As most are already aware, the citizens of the United Kingdom voted on June 23, 2016 to end its membership in the European Union. The immediate effect of the vote caused markets across the globe to come tumbling down. The Dow Jones industrial average dropped just under 3.4 percent following the vote, while some individual European stocks dropped by as much as 20 percent. Meanwhile the value of the dollar jumped to the highest levels since March as investors sought more stability. In the days following the United Kingdom’s decision to leave the EU, many of the markets have begun to return to pre “Brexit” levels. The Dow Jones industrial average has fully recovered its lost value, while the U.S. dollar index has slowly began to creep lower again.

In terms of trade, the vote to leave the EU means that the United Kingdom will also be leaving behind many of the trade agreements with the EU. That includes agreements made between the EU and the U.S. On the positive side, that leaves the U.K. with more freedom to negotiate its own trade agreements with the U.S. and may be able to avoid the restrictive policies toward U.S. beef in any new trade agreements. In recent years, U.S. beef trade with the United Kingdom has been limited but growing. The U.S. exported 3.668 million pounds of beef to the U.K. in 2015, up from 913,000 pounds in 2014 and 502,000 pounds in 2013. While U.K. imports currently pale in comparison to countries such as Canada, Mexico, and Japan, with the ability to directly negotiate with the U.S. without interference from its other European counterparts we could eventually see a boost in U.S. beef exports headed to the U.K.

So what does this all mean for beef markets? In the very short run, the "Brexit" vote caused a drop in cattle markets as traders feared that falling stock markets could put a damper on beef demand. But, as I mentioned earlier, the Dow Jones Industrial average has fully recovered and the effect on cattle markets didn't last long at all. In the days following the vote, other factors took hold in the cattle markets and traders have essentially forgotten the vote. Ultimately, in the long run the U.K.'s vote to leave the EU will not change the cattle market fundamentals. Factors such as feed prices, herd size and growth, and domestic consumer demand, among other things will continue to be the drivers behind cattle markets.

The Markets

The five-area fed steer price ended the week averaging $122.50 for live sales, and $195.53 for dressed; respectively, up $5.76 and $7.72. Nebraska feeder cattle were trading $3.00 to $7.00 higher on the week with 500-600 pound steers averaging $180.32 and 700-800 pound steers averaging $161.58. Corn was $0.28 lower on the week trading at $3.29/bu in Omaha on Thursday.