Corn and Feeder Cattle Prices Remain Volatile

US - Last week was another roller coaster ride for corn and feeder cattle futures markets. The December corn futures market declined 56 cents per bushel from the Friday, September 24 close of $5.21 ¾ to the Friday, October 1 close of $4.65 ¾.
calendar icon 8 October 2010
clock icon 4 minute read

During the same time, October feeder cattle futures rallied $3.12 ½ per hundredweight to the $111.80 close on Friday. Corn futures prices declined four out of five days while feeder cattle futures increased those same four of five days.

Declining corn prices were good news for feeder cattle producers who have cattle to market in the next few weeks. The heavy fall calf marketing season is just starting and a continuing increase in corn prices would not be supportive to calf prices. Cattle producers have watched with concern as corn futures prices rallied from lows the end of June near $3.50 per bushel to highs near $5.25 late in September. The decline in corn prices last week was due mainly to the increase in corn stocks that USDA-NASS reported in the Grain Stocks report released on September 30. Old crop corn stocks in all positions on September 1 totaled 1.71 billion bushels, up two per cent from last year and up about 300 million bushels from the 1.41 billion in the pre-report trade estimates. The rally in corn prices since June was due to USDA reducing the projected size of the US corn crop and world weather-related concerns that have reduced grain production estimates. Earlier in the summer, USDA was predicting a record 13.37 billion bushel crop but the September 10th World Agriculture Supply and Demand Estimates (WASDE) report lowered expected production to 13.16 billion bushels.

The volatility in corn (and feeder cattle) prices will likely continue until the size of the corn crop is known for sure. Early harvest yields in parts of the Corn Belt have been lower than expected. That, coupled with excessive moisture in parts of the Western Corn Belt where record yields were expected, have led some private forecasters to lower yield estimates. The September WASDE report estimated an average corn yield of 162.5 bushels per acre, but some forecasters predict that number to fall below 160. The October WASDE report will be released this week on Friday, October 8 and certainly bears watching.

Feeder calf prices are currently about 15 per cent higher than last year. Some additional weakness is likely into the heavy marketing season that is just ahead. Calf prices should stay about 15 per cent higher than last year unless corn prices surge again.

Due to the potential volatility of the market, producers considering backgrounding and winter wheat grazing programs may want to have price risk management strategies in place. Interestingly, the futures market depicts a contra-seasonal rally in feeder cattle prices with the January and March contracts trading $1 to $2 higher than the October and November contracts.

The Markets

Fed cattle prices were lower last week with moderate demand. Across the 5-area market, live prices averaged $96.57/cwt, down 91 cents from the previous week. Dressed prices declined 53 cents to average $152.28 for the week. Wholesale boxed beef prices lost ground also as the domestic economy continues to struggle. Choice boxed beef prices closed down $1.34 at $156.27/cwt. The feeder cattle complex ended the week with mixed price trends. Early week sales for both yearlings and calves tended to be lower, with later in the week sales mostly higher. The most pressure was on the lighter-weight, unweaned calves without documented vaccination programs. Corn prices dropped just three cents a bushel to close at $4.42 in Omaha on Thursday with a strengthening basis. Distillers grain prices continue to advance on strong demand. DDGS prices in Nebraska increased $7.20 per ton to $131.50 with WDGS prices advancing $2.22 to $44.90.

  Week of 10/01/10 Week of 9/24/10 Week of 10/02/09
5-Area Fed Steer all grades, live weight, $/cwt
all grades, dressed weight,
$/cwt
$96.57

$152.82
$97.48

$153.35
$82.08

$127.64
Boxed Beef Choice Price, 600-900 lb.,
$/cwt
Choice-Select Spread, $/cwt
$156.27


$8.20
$157.60


$7.91
$137.25


$5.34
700-800 lb. Feeder Steer Price Montana 3-market average,
$/cwt
Nebraska 7-market average,
$/cwt
Oklahoma 8-market average,
$/cwt
$108.20


$112.47


$112.14
$106.50


$112.45


$111.61
$93.29


$98.70


$96.33
500-600 lb. Feeder Steer Price Montana 3-market average,
$/cwt
Nebraska 7-market average,
$/cwt
Oklahoma 8-market average,
$/cwt
$121.91


$125.46


$114.09
$122.90


$126.32


$111.61
$97.92


$106.82


$100.89
Feed Grains Corn, Omaha, NE, $/bu (Thursday)

DDGS Price, Nebraska, $/ton

WDGS Price, Nebraska, $/ton
$4.42


$131.50


$44.90
$4.45


$124.30


$42.68
$3.27


$89.00


$35.75
Data Source: USDA-AMS Market News

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