 2010
clock icon 4 minute read

The CME Feeder Cattle Index

At a recent meeting a cattle producer asked me to explain the feeder cattle index that I had just referred to. The CME Feeder Cattle IndexTM (Index) is often used as a barometer for 750 lb feeder steer prices in the U.S. Since CME Group feeder cattle futures are cash settled rather than requiring actual delivery of cattle, all open contracts after termination of trading on the last Thursday of the contract month are settled with the Index price.

The Index is based on a sample of USDA Agricultural Marketing Service (AMS) reported transactions for 650-849 lb Medium and Large #1 and the combined #1 and #2 market classes of feeder steers. The sample consists of all feeder cattle auction, direct trade, video sale, and internet sale transactions within the 12-state region of Colorado, Iowa, Kansas, Missouri, Montana, Nebraska, New Mexico, North Dakota, Oklahoma, South Dakota, Texas and Wyoming for which the number of head, weighted average price and weighted average weight are reported by AMS.

The actual Index is a 7-day average price which is computed and released every weekday on the CME Group website: www.cmegroup.com. The index is a good proxy for the current US feeder cattle cash market, while feeder cattle futures prices are what traders are willing to buy and sell at for future contract months.

Arbitrage causes the Index and the expiring futures contract price to be similar at maturity. For example, the CME Group May feeder cattle futures contract settlement price on May 27, the last day of trading, was $108.55/cwt. The Index for that same day was $108.41. During the life of a feeder cattle futures contract, prices may be above or below the current Index depending on trader’s expectations for the future. For example, on May 4 August feeder cattle futures settled at $116.60 and the Index was computed at $113. A month later on June 4, August futures settled at $108.87 and the Index was $110.50.

Since the Index is an average, some geographic areas will have higher cash prices with others experiencing lower prices. Producers should be aware of their basis, which is the difference between the local cash price and the Index or futures price. Basis estimates for select markets in 28 states are available at www.beefbasis.com which may be the subject of a future column.

The Markets

The fed cattle market bounced back least week after two consecutive weeks of declines. Across the 5-Area market, live prices averaged $94.53/cwt., 90 cents higher than the previous week. Dressed prices increased $3.29/cwt to average $154.35 for the week. But wholesale beef prices were lower again last week as purchases for the Memorial Day holiday were over and concerns about world economic and financial conditions continued. Choice boxed beef prices declined $3.28 to average $162.48, and the Select market was even weaker so the Choice-Select spread increased 90 cents to $7.69. The feeder cattle market was affected by the Memorial Day holiday with many Monday auction sales cancelled. Some auctions are moving to a reduced summer schedule as feeder cattle receipts have declined seasonally. The Montana market was not reported and other markets were mixed. Better prices were recorded later in the week when corn prices declined with excellent growing conditions in the Corn Belt. 500-600 lb feeder steers were down $1.35 in Nebraska but up $1.99 in Oklahoma. The 7-8 weight steers increased $1.85 in Nebraska and were steady in Oklahoma. Corn prices declined 21 cents a bushel for the week to close at $3.34 in Omaha on Thursday. Distillers grain prices also fell with the lower corn market.

Data Source: USDA AMS Market News
Week of
06/4/10
Week of
05/28/10
Week of
06/05/09
5-Area Fed Steer all grades, live weight, $/cwt $94.53 $93.63 $82.11
all grades, dressed weight, $/cwt $154.35 $151.06 $131.53
Boxed Beef Choice Price, 600-900 lb., $/cwt $162.48 $165.76 $141.40
Choice-Select Spread, $/cwt $7.69 $6.79 $5.72
700-800 lb. Feeder Steer Price Montana 3-market average, $/cwt -- $113.13 $92.25
Nebraska 7-market average, $/cwt $115.52 $113.67 $104.73
Oklahoma 8-market average, $/cwt $109.65 $109.72 $99.68
500-600 lb. Feeder Steer Price Montana 3-market average, $/cwt -- $122.56 $110.52
Nebraska 7-market average, $/cwt $125.81 $127.16 $118.54
Oklahoma 8-market average, $/cwt $124.72 $122.73 $109.79
Feed Grains Corn, Omaha, NE, $/bu (Thursday) $3.34 $3.55 $4.26
DDGS Price, Nebraska, $/ton $106.17 $113.60 $151.10
WDGS Price, Nebraska, $/ton $34.00 $34.70 $49.50

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