READY TO RUN
Cattle prices are headed higher , despite recent geopolitical pressure .
by Wes Ishmael
Just when the pandemic was making enough progress to boost hopes , along came Russia ’ s attack on Ukraine , rocking global commodity markets and supply chains .
Spot Kansas City Wheat futures closed at $ 12.00 / bu . to end the first week of March . Spot Corn futures on the CME were at $ 7.56 . Spot West Texas Intermediate Crude Oil futures ( CME ) rocketed $ 20 / bbl . higher the same week . Feeder Cattle futures declined $ 9.59 / cwt . over the course of two weeks .
Surging grain and oil prices were tied to port closures in Russia and Ukraine , as global markets rationed available supply . Wheat dragged other feed futures higher , which were already escalating for the same geopolitical reason .
“ The Ukraine-Russia war has been the catalyst for the explosion in wheat prices , however the foundation was set through several events that caused limited exportable global supplies ,” explained Aaron Smith , crop marketing specialist at the University of Tennessee ( UT ), in his early-March weekly market comments . “ Ukraine is estimated to contribute 4.3 % of global wheat production , 11.6 % of global wheat exports and less than 1 % of global ending stocks . Russia is estimated to contribute 9.7 % of global wheat production , 16.9 % of exports , and 3.8 % of global stocks . The two countries are responsible for 28.5 % of global wheat .”
Keep in mind supply chains were still hamstrung by politics and pandemic-disrupted supply chains before the Russian attack .
“ Every time the cattle market begins to make a push to stronger prices , something unexpected happens that directly impacts cattle prices ,” explained Andrew P . Griffith , UT agricultural economist at the University , in his market comments . “ This conflict halfway around the world is not expected to overpower the fundamentals
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that are driving cattle prices higher , but the conflict will certainly increase volatility , which means prices will likely decline in the near term to unexpected levels . However , prices will most likely recover and challenge future contract highs as the initial shock works its way through the market .”
Cattle Prices Poised for Extended Increase
The futures prices Griffith refers to were just beginning to demonstrate coming strength before the Russian war stalled progress . Negotiated cash fed cattle prices finally breeched $ 140 / cwt . and 5-weight steer calves were commonly commanding more than $ 200 .
CattleFax provided an extraodinarily optimistic cattle price forecast during its Outlook Seminar in February .
With cattle numbers declining , front-end fed cattle marketing approaching pre-covid levels and beef demand continuing strong , CattleFax projected the average fed steer price this year $ 18 higher year-over-year at $ 140 / cwt . with a range of $ 130- $ 155 . The organization forecasts the average feeder steer price ( 800 lbs .) at $ 172 with a range of $ 158- $ 184 , and the average calf price ( 550 lbs .) at $ 205 with a range of $ 180- $ 230 .
Moreover , CattleFax forecasts utility cows at an average of $ 75 / cwt . with a range of $ 65 to $ 85 . Bred cows are expected to bring an average $ 1,850 / head with a range of $ 1,700 to $ 2,000 for load lots of quality , running-age cows .
The feeder cattle and calf supply will be 675,000 head fewer than last year , totaling 25.5 million head , according to CattleFax . Fed cattle
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