WLI

Volatility in negotiated cash fed cattle trade continues so far this week. Dressed prices were at $160/cwt. in the western Corn Belt Monday, then $150 on Tuesday with too few transactions to trend. Likewise, with too few transactions to trend early dressed sales in Nebraska were at $150, compared to $150-$160 the previous week.

Cattle futures edged higher Tuesday, making for a third consecutive session of mostly higher prices, underpinned by runaway wholesale beef values, while offering a glimmer of stability.

Live Cattle futures closed an average of 45¢ higher.

Except for 77¢ lower in spot Apr, Feeder Cattle futures closed an average of 67¢ higher.

Wholesale beef values continued to shatter records Tuesday.

Choice boxed beef cutout value was $18.98 higher Tuesday afternoon at a $330.82/cwt. Select was $22.10 higher at $320.88.

According to various news reports, President Trump was close to signing an executive order, utilizing the Defense Production Act to mandate packing plants remain open, in order to protect the nation’s food supply (see below).

Other than 2¢ lower and 1¢ lower in the front two contracts, Corn futures closed mainly fractionally higher to 2¢ higher.

Soybean futures closed 1¢ to 4¢ lower through Nov ’20 and then 3¢ to 8¢ higher.

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Major U.S. financial indices softened Tuesday. Pressure appeared to include skittishness over the Fed meeting Wednesday, as well as declining consumer confidence.

The Conference Board Consumer Confidence Index® declined 31.9 points from March to April to 86.9, according to The Conference Board (TCB). Although the Present Situation Index–based on consumers’ assessment of current business and labor market conditions–declined from 166.7 to 76.4, the Expectations Index–based on consumers’ short-term outlook for income, business and labor market conditions–improved from 86.8 in March to 93.8 in April.

“The 90-point drop in the Present Situation Index, the largest on record, reflects the sharp contraction in economic activity and surge in unemployment claims brought about by the COVID-19 crisis,” explains Lynn Franco, TCB Senior Director of Economic Indicators. “Short-term expectations for the economy and labor market improved, likely prompted by the possibility that stay-at-home restrictions will loosen soon, along with a re-opening of the economy. However, consumers were less optimistic about their financial prospects and this could have repercussions for spending as the recovery takes hold.”

The Dow Jones Industrial Average closed 32 points lower. The S&P 500 closed 15 points lower. The NASDAQ closed 122 points lower.

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“In small communities around the country where we employ over 100,000 hard-working men and women, we’re being forced to shutter our doors. This means one thing–the food supply chain is vulnerable,” says John Tyson, Chairman of the Board for Tyson Foods, in a letter published as an ad in Sunday’s New York Times and other newspapers. “As pork, beef and chicken plants are being forced to close, even for short periods of time, millions of pounds of meat will disappear from the supply chain. As a result, there will be limited supply of our products available in grocery stores until we are able to reopen our facilities that are currently closed.”

The United Food and Commercial Workers International Union (UFCW) estimates 22 meat packing plants closed–including union and non-union plants–at some point in the past two months. Closures reduced pork slaughter by 25% and beef slaughter by 10%, according to the organization.

“UFCW estimates have confirmed 20 worker deaths in meatpacking and food processing. In addition, at least 5,000 meatpacking workers and 1,500 food processing workers have been directly impacted by the virus,” according to a UFCW news release published Monday. “Those directly impacted include individuals who have tested positive for COVID-19, missed work due to self-quarantine, are awaiting test results, or have been hospitalized, and/or are symptomatic.”

“Tyson and every company across this vital industry, must immediately join with UFCW in calling for federal and state elected leaders to designate these frontline workers as first responders,” said UFCW International President Marc Perrone, in a Tuesday statement. “Temporary first responder status ensures these workers have priority access to the COVID-19 testing and protective equipment they need to continue doing these essential jobs. Our federal leaders must enforce clear guidelines to ensure every employer lives up to the high safety standards these workers deserve and the American people expect.”

“We have a responsibility to feed our country. It is as essential as healthcare. This is a challenge that should not be ignored,” explained Tyson, in his letter. “Our plants must remain operational so that we can supply food to our families in America. This is a delicate balance because Tyson Foods places team member safety as our top priority…The government bodies at the national, state, county and city levels must unite in a comprehensive, thoughtful and productive way to allow our team members to work in safety without fear, panic or worry.”

Cattle futures started the week with modest gains, amid sluggish trade and supported by outside markets, as well as Friday’s bullish Cattle on Feed report.

Except for 17¢ lower in spot Apr, Live Cattle futures closed an average of $1.01 higher.

Feeder Cattle futures closed an average of 67¢ higher.

Wholesale beef values continued to rocket higher with the bottleneck in packer capacity disrupting the supply chain.

Choice boxed beef cutout value was $18.47 higher Monday afternoon at a record high of $311.84/cwt. Select was $19.76 higher at $298.78.

Corn futures closed 6¢ to 10¢ lower through Mar ’21 and then mostly 3¢ to 5¢ lower.

Soybean futures closed mostly 1¢ to 3¢ lower.

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Major U.S. financial indices closed higher again on Monday, with optimism that some states are nearing at least partial reopening. Gains came despite another rugged day for oil prices: West Texas Intermediate on the CME closed $1.20 to $4.16 lower through the front six contracts; spot Jun closed at $12.78.

The Dow Jones Industrial Average closed 358 points higher. The S&P 500 closed 41 points higher. The NASDAQ closed 95 points higher.

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“There will be at least several more months of this economic environment, and it could easily stretch into 2021,” say analysts with the Livestock Marketing Information Center (LMIC), in the latest Livestock Monitor.

With volatile and uncertain markets in mind, those analysts offer four suggestions to cow-calf producers.

First, LMIC analysts say to monitor forage availability on the operation, as always, but also keep track of it locally and regionally.

“Pasture conditions this year will be critical to regional and national marketing flows of calves and yearlings,” according to LMIC analysts. “Many more animals are headed to spring and summer grazing programs than in recent years because of the drop in the number of animals being placed into feedlots, a trend that may continue for several months. Poor pasture and range conditions could cause bunches of cattle to move into the markets quickly. Further, more winter feed will be required if producers who typically don’t hold over calves into the new calendar year, did so in 2020.”

As mentioned in Cattle Current last week, the start to growing season is off to a drier start than last year. According to the U.S. Drought Monitor, 26.92% of the nation was classified from D0 (abnormally dry) to D4 (exceptional drought), for the week of Apr. 21. That’s 14.57% more than the same week last year.

Next, LMIC analysts suggest keeping an eye on feedlot placements provided by the National Agricultural Service (NASS), in the monthly Cattle on Feed report. They explain the data provides some insight to how aggressive feedlots are replacing cattle and at what weights. Conversely, it offers a notion of the number of cattle left to be placed.

Third, monitor feedstuff availability and prices, especially corn.

“Be aware of trends in soybean meal and in hay prices. The two major drivers of calf and yearling prices are fed animal prices and the cost of gain in a feedlot,” LMIC analysts explain. “Critical will be the number of corn acres planted in the Midwestern states. Beginning with planting season, the markets will focus on spring and early summer growing conditions. Low feedstuff costs can become a supportive market factor for late summer and early fall yearling and calf prices. Drought will do the opposite.”

Finally, they say to pay attention to the dairy business. One option available to hard-pressed producers in that sector is cow culling, which could pressure prices further, depending on the level and timing.

“Prepare for price volatility,” say LMIC analysts. “As conditions change, be ready to adjust marketing plans. It is especially important to communicate with family, partners, and financial institutions.”

Reduced beef packing production, due to COVID-19, continues to boost uncertainty and wreak havoc on market fundamentals as cattle feeders compete for slaughter access. Consider last week’s fluctuating cash prices for fed cattle.

Through Friday afternoon, negotiated cash fed cattle trade for the week was $5-$10 lower on a live basis in the Southern Plains at $100/cwt. in Kansas and $95-$100 in the Texas Panhandle. It was up to $10 lower in Nebraska and the western Corn Belt at $95. Dressed trade was from $8 lower to $10 higher at mostly $160, compared to the previous week’s light test.

For all of the gyrations, five-area daily weighted average direct negotiated prices through Thursday were mainly steady week to week with live steers at $96.95 and dressed steers at $154.27.

So far, the packing bottleneck appears nowhere near as dire as that faced by pork producers in 1998, when the fat hog price plummeted to about $8/cwt. toward the end of the year, due to sudden and significantly reduced packing capacity. But, it’s understandable why some are recalling the memory.

Wholesale beef values are running the opposite direction, fueled by declining supplies and what seems to be at least constant demand.

Choice boxed beef cutout value was $9.08 higher Friday afternoon at a record high of $293.37/cwt. Select was $6.13 higher at $279.02.

Cattle futures mainly consolidated and hovered, other than front-month Live Cattle.

Except for 97¢ and 30¢ lower in the front two contracts, and 10¢ lower in away Apr, Live Cattle futures closed an average of 43¢ higher.

Feeder Cattle futures closed an average of 47¢ higher.

Logic suggests the market should view Friday’s monthly Cattle on Feed report as bullish to at least neutral, given the plunge in placements and spike in marketings (see below). That may not be the case, though, as it also underscores how many more cattle than normal need to be placed at some point.

Corn futures closed mostly 1¢ to 3¢ lower.

Soybean futures closed mostly 7¢ to 10¢ lower.

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Major U.S. financial indices closed higher Friday, as crude oil prices continued to maintain stability.

The Dow Jones Industrial Average closed 260 points higher. The S&P 500 closed 38 points higher. The NASDAQ closed 139 points higher.

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Even fewer cattle were placed and even more cattle were marketed in March than expected, according to the monthly Cattle on Feed report issued Friday.

Between depressed prices keeping more cattle outside of feedlots and the slower turnover in feedyards, plenty of folks suspected feedlot placements would be significantly fewer year over year. In fact, the 1.56 million head placed in feedlots with 1,000 head or more capacity was 22.69% less (457,000 head fewer). That was the least for the month since the data series began in 1996, according to AMS. The decline was about 4.8% more than average analyst estimates ahead of the report.

In terms of placement weights, 34.04% went on feed weighing 699 lbs. or less; 52.15% weighing 700-899 lbs. and 13.81% weighing 900 lbs. or more.

Marketings in March of 2.01 million head were 13.11% more (+233,000 head) than the previous year. That was the second most for the month since the data series began. Heading into the report, analysts expected, on average, marketings to increase 12.3%.

Cattle on feed Apr. 1 of 11.30 million head were 5.49% less (656,000 head fewer) than the previous year. That was about 0.7% less than pre-report estimates.

Although still $7-$8 lower than last week, dressed trade in the north rebounded from the previous day to mostly $160/cwt. on Thursday.

Cattle futures continued to be pressured by uncertainty regarding slowing beef production and how soon some sense of normalcy can return.

Except for 10¢ and 7¢ higher in two contracts, Live Cattle futures closed an average of 96¢ lower (20¢ lower to $3.00 lower in spot Apr).

Except for 95¢ and 60¢ higher in the front two contracts, Feeder Cattle futures closed an average of $1.09 lower.

Wholesale beef values took another broad step higher Thursday, as demand continues to outpace declining supplies.

Choice boxed beef cutout value was $8.54 higher Thursday afternoon at a record high of $284.29/cwt. Select was $11.87 higher at $272.89.

Corn futures closed mostly 1¢ lower to 1¢ higher.

Soybean futures closed 2¢ to 4¢ higher through Sep ‘20, and then mostly 2¢ to 3¢ lower.

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Major U.S. financial indices closed little changed Thursday, following wide gyrations during the session. Support included more recovery in crude oil prices, while pressure included another expected surge (4.43 million) in weekly initial jobless claims, according to the U.S. Labor Department.

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

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How long beef packing plant production remains constrained by COVID-19 is the next unknown markets are pricing, says Stephen Koontz, agricultural economist at Colorado State University. He adds, “Some certainty to the course of the CORVID-19 pandemic will be needed to mitigate this risk.”

Although the inventory of long-fed cattle is climbing, in the most recent issue of In the Cattle Markets, Koontz says the uncertainty of pricing short-term needs and availability will be unclear for at least another month, given the fact that Friday’s Cattle on Feed report accounts for inventory at the first of April, with flows from March.

Incidentally, heading into the monthly Cattle on Feed report, analysts surveyed by Urner Barry, with data shared by the Daily Livestock Report see March placements down about 18%, March marketings 12% higher and the Apr. 1 on-feed inventory 5% less year over year.

“Fed cattle prices continue to soften and the impact of delayed marketings will weigh on the market until summer,” Koontz says.

In the meantime, carcass weights continue to be significantly heavier than last year’s depressed levels.

The average dressed steer weight for the week ending Apr. 11 was 886 lbs., according to USDA’s weekly Livestock Slaughter report. That was 3 lbs. lighter than the previous week, but 22 lbs. heavier than the previous year. The average dressed heifer weight was 826 lbs., which was 1 lb. heavier than the prior week and 24 lbs. heavier than the same week last year.

Cattle feeders offered 4,671 head in the weekly Fed Cattle Exchange auction on Wednesday. Of those, 860 head sold: 726 head for delivery at 1-9 days for a weighted average price of $100/cwt.; 174 head for delivery at 1-17 days for a weighted average price of $92.67. That was mainly on par with country trade so far this week.

Similarly, Choice 2-3 steers at Sioux Falls Regional (114 head) in South Dakota weighing an average of 1,453 lbs. sold for an average price of $100.15/cwt. across a range of $93.50-$102.00.

Wholesale beef values rocketed higher again Wednesday, as demand outpaces declining supplies.

Choice boxed beef cutout value was $15.90 higher Wednesday afternoon to a presumed record high of $275.75/cwt. Select was $12.20 higher at $261.02.

All of that seemed to have Cattle futures stuck in a wait-and-see mode, with light support and two-sided trade, other than a sharp drop in spot Live Cattle, given the likely continuation of near-term pressure on cash prices as the supply chain tries to sort its COVID-19 worker challenges.

Except for $2.65 lower in waning spot Apr, Live Cattle futures closed from 30¢ lower to 32¢ higher.

Except for 7¢ lower in May and 25¢ lower in the back contract, Feeder Cattle futures closed an average of 27¢ higher.

Corn futures closed mostly 4¢ to 8¢ higher through Mar ’21 and then mostly 2¢ to 3¢ higher.

Soybean futures closed 5¢ lower to 4¢ higher through Mar ‘21, and then mostly 8¢ to 10¢ lower.

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Major U.S. financial indices closed higher Wednesday, buoyed by resurgent oil prices. Although spot Jun West Texas Intermediate crude oil futures on the CME closed at an anemic $13.78, it was $2.21 higher than the previous day; the front six months closed $2.00-$2.34 higher.

The Dow Jones Industrial Average closed 456 points higher. The S&P 500 closed 62 points higher. The NASDAQ closed 232 points higher.

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Disruptions in beef production and consumption, due to COVID-19, began showing up in freezers last month, according to USDA’s Cold Storage report.

There were 502.42 million lbs. of beef in freezers Mar. 31, which was 2% more than the previous month and 11% more than the previous year. Of that, boneless beef cuts (466.87 million lbs.) was record large for the month–the data series began in 1972.

Incidentally, USDA’s annual Livestock Slaughter report also was published on Wednesday.

Commercial cattle slaughter last year of 33.6 million head was 2% more than the previous year, with federal inspection (FI) comprising 98.6% of the total. The average live weight was 1,344 lbs., down 6 lbs. from the previous year. Steers comprised 49.3% of the total FI cattle slaughter, heifers 29.7%, dairy cows 9.7%, other cows 9.6%, and bulls 1.6%. Non-dairy cows (other) numbered 3.19 million head, which was 5.5% (+165,700) more than in 2018.

Beef production last year was record high at 27.2 billion lbs., which was 1% more than the previous year.

Back to Cold Storage, frozen pork supplies in freezers Mar. 31 (621.93 million lbs.) were down 4% from the previous month, but 2% higher than last year. Pork belly stocks (78.82 million lbs.) were 6% higher month to month and 34% higher year over year.

Total red meat supplies in cold storage totaled 1.17 billion lbs., down 2% from the previous month, but 7% more than the previous year.

Total frozen poultry supplies (1.31 billion lbs.) were 4% higher than the previous month, but 2% less than a year earlier. However, total chicken supplies in cold storage of 921.42 million lbs. was record large for the month; 6% (+53.06 million lbs.) more than the same month last year. It included record-large supplies of breast and breast meat, legs and thigh meat.