WLI

Negotiated cash fed cattle trade continued in Kansas on Thursday with live prices at $96-$102/cwt., but mostly $100-$102, which was $2-$6 lower than the last week.

Cattle futures softened Thursday, with continued light trade, lower cash prices and the ongoing decline in wholesale beef values.

Live Cattle futures closed an average of 59¢ lower.

Feeder Cattle futures closed an average 71¢ lower. 

Beef exports continue to be a bright spot.

Net U.S. beef export sales of 20,100 metric tons for the week ending June 11 were 1% less than the previous week but 67% more than the previous four-week average, according to the U.S. Export Sales report from USDA’s Foreign Agricultural Service. Increased sales were mainly to South Korea, Japan, Hong Kong, Taiwan and Canada.

Choice boxed beef cutout value was $4.37 lower Thursday afternoon at $213.56/cwt. Select was $4.00 lower at $204.08.

The average dressed steer weight for the week ending June 6 was 892 lbs., which was 1 lb. heavier than the prior week and 46 lbs. heavier than the same week a year earlier, according to USDA’s Actual Slaughter Under Federal Inspection report. The average dressed heifer weight of 824 lbs. was 2 lbs. lighter than the previous week, but 42 lbs. heavier than the prior year.

Corn futures closed mostly fractionally higher.

Soybean futures closed mostly 1¢ to 2¢ higher. 

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Major U.S. financial indices closed narrowly mixed Thursday. Pressure included more initial weekly jobless claims than traders expected. Initial claims were 1.51 million according to the U.S. Department of Labor; that was 58,000 fewer than the previous week.

The Dow Jones Industrial Average closed 39 points lower. The S&P 500 closed 1 point higher. The NASDAQ closed 32 points higher.

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“Given a potential months-long economic recession, overall beef demand will likely be down even as sit-down restaurants open across the USA,” says Brenda Boetel, Extension livestock economist at the University of Wisconsin-River Falls, in the latest issue of In the Cattle Markets. “Consumers will likely see a small decrease in beef consumption due to the expected decrease in 2020 beef production quantities, but the respective beef demand will likely be down more as consumers will be less willing to pay high prices for beef. The return to U.S. consumers spending large amounts on highly valued beef cuts will be slow and largely dependent on macroeconomic growth. Sit-down restaurants will find creative ways to entice patrons to return, including menu changes with lower price entrees. As such, overall beef demand will likely be down, while demand for higher-valued primals, typically consumed through foodservice, will be down more than the overall beef demand.”

Keep in mind that demand and consumption, though related, are quite different.

Boetel explains consumption is a function of production. As a perishable product, most all beef produced will be consumed. Calculated beef consumption is simply the sum of beef production and beef imports, minus exports and disappearance. She says beef consumption is projected to be 12.5% less in the second quarter of this this year, compared to the same time last year. That has to do with less beef production, spawned by disruptions to beef packing capacity.

Beef demand, on the other hand, reflects consumers’ perceptions of beef in the marketplace and is representative of consumers’ willingness to pay for beef, according to Boetel.

“Beef demand is impacted by several factors including beef prices, as well as prices of alternative proteins such as pork and chicken,” she explains.  “Additionally, income is another determining factor in beef demand, as well as other factors such as tastes and preferences.

“Even though we eat (i.e., consume) the beef produced, it doesn’t mean that beef demand remains in a consistent relationship with production. Beef consumption can increase without an increase in beef demand because beef demand and beef consumption are not the same thing. For example, beef consumption might increase because more beef is produced, but beef demand decreases because consumers are willing to pay less for each pound of beef they do consume.”

Boetel points out the beef demand index calculated at Kansas State University decreased almost 18% for choice retail beef in April of this year, compared to the same time last year. Driving forces included the substantial loss of food service sales, as well as the economic downturn.

Looking ahead, Boetel says many analysts expect global economic growth this year to contract by nearly 3%, while the U.S. economy is expected to contract by nearly 5.7%.

All of that likely means continued overall pressure on cattle prices.

“Until sit-down restaurants are operating at levels prior to COVID, there will likely be differences in the spread between different primals, no matter the amount of cattle processed,” Boetel says. “It will take months for the U.S. processing sector to work through the backlog of cattle on feed, but as it does so, the spread between wholesale beef and live cattle prices will return to traditional levels, although at likely lower absolute price levels for both live cattle and beef due to the macroeconomic downturn.”

Negotiated cash fed cattle prices continued $2-$6 lower on a live basis Wednesday at $100-$102/cwt. in the Southern Plains, mostly $102 in Nebraska; $99-$102 in the western Corn Belt on Tuesday. Dressed trade was at $160-$162, which was $5-$10 lower in Nebraska and steady to $10 lower in the western Corn Belt.

Cattle feeders offered 1,220 head in the weekly Fed Cattle Exchange auction; none sold.

Choice steers and heifers sold $2.25-$2.50 lower at the fat auction in Tama, IA. There were 122 Choice 2-4 steers weighing an average of 1,378 lbs., bringing an average of $104.13/cwt.

Slaughter steers and heifers sold $3-$6 lower at Sioux Falls Regional in South Dakota. There were 498 Choice 3-4 steers weighing an average of 1,533 lbs. and bringing an average of $102.76.

Cattle futures mostly tread water Wednesday amid continued light trade.

Live Cattle futures closed an average of 22¢ higher, except for unchanged in Dec.

Except for 32¢ lower in the back two contracts, Feeder Cattle futures closed an average 36¢ higher. 

Choice boxed beef cutout value was $9.96 lower Wednesday afternoon at $217.93/cwt. Select was $5.09 lower at $208.08.

Corn futures closed mostly fractionally lower.

Soybean futures closed 3¢ to 4¢ higher. 

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Major U.S. financial indices lost recent steam Wednesday, with some likely profit taking and continued uncertainty about COVID-19.

The Dow Jones Industrial Average closed 170 points lower. The S&P 500 closed 11 points lower. The NASDAQ closed 14 points higher.

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“With higher anticipated fed cattle slaughter in 2020, feedlot marketings will increase. A faster pace of marketings and higher forecast fed cattle prices than last month will likely improve feedlot demand for feeder cattle,” say analysts with USDA’s Economic Research Service (ERS), in the latest monthly Livestock, Dairy and Poultry Outlook.

Based on recent price data, ERS increased the projected annual feeder steer price (basis Oklahoma City) by almost $7, compared to the previous month, to $131.40/cwt.

The projected second-quarter feeder steer price was raised by $5 to $126. Forecast price for the third quarter increased $9 to $132. The fourth-quarter price projection rose $13 to $131.

“In the second quarter, the capacity of beef packing plants to slaughter fed cattle was reduced by as much as 41%, which prompted lower prices for fed cattle. As beef production declined, wholesale beef prices skyrocketed, which greatly expanded packer margins. However, as packers’ capacity to slaughter began to rebound at the beginning of May, increasing demand for cattle, it likely increased their willingness to pay higher prices for cattle,” say ERS analysts.

The average five-area direct fed steer price in May was $111.53/cwt. on a live basis, which was more than 9% higher than in April, according to ERS. With that in mind, USDA increased its price forecast for fed steers in the second quarter by $3 to $104. Forecast prices for the third and fourth quarters increased by $6 to $105 and $106, respectively.

“Based on USDA, Agricultural Marketing Service estimated weekly slaughter for the week ending June 13, steer and heifer slaughter recovered to 4% below the same week a year ago, and cow and bull slaughter improved to 7% above the same week last year,” say ERS analysts.

Negotiated cash fed cattle prices continued the early-week’s lower tone through Tuesday afternoon, according to the Direct Slaughter Cattle Dashboard from USDA’s Agricultural Marketing Service. Live steers averaged $102.81/cwt. and live heifers averaged $101.62. In the beef, steers averaged $164.62 and heifers averaged $163.41.

Cattle futures rallied higher on Tuesday, amid relatively light trade, helped along by strength in outside markets, normalizing supply chains and possibly some early positioning ahead of the monthly Cattle on Feed report due out Friday.

Live Cattle futures closed an average of 99¢ higher (25¢ higher in spot Jun to $1.22 higher).

Feeder Cattle futures closed an average $2.03 higher ($1.70 higher in spot Aug to $2.30 higher at the back).

Choice boxed beef cutout value was 72¢ lower Tuesday afternoon at $227.89/cwt. Select was $1.18 lower at $213.17.

Corn futures closed mostly fractionally higher to 1¢ higher.

Soybean futures closed mostly 2¢ lower through Sep ’21 and then mostly unchanged.

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Major U.S. financial indices closed strongly higher Tuesday, buoyed by news of an effective COVID-19 treatment, as well as a record high bounce in domestic retail sales.

Although 6.1% less than a year earlier, retail sales in May of $485.5 billion were a staggering 17.7% more than in April, according to the U.S. Census Bureau.

The Dow Jones Industrial Average closed 526 points higher. The S&P 500 closed 58 points higher. The NASDAQ closed 169 points higher.

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Although consumers moved on from the panic grocery shopping they did in the early stage of COVID-19, they’re keeping up their at-home inventories of foods and beverages. At the end of last month, compared to early April, the estimated number of food and beverage packages on hand in homes declined by only 3%, according to the NPD Group (NPD).

Some consumers are finding it easier to maintain at-home inventories than others.

For the week ending May 28, 68% of U.S. grocery shoppers reported to NPD that they hadn’t encountered any out-of-stock foods and beverages they shopped for during the week. The other 32% of shoppers reported experiencing out-of-stock items that same week, according to NPD’s NET® COVID-19 Pantry & Food Strategy Tracker.

More specifically, 51% of the consumers who reported encountering out of stocks said they weren’t able to purchase the meat or poultry item they were looking for, which was 10% fewer than the previous week.

For perspective, 33% of consumers reported out of stocks of water, coffee, tea, and juice in the week ending May 28 compared to 25% the previous week.

Categories with increased week-to-week out of stocks reported by consumers included fruits, vegetables and potatoes, as well as dairy products.

Still, David Portalatin, NPD food industry advisor says, “Considering the unprecedented situations COVID-19 presented over the last few months, the U.S. food supply chain held up remarkably well.”

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Net cattle feeding returns will be significantly negative through the summer, before improving, according to the latest Historical and Projected Kansas Feedlot Net Returns from Kansas State University.

Keep in mind, the net return projections reflect cash to cash, without any price risk management.

Currently, the net returns projected for steers closed out in May are -$107.72/head with a Feedlot Cost of Gain (FCOG) of $85.38/cwt. Net returns for heifers are projected at -$83.67/head with a FCOG of $91.82.

From there, projected net returns for steers range from -$194.58 per head (Aug.) to -$276.79 (June) with FCOG of $78.30 to $84.16/cwt. For September through February of next year, projected net returns range from -$73.90 (Sept.) to -$13.23 (Feb.) with FCOG ranging from $77.50 (Sept.) to $80.23 (Feb.).

Forecast summer net returns for heifers are similar: -$141.64 (Aug.) to -$240.81 (June) with FCOG of $85.87 (Aug) to $90.54 (June). For September through February of next year, projected net returns range from -$84.71 (Sept.) to -$19.48 (Feb.) with FCOG ranging from $83.54 (Nov.) to $86.29 (Jan.).

Although too few to trend, negotiated cash fed cattle sales started the week on a mostly lower note, with live trades at $100/cwt. in the Texas Panhandle, $98-$100 in Kansas and at $100-$105 in Nebraska. Early dressed trades in Nebraska were at $159-$167; mostly $167 in the western Corn Belt, according to the Agricultural Marketing Service (AMS).

The weighted five-area direct average price for steers last week, on a live basis, was $104.47/cwt., which was $7.92 less than the previous week. The average dressed steer price was $12.64 less at $166.40. Prices for the same week last year were $113.62 and $184.48, respectively.

Cattle futures followed equity markets on Monday, down early before recovering into the close.

Live Cattle futures closed an average of 61¢ higher, except for unchanged in spot Jun.

Feeder Cattle futures closed an average 56¢ higher (7¢ higher in spot Aug to 77¢ higher at the back).

Choice boxed beef cutout value was $2.03 lower Monday afternoon at $228.61/cwt. Select was $4.92 lower at $214.35.

Corn futures closed mostly 1¢ lower.

Soybean futures closed 2¢ to 3¢ lower through Jan ’21 and then mostly 1¢ lower.

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Major U.S. financial indices closed higher Monday, amid a volatile day of trade. Pressure early, tied to resurgent COVID-19 cases in some states, drove indexes sharply lower. The Fed’s announcement that it would buy individual corporate bonds, expanding its support of credit markets, pulled indexes higher, led by tech stocks.

The Dow Jones Industrial Average closed 157 points higher. The S&P 500 closed 25 points higher. The NASDAQ closed 137 points higher.

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“Feeder cattle prices are expected to hold firm through the summer, while feed costs are expected to decline with larger feedstuffs production,” say analysts with the Livestock Market Information Center (LMIC), in the latest Livestock Monitor. “Drought continues to be an aspect to watch. But, with the improvement of fed cattle prices later this year and lower corn costs, cattle feeding margins could become supportive of feeder cattle prices.”

LMIC analysts point out calf and feeder cattle auction volumes were the least for March since 2002 and the least for April since 2012, mirroring significant year-over-year declines in feedlot placements. Through May, however, they say calf and feeder cattle volume marketed via auction, direct and Internet/video was 9.5% more than the same time last year.