Sort and Cull

Several Factors Influence Sharp Sell-Off in Live Cattle Following WASDE Report

Elaine Shein
By  Elaine Shein , DTN/Progressive Farmer Associate Content Manager
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Feeder cattle contracts led the plunge in lower prices on Thursday, falling nearly $8 per cwt in nearby contracts. (DTN file photo by Chris Clayton)

OMAHA (DTN) -- It was a dismal and volatile day for cattle prices, following Thursday's release of the World Agricultural Supply and Demand Estimates (WASDE) report.

Larger-than-expected beef production estimates for 2024 influenced the big drop in live cattle prices Thursday, but DTN Lead Analyst Todd Hultman said that wasn't the only influence on the bearish market.

"It looks to me like Thursday's sharp sell-off in live cattle had several contributing factors, including $4-lower cash trade in the South and $5-lower trade in the North, concerns about a lower slaughter pace this week and a choice boxed beef price that slipped below $300," Hultman said. "Thursday's lower stock market after Federal Reserve Chairman Jerome Powell repeated the Fed's commitment to get inflation down to 2% was also seen as a bearish threat to retail demand for beef."

DTN Contributing Analyst Rick Kment said there had been a sliver of hope in the cattle complex Wednesday with higher prices midweek. However, Thursday's November WASDE report posted reduced overall beef for 2023, with a strong increase production projected in beef.

However, the bearish market freefall continued Thursday, adding to an already bearish market structure and creating concerns of further price pressure, Kment noted. "This will continue to likely cause concern for beef producers and overall cattle prices in the near future," he said.

The market prices Thursday reflected that concern.

CATTLE COMPLEX PRICES DIVE

"Thursday turned into a dismal day across the cattle complex with aggressive triple-digit losses flooding back into live cattle and feeder cattle contracts with no sense of market stability in sight. Feeder cattle contracts led the plunge lower, falling nearly $8 per cwt in nearby contracts, as technical market weakness is the main driving point to the most recent move lower. Live cattle futures mirrored the market negativity with $5-per-cwt losses by the time markets closed Thursday afternoon," noted Kment.

As for live cattle Thursday, "The move lower quickly sparked follow-through liquidation from all sides, causing nearby contracts to tumble over $5 per cwt in nearby contracts. December live cattle futures have now fallen $10 per cwt in the last week, creating significant concerns across the complex," Kment said.

WASDE NUMBERS FOR CATTLE COMPLEX

He noted the role WASDE played as it adjusted beef production significantly higher for 2024 from the October report.

"Fourth-quarter beef production fell 55 million pounds, creating the expectation of annual production levels falling 44 million pounds from last month's estimate. The focus on increased production of 535 million pounds in 2024 was strongly attributed to gains in first-quarter projections accounting for 235 million pounds.

"The confirmation of these numbers is adding additional bearish influence to overall market prices as traders are focusing on larger-than-expected beef production through most of 2024," he said.

"Beef price levels for the fourth quarter of 2023 were unchanged, which also left overall annual price projections unchanged at $177.30 per cwt. Price levels for 2024 were unchanged when it came to annual overall price projections, but first-quarter 2024 prices were reduced by $2 per cwt from the previous month while second-quarter prices fell $1 per cwt," Kment added.

As for beef imports for 2023, they "increased by 36 million pounds from the previous month while total beef supplies fell 8 million pounds. Expected imports in 2024 increased 40 million pounds from last month's estimate, increasing overall 2024 supply issues by 590 million pounds," said Kment.

NORTH AND SOUTH

Hultman had mentioned the trade being seen in North and South cattle sales.

Looking into the difference in prices, Kment said, "Cattle sales were reported at $180 to $181 live basis in the South with most trade seen at $181 per cwt. This is $4 per cwt lower than last week's weighted average price. Northern trade was seen at $287 dressed basis and a few live trades at $180 in western Nebraska. Northern trade is generally $5 per cwt lower than last week's weighted average price. Asking prices on cattle left remain at $183 live in the South and $288 dressed in the North," he said.

"It is likely that additional trade will be sought before the end of the week, but the pressure in futures trade could quickly cut overall trade interest off with limited cattle sold."

As for the slaughter numbers and how they affected the live cattle trade, Kment reported that December live cattle closed $5.05 lower at $174.35, February live cattle closed $5 lower at $174.475 and April live cattle closed $4.68 lower at $176.95. "Thursday's slaughter is estimated at 122,000 head, 2,000 head less than a week ago and 7,000 head less than a year ago," he said. Boxed beef prices closed mixed: choice up $0.67 ($299.42) and select down $1.61 ($269.42) with a movement of 133.11 loads (49.46 loads of choice, 31.60 loads of select, 19.59 loads of trim and 32.46 loads of ground beef).

Hultman will provide more technical insight into what is happening with the cattle market, including a closer look at this week's prices, in the Sort and Cull blog (https://www.dtnpf.com/…) on Nov. 13 and also in next week's CattleLink newsletter.

More DTN coverage on Thursday's November USDA WASDE Report can be found at https://www.dtnpf.com/…. The DTN Closing Market video has more insight at https://www.dtnpf.com/….

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Editor's Note: Want more livestock market information? DTN customers can find daily updates, analysis and strategies on the DTN cattle market in their various DTN products. Noncustomers can start a new MyDTN demo at https://www.dtn.com/….

DTN Livestock Analyst ShayLe Stewart will be out of the office for a few weeks. We will continue to update her Sort and Cull blog with livestock market content. Please send any questions or comments to Editor-in-Chief Greg Horstmeier at greg.horstmeier@dtn.com.

Elaine Shein can be reached at elaine.shein@dtn.com

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Elaine Shein

Elaine Shein
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