WLI

Calves and feeder cattle continued to trade mixed last week, but mainly higher, with the strongest demand for grass cattle once again.

Nationwide, steers and heifers sold mostly steady to $5/cwt. higher, with instances of $6-$8 higher, according to the Agricultural Marketing Service (AMS).

“Buyers pursued all classes of feeder cattle, despite high feed cost,” say AMS analysts. “The supply of feeders weighing 600-950 lbs. is much greater, with backgrounded steers and heifers, and saw moderate to good demand, especially for those with good weighing conditions.”

AMS analysts also note auction receipts were lighter in the Midwest and Northern Plains last week as some auctions transition to a semi-monthly schedule and as the late winter storm hampered some cattle movement.

High corn prices and stagnant cash fed cattle prices helped pressure Cattle futures last week, although fundamentals suggest markets are on the cusp of moving higher.

“After the fed cattle market works through ample cattle supplies in the first half of the year, beef production is expected to decrease year over year in the second half of the year. Live Cattle futures for the fall suggest higher fed cattle prices in the last half of the year,” says, Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments.

Similarly, Peel points to the premium for fall Feeder Cattle futures, compared to nearby contracts, explaining that summer stocker prospects are promising at this point in time.

“Feeder steer prices for February 2021 averaged $131.82/cwt. for steers weighing 750-800 lbs., sold at Oklahoma National Stockyards, just over $6 above a year ago,” say analysts with USDA’s Economic Research Service (ERS), in the latest monthly Livestock, Dairy and Poultry Outlook. “However, prices for the first two weeks of March are almost $8 above the same month last year.”

ERS increased the expected first-quarter average for feeder steers by $1 to $133/cwt. Price projections were unchanged for the remainder of the year: $134 in the second quarter; $139 in the third quarter; $140 in the fourth quarter; $136.50 for the 2021 average.

In the meantime, Feeder Cattle futures gave back a majority of the previous week’s gains, closing an average of $1.89 lower week to week on Friday (90¢ lower toward the back to $3.80 lower toward the front).

Week to week on Friday, Corn futures closed an average of 14¢ higher in the front two contracts (old crop) and then an average of about 7¢ lower through the next four.

Fed Cattle Prices Show Some Give

Negotiated cash fed cattle prices last week were steady on a live basis at $114/cwt. in Kansas, steady to $1 higher in Nebraska at $114, $1-$2 higher in the western Corn Belt at $114-$115. Prices were a touch higher than steady in the Texas Panhandle, with the Texas Cattle Feeders Association reporting $114.24 for steers and $114.30 for heifers. Dressed trade was $2 higher in Nebraska and $2-$4 higher in the western Corn Belt at $182.

“Live steer prices in the five-area marketing region are nearly flat since the first week of February, hovering around $114/cwt., despite a strong rally in the comprehensive cutout to near-record levels for the month of February,” explain ERS analysts. “An abundant supply of fed cattle on feed over 150 days Feb. 1 that is greater than the same time last year, along with the inability to process a portion of those cattle due to the winter storm system in February, likely did not support higher prices in line with typical seasonal patterns.”

Week to week on Friday, Live Cattle futures closed an average of $1.26 lower (35¢ lower at the back to $2.20 lower).

“Cattle feeders have watched the Apr Live Cattle contract continue to struggle, unable to get to the $120.00 mark, as Apr is normally the high of the year, when supplies of market-ready cattle are the tightest,” say AMS analysts. “We have seen a very unusual premium in the Live Cattle Jun and Aug contracts for this time of year.”

Choice boxed beef cutout value was $4.12 higher week to week on Friday at $229.99/cwt. Select was 32¢ lower at $219.95.

“Boxed beef cutout values are finding a bottom and seeing strength, as the food service industry is expected to see more business, with expectations for restaurant industry sales to increase through spring into summer,” according to AMS analysts. As well, they point to expectations for increased retail demand heading into grilling season.

No COF Surprises

Cattle feeders placed 1.68 million head in February, according to the monthly Cattle on Feed report from USDA—for feedlots with 1,000 head or more capacity. That was 1.86% less than a year earlier and close to average expectations ahead of the report for a decline of 1.7%.

Recent winter storms that closed sale barns may have limited placements. On the other hand, current and expected wheat prices may elevate feedlot placements in March, as more producers with a dual-purpose winter wheat crop look to put it in the bin.

“…the expectation that relatively high wheat prices may discourage the grazing-out of small grains pastures and move more cattle into feedlots sooner than previously expected is anticipated to shift placements from the second quarter to the first quarter,” ERS analysts say. “As a result, some fed cattle marketings are expected to shift from the fourth quarter to the third quarter.”

Feedlot marketings in February of 1.73 million head were 43,000 head fewer (-2.42%) year over year. Expectations ahead of the report were for a decline of 2.6%.

“Because of the weather disruption, there is a temporal shift of expected steer and heifer marketings out of the first quarter to be marketed in the second quarter,” say ERS analysts.

Cattle on feed March 1 of 12.0 million head were 189,000 head more (+1.60%), the second highest inventory for the month since the data series began in 1996. Average pre-report expectations were for an increase of 1.5%.

Friday to Friday Change

Weekly Auction Receipts

CME Feeder Index

Thursday through Thursday…

*Wednesday-to Wednesday for CME Feeder Index

Cash Stocker and Feeder

North Central

South Central

Southeast

(AMS National Weekly Feeder & Stocker Cattle Summary)

Wholesale Beef Value

Futures

Equities

Calves and feeder cattle sold mixed at the weekly auctions monitored by Cattle Current last week, but mainly steady to higher in the Southeast.

Sluggish, stagnant negotiated cash fed cattle prices, tied to the abundant supply, and seasonally weaker wholesale beef prices continue to hamper markets. On the other hand, improving supply fundamentals after the first quarter and the potential for a demand bounce from COVID-19 economic stimulus are boosting confidence.

Passage of the federal government’s $1.9 trillion coronavirus relief funding added support to overall equity and commodity markets last week, along with growing optimism the nation’s vaccination program is paving the way toward economic recovery.

Week to week on Friday, Feeder Cattle futures closed an average of $2.42 higher ($1.25 higher at the back to $4.20 higher toward the front).

The CME Feeder Cattle Index was 72¢lower week to week on Thursday at $134.13.

“The number of stocker cattle buyers is increasing as warm weather has resulted in cool season perennial pastures starting to green and grow,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “This trend will continue the next several weeks as spring and summer grazing operations look to fill pastures with lightweight cattle that will be efficient on grass and that will be ready for the feedlot in late summer or early fall. The primary interest in cattle is the lightweight animals. Heavier feeder cattle that would be destined for the feedlot are not garnering as much interest.”

In the meantime, Derrell Peel, Extension livestock marketing specialist at Oklahoma State University points out auction volumes will increase in the Southern Plains over the next few weeks as cattle grazing dual-purpose winter wheat pasture head to market.

“Another factor hanging over feeder markets is the dramatic rise in feed costs and feedlot cost of gain,” Peel says, in his weekly market comments. “The latest summary of the Kansas Focus on Feedlots data shows that feedlot cost of gain for closeouts in January was up 8.6% from the recent low in October. Feedlot cost of gain will continue to increase and reflect higher grain prices in the coming months. Feeder prices will continue to adjust in response higher feed prices as the year progresses.”

There was a brief, slight respite last week with Corn futures closing an average of 5.5¢ lower on Friday, through the front six contracts (2.6¢ to 12.8¢ lower).

“U.S. corn market prices continue to rise, largely driven by strong export demand and tight global supplies,” say analysts with USDA’s Economic Research Service (ERS), in the latest USDA Feed Outlook. “The average cash-spot corn-market prices for Central Illinois and the Gulf for February 2021 were $5.56/bu. and $6.24/bu., respectively. By comparison, the same prices in February 2020 were $3.75 and $4.29.”

ERS left the 2020-21 U.S. corn supply and use outlook unchanged in the latest monthly World Agricultural Supply and Demand Estimates (WASDE) released last week. The projected season-average farm price also was unchanged at $4.30/bu. 

Fed Cattle Prices Continue Steady

During the next several months, cattle feeders should begin wresting some long-held market leverage back from beef packers. Until then, packers are holding prices in check.

Negotiated cash fed cattle prices were steady last week at $114/cwt. in the Southern Plains, steady to $1 higher at $114 in Colorado, steady in Nebraska at $113-$114 and steady to $1 lower in the western Corn Belt at $112-$113. Dressed trade was steady in Nebraska at $180 and steady to $2 lower in the western Corn Belt at $178-$180.

Week to week on Friday, Live Cattle futures an average of $1.68 higher (87¢ to $2.70 higher) except for 2¢ lower in spot Apr.

“For six consecutive weeks, finished cattle have traded steady, with the 5-area weighted average price being in less than a $0.50/cwt. range,” Griffith says. “This screams packer leverage and complete control of the market in the short term. How long packers will maintain this leverage is not known. The supply information would indicate leverage shifting to cattle feeders fairly soon. However, it seems we do not always have complete information in this analysis. The April Live Cattle contract has declined $6 over a four-week period and the cash price is showing no signs of making a run to $120, much less to $126 where it peaked. A rally through the end of March will go a long way to positivity throughout the cattle complex.”

Fed steer price forecasts were unchanged in the latest WASDE at $113/cwt. for the first and second quarters, $114 in the third quarter and $119 in the fourth quarter for an annual average of $115.

Wholesale Beef Prices Soften

Choice boxed beef cutout value was $5.46 lower week to week on Friday at $225.87/cwt. Select was 58¢ lower at $220.27.

Griffith points out declining Choice prices the past couple of weeks, as well as the narrowing Choice-Select price spread are typically associated with January and February, rather than March.

“January and February tend to be the weakest demand months for beef, which depresses beef prices. Similarly, the shift in beef consumption during the winter months tends to be from middle meats to end meats, which results in the narrowing of the Choice-Select spread,” Griffith explains. “As the market moves through March, Choice beef prices tend to escalate more quickly than Select prices, because the market is gearing up for post-Easter demand and the grilling season.”

ERS analysts increased estimated beef production for this year by 40 million lbs. in the latest WASDE to 27.58 billion lbs.

“First-half beef production is raised from last month as lower expected fed cattle slaughter in the first quarter is more than offset by higher first-half non-fed cattle slaughter,” according to ERS analysts. “Second-half production is adjusted to reflect a more rapid pace of first-quarter feedlot placements.”

Total red meat and poultry production was reduced 127 million lbs. to 107.47 billion lbs., with expected reductions in pork, broiler and turkey production.

Friday to Friday Change

Weekly Auction Receipts

CME Feeder Index

Thursday through Thursday…

*Wednesday-to Wednesday for CME Feeder Index

Cash Stocker and Feeder

North Central

South Central

Southeast

(AMS National Weekly Feeder & Stocker Cattle Summary)

Wholesale Beef Value

Futures

Equities

Except for steady to mostly higher in the Southeast, calves and feeder cattle sold mixed last week, based on auction sales monitored by cattle Current.

“Corn made another sharp gain on Tuesday and the recent volatility in that market along with the fact that cattle feeders have been unable to achieve higher prices for fed cattle made buyers conservative on some of the heavier yearlings,” explained the AMS market reporter on hand for Tuesday’s sale at Kingsville Livestock Auction in Missouri, where steers weighing 850-900 lbs. sold $5-$8 lower.

Worries about rising inflation rates and interest rates competed with optimism about pandemic recovery, fueling overall commodity and equity market uncertainty.

The CME Feeder Cattle Index was $4.06 lower week to week on Thursday at $134.85.

Week to week on Friday, Feeder Cattle futures closed an average of $1.94 higher (7¢ to $3.20 higher), except for an average of $3.81 lower in the front two contracts.

“Whiplash is running rampant through Feeder Cattle futures,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “Since the start of 2021, March Feeder Cattle futures prices have traded in nearly a $15 range.

“The wide price swings were most evident in January, followed by a much narrower trading range in February. However, futures started March on a negative note, which means there will have to be a large swing to the upside for sellers to see any benefit on the cash market. Summer and fall Feeder Cattle futures contracts tend to rally out of March, but that does not mean much for the spring contracts. All eyes are on the finished cattle market to help determine where feeder cattle prices should be this spring. March-placed cattle generally come off feed in the August and September time period, which means the August Live Cattle market is a major determinant of current feeder cattle prices. If there is a Live Cattle price rally this spring, then that could result in cattle feeders being willing to bet on the come or bet on higher prices in the future, which may mean they will be willing to spend some of their profits to pay up for feeder cattle. The current market dynamics present a great example of why it is important to be an active cattle marketer compared to a passive marketer.”

Rising feed costs continue to hamper calf and feeder cattle prices, as well.

Week to week on Friday, Corn futures closed an average of 9¢ higher through the front six contracts, except for an average of 1¢ lower in near May and Jly.

Week to week on Friday, Soybean futures closed an average of 25¢ higher through the front six contracts.

USDA issues the monthly World Agricultural Supply and Demand Estimates Tuesday (Mar. 9), which hold the potential to add price volatility.

Fed Cattle Trudge Steady

Negotiated cash fed cattle prices continued in the steady rut last week, as packers exploited plentiful supplies and sold-ahead inventory. Plenty of folks also expect more wheat pasture cattle to move this month, given the current value of harvesting a dual-purpose winter wheat crop.

For the week, established trade was steady on a live basis at $114/cwt. in the Southern Plains and Northern Plains. Dressed trade in Nebraska was $2 lower at $180. The previous week, live sales in the western Corn Belt were at $114, with dressed trade at $182.

Week to week on Friday, Live Cattle futures closed an average of 97¢ higher (2¢ to $1.50 higher) except for an average of 70¢ lower in the front two contracts.

As mentioned in the last Cattle Current weekly summary, Kevin Good, vice president of industry relations and analysis at CattleFax sees this year as a tale of two halves.

“There are more cattle in the system early in 2021 with big supplies on feed and heavy weights, however the second part of the year will transition to tighter calf crops and tighter slaughter,” Good explained during the Feb. 24 CattleFax Outlook during the virtual 2021 Cattle Industry Convention Winter Reboot.

CattleFax projects total slaughter this year to be 33.5 million head, which would be 700,000 head more year over year. Average carcass weights are projected 4 lbs. lighter.  Beef production is projected 500 million lbs. more than 2020 to 27.6 billion lbs.

Choice boxed beef cutout value was $9.20 lower week to week on Friday at $231.33/cwt. Select was $8.88 lower at $220.85.

Friday to Friday Change

Weekly Auction Receipts

CME Feeder Index

Thursday through Thursday…

*Wednesday-to Wednesday for CME Feeder Index

Cash Stocker and Feeder

North Central

South Central

Southeast

(AMS National Weekly Feeder & Stocker Cattle Summary)

Wholesale Beef Value

Futures

Equities