WLI

Negotiated cash fed cattle prices continued across a broad range last week. On a live basis, prices were steady to $5 lower in the Texas Panhandle at $115-$120/cwt., $5 less in Kansas at $115, steady to $7 less in Nebraska at $112-$120 and steady to $1 higher in the western Corn Belt at $115. Dressed prices were steady to $12 lower in Nebraska at $178-$190 and $5-$15 lower in the western Corn Belt at $175-$185.

Through Thursday, the five-area direct weighted steer price was $115.65/cwt. on a live basis and $183.30 in the beef. Week to week, that was $1.64 less and 45¢ less, respectively.

Cattle futures closed lower Friday, likely influenced by week-end and month-end position squaring. Never mind wonderments about how much packers are currently supporting fed cattle prices, relative to the lower levels suggested by fundamentals.

Live Cattle futures closed an average of $1.30 lower, (7¢ lower at the back to $1.75 lower in spot Jun).

Feeder Cattle futures closed an average of $1.01 lower (15¢ lower in spot Aug to $1.52 lower at the back).

Choice boxed beef cutout value was $6.22 lower Friday afternoon at $363.34/cwt. Select was $4.02 lower at $340.07.

Corn futures closed mostly 1¢ lower.

Soybean futures closed 4¢ to 6¢ lower through Jan ’21 and then mostly fractionally mixed to 1¢ lower.

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Major U.S. financial indices closed mixed Friday, amid volatile trade related to rising political tensions between the U.S. and China.

The Dow Jones Industrial Average closed 17 points lower. The S&P 500 closed 14 points higher. The NASDAQ closed 120 points higher.

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Disruptions in cattle slaughter, due to COVID-19, cloud the picture but analysts with the Livestock Marketing Information Center (LMIC) expect USDA’s July 1 Cattle report to reveal further declines in beef cow numbers.

“A smaller July 1 inventory will imply the same situation for Jan. 1, 2021. This would be the second consecutive year-on-year decline for the beef breeding herd that has only just begun this liquidation phase, which may now be sharper than previously expected,” say LMIC analysts, in the latest Livestock Monitor.

Before the pandemic began disrupting packing plants, LMIC analysts point out weekly beef cow harvest was running well ahead of year-ago levels. Beef cow slaughter was 2% to 20% below year-ago levels for the last seven weeks.

As for heifer slaughter, it’s 4% less so far this year, compared to 2019.

“Smaller heifer slaughter would normally imply, when discussing inventory, the possibility that this liquidation phase of the cattle cycle is over and producers are adding breeding type animals. There may be some individuals that are doing so, but the national picture suggests otherwise,” say LMIC analysts. “The decrease in heifer slaughter is misleading for a couple of reasons, but is not indicative of breeding herd growth. First, slaughter disruptions have caused data patterns that are atypical. The backlog of fed cattle is likely skewed towards more heifers; because of the lighter dressed weight, they can likely stay on feed longer than a heavyweight steer. Second, heifer slaughter should fall below a year ago after last year’s large numbers of heifers on feed and a smaller 2019 calf crop. Lastly, producers are cautious after a couple of years of negative returns for cow-calf operations. Many are not thinking of expanding. Adding worry for many in the West is the expanding drought conditions.”

Along with weather and forage availability, economics will continue to drive decisions about herd liquidation or expansion.

“Calf prices improved in recent weeks, but it remains to be seen what fall-weaned calves will bring. LMIC currently sees fourth-quarter calf prices as similar to a year ago,” explain LMIC analysts. “Expenses and feed costs are expected to be lower, and cull cow values have improved in some areas from last year. Under these assumptions, cow-calf returns should be better than the year before, but the outlook is still full of uncertainty.”

Negotiated cash fed cattle sales were mixed on a live basis Thursday, compared to last week: steady in Nebraska at $119-$120/cwt., steady to $1 higher in the western Corn Belt at $115; steady to $5 lower in the Southern Plains at $115-$120. Dressed prices were steady to $12 lower at $178-$190.

Cattle futures closed mixed but mainly higher Thursday, bouncing back from early pressure.

Live Cattle futures closed an average of 32¢ higher, except for 5¢ and 67¢ lower in near and away Oct, respectively.

Feeder Cattle futures closed mixed, an average of 99¢ higher across the front half of the board (45¢ higher to $1.47 higher in spot Aug) to an average 12¢ lower across the back half.

Choice boxed beef cutout value was $8.21 lower Thursday afternoon at $369.56/cwt. Select was $6.11 lower at $344.09.

Corn futures closed 5¢ to 7¢ higher through May ’21 and then mostly 4¢ higher.

Soybean futures closed mostly fractionally lower.

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Major U.S. financial indices closed lower Thursday, apparently mostly hamstrung by rising political tensions between the U.S. and China.

The Dow Jones Industrial Average closed 147 points lower. The S&P 500 closed 6 points lower. The NASDAQ closed 43 points lower.

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Recent slaughter data suggest the worst of COVID-19 packing disruptions may be over.

“For beef and pork, the plants are mainly back online, but are running at reduced capacity due to social distancing of workers, etc. Beef and pork are currently running at about 10% to 15% below last year,” says Jayson Lusk, agricultural economist at Purdue University, in his latest comments. “The worst of the disruptions occurred in late April and early May when we were running about 40% below last year, but significant improvements have been made since then.”

For perspective, the week ending May 2 might be the ebb in packing capacity, when USDA estimated cattle slaughter at 425,000 head, which was 36.8% less (-248,000 head) year over year. Actual cattle slaughter under federal inspection that week ended up 438,614 head, which was 34.8% less (-233,836 head).

By the week ending May 23, estimated slaughter of 555,000 head was 14.2% less (-92,000 head) than a year earlier. Actual slaughter data for the week wasn’t yet available.

There’s still an immense and growing backlog of market-ready fed cattle, but gains in packing capacity suggest it may prove to be less than originally anticipated.

In the meantime, longer-fed cattle are racking up the per-head tonnage.

The average dressed steer weight for the week ending May 16 was 901 lbs., which was 5 lbs. heavier than the previous week and 52 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 831 lbs. was 2 lbs. heavier than the previous week and 43 lbs. heavier than last year.

Negotiated cash fed cattle trade continued steady to unevenly steady Wednesday across a broad range: $120/cwt. in the Southern Plains and mostly $115 on a live basis in the western Corn Belt, but lower in Nebraska at $114-$115. Dressed sales so far this week are at $178-$190.

Cattle feeders consigned 1,164 head to Wednesday’s weekly Fed Cattle Exchange auction–all from the Southern Plains. None sold.

Slaughter steers and heifers sold unevenly steady at Sioux Falls Regional in South Dakota, where 262 head of Choice 2-3 steers weighing an average of 1,411 lbs. sold for an average of $110.40/cwt.

Cattle futures closed higher Wednesday, maintaining strong gains from the previous session.

Live Cattle futures closed an average of 70¢ higher (10¢ higher to $1.47 higher toward the front of the board). Spot June closed at $100.80, the highest level since the first part of March.

Feeder Cattle futures closed an average of 66¢ higher.

Choice boxed beef cutout value was $7.72 lower Wednesday afternoon at $377.77/cwt. Select was $9.82 lower at $350.20.

Corn futures closed fractionally higher to 1¢ higher.

Soybean futures closed 1¢ to 2¢ higher.

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Major U.S. financial indices closed higher again Wednesday. Optimism included the fact that all 50 states are now open for business, to varying degrees.

The Dow Jones Industrial Average closed 553 points higher. The S&P 500 closed 44 points higher. The NASDAQ closed 72 points higher.

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Customer transactions at major U.S. restaurant chains continued to improve slightly for the fifth consecutive week, according to the NPD Group.

Specifically, restaurant customer transactions for the week ending May 17 were 21% less than a year earlier, compared to a decline of 23% the previous week.

Transactions at major quick service chain restaurants, which represent the majority of restaurant transactions, improved by 1% week to week, to a decline of 21%, according to NPD’s CREST^®Performance Alerts.

Restaurant transactions at major full service chains were 49% less than a year earlier, which was 9% more positive than the previous week. The NPD folks say the lifting of COVID restrictions the previous week added 93,000 restaurant units, which helped bolster transaction improvement.

Transactions at full service restaurants in states where on-premise dining was permitted to reopen as of May 10 improved 13 percentage points in the week ending May 17, down 33% year over year, compared to a decline of 46% the prior week.

“The reopening of restaurant dine-in services across the country will certainly continue to help drive improvements, but it’s important to keep in mind that restaurant on-premise dining operations are not serving to full capacity because of safety protocols,” says David Portalatin, NPD food industry advisor. “Equally important to the industry’s recovery is the consumer’s comfort level with dining in at a restaurant now.”  

As for dining at home, according to NPD’s NET^®COVID-19 Pantry & Food Strategy Tracker, consumers reported that 63% of their eating occasions during the COVID-19 outbreak have been atypical, meaning they’re eating foods and beverages that are different from their normal routines.

The weekly weighted average live steer price (five-area direct) last week was $117.06/cwt., which was $4.75 higher than the previous week. The weekly weighted steer price in the beef was $3.70 higher at $183.35.

Higher outside markets, last week’s friendly Cattle on Feed report and recent cash strength helped lift Cattle futures Tuesday.

Live Cattle futures closed an average of $2.06 higher.

Feeder Cattle futures closed an average of $3.86 higher.

Choice boxed beef cutout value was $11.25 lower Tuesday afternoon at $385.49/cwt. Select was $14.16 lower at $360.02.

Corn futures closed mostly 1¢ higher.

Soybean futures closed 10¢ to 13¢ higher through Jan ’21 and then mostly 5¢ to 8¢ higher. Support included announcement of new export sales to China.

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Major U.S. financial indices closed higher Tuesday, buoyed by positive economic news as the domestic economy continues to reopen.

The closely watched Consumer Confidence Index® held steady in May, following the steep decline in April.

“Following two months of rapid decline, the free-fall in Confidence stopped in May,” says Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “The severe and widespread impact of COVID-19 has been mostly reflected in the Present Situation Index, which has plummeted nearly 100 points since the onset of the pandemic. Short-term expectations moderately increased as the gradual reopening of the economy helped improve consumers’ spirits. However, consumers remain concerned about their financial prospects. In addition, inflation expectations continue to climb, which could lead to a sense of diminished purchasing power and curtail spending. While the decline in confidence appears to have stopped for the moment, the uneven path to recovery and potential second wave are likely to keep a cloud of uncertainty hanging over consumers’ heads.”

Also, sales of new single-family houses in April 2020 beat widespread expectations at a seasonally adjusted annual rate of 623,000, according to estimates released by the U.S. Census Bureau and the Department of Housing and Urban Development. That was 0.6% more than the revised March rate, but 6.2% less than a year earlier. 

The Dow Jones Industrial Average closed 529 points higher. The S&P 500 closed 36 points higher. The NASDAQ closed 15 points higher.

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Feedlot placements for March and April were down a combined 867,000 head from the previous year, suggesting a significant decline in fed marketing, mostly in September and into October, says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his latest market comments.

“The delayed placements from March and April will show up starting in May, and will be heavier, but the delay will help feedlots have a chance to get current,” Peel says. “The feedlot industry will spend much of the summer working through the backlog of fed cattle but the hole from March and April feedlot placements should provide a marketing window to catch up by this fall if not before.”

Although average year-over-year fed cattle marketings declined an average of 6.4% for March and April combined, Peel notes, “The slowdown in April marketings and resulting backlog of fed cattle in feedlots would have been more severe without the strong March marketings that pulled some cattle ahead.”