22 January 2010

4 minute read

North America

Feeder Cattle and Corn Price Volatility Continues in 2010

Market strength was prevalent throughout the feeder cattle complex last week as steer and heifer calves traded mostly $2 to $6 per hundredweight (cwt.) higher with some lighter weight steers gaining as much as $10. Feeder cattle over 600 pounds sold firm to $3/cwt. higher at many markets.

CME March feeder cattle futures prices posted a $2.25 gain from the $96.40 close on Monday to the $98.65 settle price on Friday, the highest level since September. The feeder cattle market was buoyed by the January 12 release of the USDANASS crop report which increased the estimated size of the US corn crop to a record 13.15 billion bushels. Some traders had expected a lower estimate due to adverse harvest weather in parts of the Corn Belt and the historically large amount of corn acres still unharvested.

All CME Group corn futures contracts closed down the limit on Tuesday and the March contract ended the week 51 cents per bushel lower at $3.715, the lowest level since early October.

Feeder cattle market volumes were high in the Northern Plains last week, and sellers were thankful for the higher prices. The weekly combined North and South Dakota auction market volume was the highest for this marketing season, surpassing the previous high week of October 26-30 by 2,300 head.

One reason for the increased volume was that reduced marketings occurred the week of January 4-8 due to stormy weather and some auction markets cancelling sales. But a major reason for increased sales was the reduced auction sales volume that occurred in the Northern Plains throughout the fall marketing season. Mild weather and good forage conditions resulted in many calves being weaned a month later than last year when winter set in early and drought limited forage availability.

Cattle operations that graze cows on corn stalks after weaning the calves also had to wait until the corn was harvested to wean. Placements of cattle on feed in the US were down over eight per cent in November, and the USDA Cattle on Feed Report to be released this Friday, January 22, is expected to show placements down again in December. Relatively large feeder cattle marketings in the Northern Plains are expected for the next several weeks.

The Markets

A nice post holiday rally in boxed beef prices last week failed to spill over very much into the fed cattle market, where trade was moderate to active on Tuesday and Wednesday. The 5-area fed steer price increased only 16 cents a hundredweight to $84.98 on a liveweight basis, and improved just 18 cents on a dressed basis to $136.92.

Choice boxed beef prices rallied $4.68 to $144.91, which was encouraging given the struggling US economy and the increased demands on consumer pocketbooks that took place over the holidays. The select market rallied as well leaving the choice-select spread unchanged at $5.26 for the week. A large volume of feeder steers traded at higher prices at all markets with the 5-600 lb calves showing the most strength. Corn prices plummeted in the wake of the USDA crop report with corn down 37 cents per bushel in Omaha last Thursday. Distillers grain trended upward with DDGS in Nebraska gaining nearly $2 a ton to $114 and WDGS dropping $2 to $43.