August Futures Settlements
August feeder and live cattle contracts both expired last Thursday. Live cattle moved up 0.925 per hundredweight on the day to close at $179.725, relatively close to cash trade in Texas and Oklahoma for the same day. August feeder cattle futures dropped $0.950 per hundredweight to close at $249.10. We still have a few days to see the final August Feeder Cattle Index settlement, but it should be close to the futures contract.
Interestingly enough, feeders settle the last Thursday of the month and live cattle close the last business day of the month, putting expiration for both contracts on the same day. The front month for live cattle will now be October with September on top for feeders. Both contracts still show significant carry — higher prices — into the future.
Elevated futures prices across the curve are likely finding support from the lack of heifer slaughter, strong beef demand and an economy that is yet to significantly falter. Although prices look good in the cash and futures markets, it is important to stay focused on the broader economy in case any unexpected turbulence emerges.
Corn: Steady at the Lower End of the Range
Corn traded sideways through the end of August as the market digests variable yield expectations as we approach fall. December futures are staying between $4.70 and $5.00 per bushel, the low end of where corn futures have traded for some time. Historically, seasonality suggests that December corn futures tend to find a bottom somewhere between the last half of August and the first half of September.
Choppers are beginning to roll on corn silage throughout the Midwest and first reports have been fair, but with lower moisture than usual for this time of year in some areas, which does not surprise all things considered.
With corn prices sitting towards the low end of recent ranges, it begs the question: How do these prices feed into your ration? These are levels that most producers find attractive to start owning or at the very least establishing topside coverage, leaving the bottom open should corn continue to break into fall. Where does the topside risk lie in this market with historically large corn acres and poor demand? It sits in the uncertainty around yields that most can’t yet quite seem to peg down. If you find current corn values attractive, it may be worth the discussion to see what can be done to either re-open the bottom side after a physical purchase or protect against increases while remaining unpriced to the downside.
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