Fed cattle markets made some progress and saw building optimism as October began. Andrew Griffith, University of Tennessee ag economist, says the action gave a boost to cattle feeders.
“Finished cattle prices surged higher this week, which is exactly how cattle feeders wanted to start the month of October,” he says. “The $2 gain on a live-weight basis results in $28 to $30 more in revenue for each head that walks into a packing facility. The higher price means improved margins compared to last week as many of the cattle coming off feed right now were purchased on a depressed feeder cattle market.”
Griffith says more gains could lie ahead.
“This week’s prices are still a long way from the fourth quarter target high between $115 and $120, but a $7 to $8 price improvement over the next two months is obtainable,” he says. “Reaching the aforementioned price target for a fourth quarter apex will likely result in strong competition for feeder cattle moving forward.”
As for boxed beef prices, Griffith says they have been in a “holding pattern,” typical for the early fall beef market, although several factors could impact the market.
“There are several factors that may influence the beef market moving through the last quarter of the year,” he says. “The first would be more stimulus money being deposited in the bank accounts of American consumers. If Congress passes another substantial stimulus package then this could result in more beef purchases as discretionary income inevitably increases. There are sure to be consumers in the working public who continue to be negatively impacted by the pandemic, but there are others who are unscathed and still others whose income has increased during this time.”
Exports will also play a key role for beef markets, Griffith says, in particular destinations in Asia.
“A second major factor will continue to be the export market,” he says. “Based on weekly beef muscle cut export data, some major export destinations such as Japan and Korea were a little slack in September relative to August, but the monthly data will provide more detail.”
Griffith says he expects producers to continue moving a lot of calves born in the late winter and early spring to the market in the coming weeks.