It doesn’t seem to take much to move markets; a worse-than-expected jobs report a couple weeks ago rolled the markets and took cattle with it. Then this week we had a better-than-expected Consumer Price Index report showing that inflation is dropping that caused a rally in the broader stock markets.
The interesting thing is the futures markets seem to have little influence on the cash cattle markets. Western Video Market held their Cheyenne sale and fared fairly well, especially on calves. Yearlings were off several dollars but remained strong. The fundamentals of cattle supplies are still positive for cow-calf producers and cattle feeders will enjoy much cheaper feed costs.
Corn yield is projected to be a record 183.1 bushels per acre nationally, up 5.8 bushels (+3.3%) from last year’s record yield and 2.1 bushels above trendline estimates. Despite this increase in yields above industry estimates, a further decrease in planted acreage to 90.7 million acres (-0.9%) pushed overall production projections downward. New crop corn production is now estimated at 15.15 billion bushels, which if realized, would be the third-largest U.S. corn crop on record.
The summer doldrums are behind us in the beef markets, and the cutout has held up well, gaining a few bucks recently. Packers will be looking for Labor Day needs and will need to get extra cattle inventory around them—it’s a seasonal thing.
No one likes seeing these markets break when they do. It’s confusing because fundamentals rarely have much to do with these breaks. Typically, they don’t take long to correct, and the cattle markets will work their way back up and we’ll forget all about the episode.
The Ag Center’s Cattle Report had an interesting comment about markets, “We all have experienced crazy markets—meaning a market we can’t understand. The market moves are usually extreme, and the apparent diver is undiscoverable. Trying to make sense out of a rogue market is frustrating and non-productive. Peace of mind is important and trying to make sense out of something with no respect for logic or reason is futile.
“The natural inclination of human nature is to try to discern a pattern, a motivation, or a logic. When this fails the next step is to try to get a gut feeling for the interim highs and lows. This type of guesswork usually leads to trouble and wrong decisions—sometimes accompanied by financial losses. It is nearly impossible to pick highs and lows either for the day or week. Jumping into the long side following four days of declines might be right but often is not.
“A week ago, Friday’s close in the futures market left some feeling all was well and the futures were on the road to recovery. After all there were no more cattle created from the recent gyrations in the futures. The cow slaughter continues well under prior year, and the shortfall must be made up from the fed cattle population and this number will continue to dwindle.
“The truth is that things may not be ok, and the markets may not recover, and we may never know why or understand the forces acting on us or the market. The old adage holds true of limiting our concerns to those things we can do something about and purging the devil’s workshop of the needless hours spent on things we can do nothing about. Easier said than done.”
Now that inflations is subsiding according to the last Consumer Price Index report, everyone is looking to the Fed to lower interest rates in September. Unemployment is at 4.3%, still low but the highest since the pandemic. Are we looking at a recession? I don’t think so. Stock markets have almost fully recovered from the mess two weeks earlier and folks are still spending money and there is plenty of construction occurring.
We don’t have a lot of control over issues affecting the cattle business, especially Mother Nature, who has been brutal this summer. Fires in the West, floods in the East and plenty of hot weather to go around. I still suggest that we continue to pray for rain in the West, the Drought Monitor is changing a bit,
Stay the course with the markets. They will fluctuate. If it makes you nervous, spread your marketings out and average in, but feed availability always makes those decisions for us. Remember there are so few cattle that this market won’t swing too far. — PETE CROW
