WLI

Negotiated cash fed cattle prices were lower across a broad range last week. The weighted average five-area direct live steer price was $2.97 lower week to week on Thursday at $112.68/cwt. The dressed price was $4.13 lower at $179.17. Prices were $113.51 and $184.16 at the same time last year.

Softer cash prices, declining wholesale beef values and the outlook for continued price erosion weighed on Cattle futures Friday.

Live Cattle futures closed an average of $1.59 lower in the front four contracts, then an average of 52¢ lower (17¢ to 95¢ lower). 

Feeder Cattle futures closed an average $1.15 lower, from 55¢ lower in spot Aug to $1.35 lower at the back.

Choice boxed beef cutout value was $10.78 lower Friday afternoon at $261.48/cwt. Select was $13.99 lower at $246.42.

Corn futures closed mostly 2¢ higher.

Soybean futures closed mostly 2¢ to 4¢ higher across the front half of the board and then mainly fractionally lower to 1¢ lower.

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Major U.S. financial indices closed higher on Friday, buoyed by a surprising surge in employment.

Total nonfarm payroll employment rose by 2.5 million in May, according to the U.S. Bureau of Labor Statistics. The unemployment rate declined by 1.4% to 13.3%.

Average hourly earnings for all employees on private non-farm payrolls fell by 29¢ in May to $29.75, following a gain of $1.35 in April.

“Today’s report shows much higher job creation and lower unemployment than expected, reflecting that the re-opening of the economy in May was earlier, and more robust, than projected,” says U.S. Secretary of Labor Eugene Scalia. “

“Millions of Americans are still out of work, and the Department remains focused on bringing Americans safely back to work and helping States deliver unemployment benefits to those who need them. However, it appears the worst of the coronavirus’s impact on the nation’s job markets is behind us.”

The Dow Jones Industrial Average closed 829 points higher. The S&P 500 closed 81 points higher. The NASDAQ closed 198 points higher.

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“Considering all the challenges the U.S. red meat industry faced in April, export results were encouraging,” says Dan Halstrom, president and CEO of the U.S. Meat Export Federation (USMEF). “Exporters lost several days of slaughter and processing due to COVID-19, and shipments to Mexico and some other Latin American markets declined due to slumping currencies and the imposition of stay-at-home orders. Despite these significant headwinds, global demand for U.S. beef and pork remained strong.”

April beef exports were down 6% from a year ago to 98,613 metric tons (mt), with value falling 11% to $600.9 million, according to data released by USDA and compiled by the USMEF. But, exports achieved outstanding growth in Japan, where U.S. beef is benefiting from reduced tariffs under the U.S.-Japan Trade Agreement. Exports also trended higher to China, following the late-March implementation of the U.S.-China Phase One Economic and Trade Agreement.

For January through April, beef exports totaled 433,316 mt, up 5% from a year ago, valued at $2.66 billion (up 3%).

With lower April slaughter numbers, beef export value per head of fed slaughter climbed to a record $363.35, up 19% from April 2019. For the first four months of the year, per-head export value increased 5% to $326.47.

“International customers are relieved to see U.S. production rebounding, solidifying our position as a reliable supplier,” Halstrom says. “This helps address a major concern for buyers, as COVID-19 has disrupted meat production in many countries, not just the United States. Demand remains robust for U.S. red meat, especially at retail, but USMEF is actively working with our foodservice customers across the globe to help ensure a strong recovery for the restaurant, catering and hospitality sectors. Many are adjusting to an entirely new business climate, and the U.S. industry assisting them in this process can help ensure that U.S. pork, beef and lamb will be featured on their menus.”

U.S. pork exports in April were 264,048 mt, up 22% from a year ago but the lowest since November 2019. Export value of $682.8 million was up 28% year-over-year but the lowest since October 2019. Through the first four months of 2020, pork exports remain on a record pace at 1.1 million mt, up 35% from a year ago, with value up 45% to $2.91 billion.

Negotiated cash fed cattle prices were sharply lower in the Southern Plains on Thursday at $105/cwt., which was $13 less than the bulk of the previous week’s trade. For the week, established live prices in the North are $3-$4 lower than the previous week at $109-$117 in Nebraska and at mostly $110 in the western Corn Belt. Dressed prices for the week are steady to $10 lower at $175-$185.

Cattle futures faded the softer cash prices, though, with support including the weekly U.S. Export Sales report from USDA’s Foreign Agricultural Service. Net sales of 12,300 metric tons of beef for the week ending May 28 were 7% more than the previous week and 97% more than the prior four-week average. Increased beef export sales were mostly to South Korea, Japan, Canada, Hong Kong, and China.

Live Cattle futures closed an average of 86¢ higher, from 27¢ higher in spot Jun to $1.12 higher.

Feeder Cattle futures closed an average 89¢ higher, from 50¢ higher in spot Aug to $1.17 higher at the back.

Wholesale beef values continue to plunge, adjusting back to more normal fundamentals. Choice boxed beef cutout value was $23.64 lower Thursday afternoon at $272.26/cwt. Select was $16.37 lower at $260.41.

Total fed cattle slaughter for the week ending May 23 was 444,378 head, which was 51,816 head more (+13.2%) than the previous week and the most since the first week of April, according to USDA’s Actual Slaughter Under Federal Inspection report. Total cattle slaughter of 571,506 head was 52,383 head more (+10.1%) than the prior week and the most since the first week of April. Compared to the prior year, though, fed cattle slaughter was still 14.5% less and total cattle slaughter was 11.6% less.

The average dressed steer weight for the week was 894 lbs., which was 6 lbs. lighter than the previous week, but 52 lbs. more than the same week a year earlier. The average dressed heifer weight of 826 lbs. was 5 lbs. less than the previous week, but 41 lbs. heavier than the prior year.

The lowest U.S. Dollar since March supported Grain futures.

Corn futures closed 3¢ to 5¢ higher.

Soybean futures closed mostly 10¢ to 14¢ higher.

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Major U.S. financial indices closed narrowly mixed Thursday. Pressure included more initial jobless claims than the market expected.

Initial unemployment insurance claims for the week ending May 30 were 1.88 million, which was 249,000 fewer than the previous week, according to the U.S Labor Department.

The Dow Jones Industrial Average closed 11 points higher. The S&P 500 closed 10 points lower. The NASDAQ closed 67 points lower.

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Customer transaction declines at major U.S. restaurant chains continued to improve in the week ending May 24, according to The NPD Group (NPD).

With nearly 320,000 restaurant units in the U.S. allowed to offer some level of on-premise dining, total major restaurant chain transactions declined by 18% compared to the same week last year, which represented a week-to-week gain of 25 points. That’s according to NPD’s CREST^®Performance Alerts, which provides a weekly view of chain-specific transactions and share trends for 70 quick service, fast casual, midscale, and casual dining chains.

Major full service chain restaurant transactions declined by 42% versus same time last year, a 7-point improvement from the prior week’s decline.

Transactions at quick service restaurant chains were down 17% year over year, improving from the 20% decline a week earlier.

NPD’s CREST^®foodservice market research, indicates total industry traffic at chain and independent restaurants was down 35% in April compared to year ago, which aligns with NPD’s weekly restaurant chain transactions tracking.

“Among the most interesting behaviors we’re seeing is the rapid escalation of using technology to engage with restaurants,” says David Portalatin, NPD food industry advisor. “Going forward, we might expect a digital divide that sets apart restaurants with well-executed digital offerings and requires those without to turn to the newfound prowess of third-party platforms.”

Negotiated cash fed cattle prices continued softer week-to-week on Wednesday. Live prices were $117/cwt. in the Texas Panhandle, $110-$117 in Kansas and mostly $117 in Nebraska. Dressed trades were at $175-$185.

Cattle feeders offered 1,736 head in the weekly Fed Cattle Exchange auction Wednesday. Just one lot–199 steers from Texas–sold at a weighted average price of $110.50/cwt. for delivery at 1-17 days.

Despite softer cash prices, surging outside markets helped support Cattle futures on Wednesday.

Except for 10¢ lower in the back two contracts, Live Cattle futures closed an average of 40¢ higher, from 2¢ higher to $1.15 higher.

Feeder Cattle futures closed an average 84¢ higher.

Wholesale beef values continue to plunge as packing capacity recovers. Choice boxed beef cutout value was $22.83 lower Wednesday afternoon at $295.90/cwt. Select was $13.80 lower at $276.78.

Corn futures closed mostly fractionally higher to 1¢ higher.

Soybean futures closed 5¢ to 7¢ higher through Jan ’21 and then mostly 3¢ to 4¢ higher.

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Major U.S. financial indices closed strongly higher Wednesday.

Positive news included fewer lost jobs than originally anticipated, based on the closely watched ADP National Employment Report^®. Still, private sector employment decreased by 2.76 million jobs from April to May, according to the report. 

“The impact of the COVID-19 crisis continues to weigh on businesses of all sizes,” says Ahu Yildirmaz, co-head of the ADP Research Institute. “While the labor market is still reeling from the effects of the pandemic, job loss likely peaked in April, as many states have begun a phased reopening of businesses.”

The Dow Jones Industrial Average closed 527 points higher. The S&P 500 closed 42 points higher. The NASDAQ closed 74 points higher. Those were the highest levels since the first part of March.

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“It’s too soon to talk too much about markets returning to normal, but the steady improvements associated with the packing industry facing fewer obstacles is a relief,” says Stephen Koontz, agricultural economist at Colorado State University, in the latest issue of In the Cattle Markets from the Livestock Marketing Information Center.

Koontz explains recent weekly commercial cattle slaughter under federal inspection is a little more than 71% of the year’s peak weekly volume, before COVID-19 began reducing slaughter capacity. The low point was approximately 60% of the peak.

“These slaughter numbers will determine when the cattle and beef markets return to more normal relationships,” Koontz says. “There are very large supplies and substantial inventory of long-fed cattle on feed. There has been a steady improvement in fed cattle and feeder cattle prices through last month and into the current. Continued improvement hinges on any further disruptions and steady elevation in slaughter numbers.”

From the lows of the year, Koontz points out: the five-area weighted average fed steer price is up about $15 at $115/cwt.; 7 to 8-weight feeder prices are up about $15 to $135; 4 to 5-weight calf prices are up about $8 to $170.

“But let’s not forget those steer and heifer slaughter weights are in a contra- seasonal increase and are no less than 40 lbs. per animal above last year. That’s a 4.8% increase in beef supplies due to carcass weights,” Koontz says. “And there are 4.8 million head of cattle on feed over 120 days, based on the last report. Working through these supplies will easily require the rest of the summer.”

Early negotiated cash fed cattle trade on Monday was unevenly steady with the bulk of last week’s trade. Live prices were at $118/cwt. in the Southern Plains and Nebraska. Dresses sales in Nebraska and the western Corn Belt were at $178-$187.

Cattle futures closed mixed but mainly higher Monday as traders weigh short term beef demand against increasing supplies and lower boxed beef values.

Live Cattle futures closed mixed, an average of 70¢ lower through the front three contracts (5¢ to $1.42 lower) and then an average of 88¢ higher.

Feeder Cattle futures closed an average of $2.05 higher.

Choice boxed beef cutout value was $22.19 lower Monday afternoon at $341.15/cwt. Select was $23.24 lower at $316.83.

Corn futures closed mostly 2¢ to 3¢ lower.

Soybean futures closed mostly unchanged to 1¢ higher.

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Major U.S. financial indices closed higher Monday, apparently on increasing optimism about reopening the economy and despite trade-quashing chatter between the U.S. and China, as well as curfews imposed in various cities, aimed at quelling recent violent protests.

The Dow Jones Industrial Average closed 91 points higher. The S&P 500 closed 11 points higher. The NASDAQ closed 62 points higher.

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“Barring a major setback, it appears that beef markets are moving past the worst of the disruptions that have caused upheaval in recent weeks,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “The last few weeks have revealed much about the nature of specialized beef supply chains and much about the variable demands for the wide variety of beef products. It has also revealed how market prices adjust to wild swings in beef product demand and supply conditions.”

Those disruptions were first spawned by the massive shift in consumer beef demand toward retail purchases and away from food service as the pandemic quarantine began. Then came the disruptions to beef packing and processing.

“Cattle slaughter and beef production decreased on a year-over-year basis for four consecutive weeks. The lowest point occurred the last week of April when total cattle slaughter was down 34.8% year over year. Beef production that same week was down 33.8% compared to the same week one year ago,” Peel says.  “Significant recovery has occurred from that low with estimated cattle slaughter the week ending May 30 down 10.9% year over year. With cattle carcass weights increasing sharply due to delays in marketing fed cattle, estimated beef production last week was down just 7.6% year over year.”

Along the way, wholesale beef values skyrocketed overall, while price impacts varied across the carcass. For example, Peel points to increased demand for the Chuck and Round from March through April. Conversely, he explains prices for beef products dependent on food service demand, including many middle meat cuts, dropped in March before general shortages of products pushed prices higher in April and May. 

“Additional dynamics are expected as food service continues a slow recovery and macroeconomic conditions continue to affect beef demand, but hopefully beef product markets are settling back into a much more stable situation and with typical product price relationships reestablished,” Peel says.