Overdone? Cattle Markets Continue Retreat After Tyson Fire

November feeder cattle futures closed down $5.60 and notched a contract low. ( FJ )

Cattle markets continued reeling Tuesday on news Tyson Foods was forced to close its Holcomb, Kan., beef processing facility due to Friday night’s fire.

Tuesday saw both Live Cattle and Feeder Futures close substantially lower. 

The front-month Live Cattle futures closed locked down their daily limit losses of $4.50 and set contract lows today. The daily expanded trading limit will be $4.50 again on Wednesday. Meantime, November feeder cattle futures closed down $5.60 and notched a contract low. Feeder cattle futures will also see expanded daily trading limits on Wednesday, at $6.75.

Wholesale beef prices continued to move sharply higher, jumping another $7.74 for Choice on Tuesday to close at $226.36. Select was up $2.79 to $200.58.

“Feeder futures prices closing limit down is inconsistent with what you would expect when grains are trending lower,” says Sterling Marketing president John Nalivka. The WASDE report on Monday sent grain futures prices sharply lower, which typically has a positive influence on Feeder futures.

Two limit-down days is overreaction, Nalivka says.

“Cattle feeders and packers will scramble and find a home for the cattle displaced by the Holcomb fire,” Nalivka says. “The biggest issue will be if packers can find the labor to run the extra shifts needed to increase their kills.”

Sufficient labor remains a constant worry for packers, which justifies Tyson’s pledge to pay its idle Holcomb workers for 40-hour work weeks until the plant reopens. It can’t afford to let those workers move to new jobs if Tyson plans to reopen.

For cattle feeders, Nalivka says it will be critical not to let marketings slow to the point where carcass weights are increased. 

“In the short-term, it will be key to hold weights under a year ago, which is assuming that demand remains steady, and I think it will,” Nalivka says. “We’ll know more how this will play out in the coming days, but I expect we’ll look back on Monday and Tuesday’s markets and see overreaction.”

Comments
Submitted by Big daddy on Tue, 08/13/2019 - 19:00

Once again packers prove they have no shame and no conscience, fats down 10 boxed beef up 5. Of course were supposed to believe that they don't cheat or manipulate the markets.

Submitted by Jon Sunday on Wed, 08/14/2019 - 07:42

The double down on futures makes little sense except for packers to make a profit over a small and hopefully short term event.

In reply to by Big daddy (not verified)

Submitted by Jonathon King on Wed, 08/14/2019 - 08:47

Why is it key to keep marketing weights from increasing? Can someone please help me understand that? Thanks

Submitted by Joel Jackson on Wed, 08/14/2019 - 09:03

Captive markets, subsidies and overregulation. Every time it's the cow calf producer who doesn't take government welfare or bet against their selves in the futures market that take it in the shorts.