WLI

Cattle futures closed mixed on Wednesday, mostly higher for Feeder Cattle. Support included higher wholesale beef values, tied to slowing beef production, due to COVID-19. Based on futures prices the last couple of days, much of that appears to have been priced into the market previously.

Other than unchanged to 50¢ lower in three contracts, Live Cattle futures closed an average of 54¢ higher (7¢ higher at the back to $1.02 higher in the front two contracts).

Other than 60¢ lower in spot Apr, Feeder Cattle futures closed an average of 95¢ higher (37¢ to $1.50 higher).

Wholesale beef values were sharply higher on good demand and light offerings, according to the Agricultural Marketing Service.

Choice boxed beef cutout value was $3.86 higher Wednesday afternoon at $230.53/cwt. Select was $6.45 higher at $222.22.

Corn futures closed 3¢ to 6¢ lower through Jly ’21 and then 2¢ lower.

Soybean futures closed mostly 5¢ to 9¢ lower.

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Major U.S. financial indices closed lower Wednesday with early quantification of domestic COVID-19 economic impact.

Advance estimates of U.S. retail and food services sales for March 2020, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, declined 8.7% from February to March at $483.1 billion, according to the U.S. Commerce Department. That was 6.2% less compared to March of last year.

Crude oil prices also continued lower, with West Texas Intermediate on the CME closing $1.36 to $2.30 lower across the front six months starting in Jun. Spot May closed at $19.87.

The Dow Jones Industrial Average closed 445 points lower. The S&P 500 closed 62 points lower. The NASDAQ closed 122 points lower.

More broadly, the International Monetary Fund, in the latest World Economic Outlook, projects global economic growth at -3% this year. That’s 6.3% less than the January outlook and assumes the pandemic and containment requirements peak in the second quarter for most countries.

“This makes the Great Lockdown the worst recession since the Great Depression, and far worse than the Global Financial Crisis,” according to IMF. “…activity is projected to remain below the level we had projected for 2021, before the virus hit. The cumulative loss to global GDP over 2020 and 2021 from the pandemic crisis could be around $9 trillion, greater than the economies of Japan and Germany, combined.”

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Economic losses in the cattle industry, stemming from COVID-19, will reach $13.6 billion, according to a study–Economic Damages to the U.S. Beef Cattle Industry Due to COVID-19–conducted by a team of industry-leading agricultural economists led by Derrell Peel, Breedlove Professor of Agribusiness and Extension livestock marketing specialist at Oklahoma State University. It was commissioned by the National Cattlemen’s Beef Association (NCBA) to assist USDA in determining how best to allocate CARES Act relief funds to cattle producers.

“This study confirms that cattle producers have suffered massive economic damage as a result of the COVID-19 outbreak and those losses will continue to mount for years to come, driving many producers to the brink of collapse and beyond if relief funds aren’t made available soon,” says NCBA CEO Colin Woodall. “This study also clearly illustrates the fact that while the relief funds provided by Congress were a good first step, there remains a massive need for more funding to be allocated as soon as members of Congress reconvene.”

Woodall pointed out that relief funds that were meant to provide aid directly to cattle producers were divided among multiple commodities, many of which already have government programs in place to support production. However, cattle producers have always maintained their independence from government programs, and most operate today without the safety net others enjoy.

“It’s only because of the extraordinary circumstances we face today that cattle producers need relief. While we appreciate the many members of Congress who supported the cattle industry and ensured cattle producers were eligible for relief funds, we need these same members to do more to make certain every cattle producer who needs relief can access funding. That’s why we’re calling today for additional funds to be made available specifically for cattlemen and women,” said Woodall.

Cow-calf producers will be impacted the most, with COVID-19-related losses estimated at $3.7 billion, or $111.91 per head for each mature breeding animal in the United States. Without offsetting relief payments, those losses could increase by $135.24 per mature breeding animal, for an additional impact totaling $4.45 billion in the coming years.

Economic losses for stockers and backgrounders were estimated at $159.98 per head, for a total economic impact of $2.5 billion in 2020.

Losses in the cattle feeding sector were estimated at $3.0 billion or $205.96 per head.

Researchers included: Derrell S. Peel, Oklahoma State University; Dustin Aherin, Rabobank; Randy Blach, CattleFax; Kenneth Burdine, University of Kentucky; Don Close, Rabobank; Amy Hagerman, Oklahoma State University; Josh Maples, Mississippi State University; James Robb, Livestock Marketing Information Center; and Glynn Tonsor, Kansas State University.

Cattle futures closed higher Wednesday, recovering some ground lost in the previous session’s limit losses. Increased trade activity and higher outside markets provided support.

Live Cattle futures closed an average of $1.77 higher ($1.17 higher to $2.70 higher in spot Apr).

Feeder Cattle futures closed an average of $2.01 higher (40¢ to $2.80 higher).

Wholesale beef values were higher on Choice and sharply higher on Select with moderate to good demand and moderate to heavy offerings, according to the Agricultural Marketing Service.

Choice boxed beef cutout value was 81¢ higher Tuesday afternoon at $226.67/cwt. Select was $4.37 higher at $215.77.

Corn futures closed 3¢ to 5¢ lower through Dec ’20 and then mostly 1¢ to 2¢ lower.

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

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Major U.S. financial indices closed higher on Tuesday, with various data pointing to signs that coronavirus is stabilizing in this country.

The Dow Jones Industrial Average closed 558 points higher. The broader S&P 500 closed 84 points higher. The NASDAQ closed 323 points higher.

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“The red ink projected for cattle feeders, with few risk management opportunities ahead, is likely to significantly dampen placements in March and through summer,” say analysts with the Livestock Marketing Information Center (LMIC), in the latest Livestock Monitor. “The fall-out of fed cattle prices are expected to result in negative margins, even though feed costs are expected to be lower. This pessimism in cattle feeding has led to reluctance in buying cattle to fill pens.  Coronavirus has also limited auctions, with some suspending auction sales or instituting more restrictions on day of sale.”

March auction receipts were 43% less than a year earlier, according to LMIC. Combined video auction and direct receipts were 47% less. Feeder cattle imports from Canada and Mexico were also fewer.

“March placements are expected to decrease significantly, flattening the seasonal increase. Placements through the rest of the summer are likely to be below a year ago as the trends above are unlikely to change without significant improvements on the public health front,” say LMIC analysts. “One of the key factors moving forward will be pasture and range conditions. Good forage conditions will allow cattle to gain weight outside the feedlot and buy time, which at this point looks like a pivotal hedge/risk management option. If drought becomes an issue, it will force placements into feedlots even if economic conditions for feeding animals is weak. Cattle feeding returns are expected to be negative until fall 2020. Producers selling feeder animals in a drought market will likely face prices sharply below a year ago.”

Cattle futures closed limit-lower amid light trade and declining open interest and pressured by mounting concerns about beef packing production amid COVID-19 (see below).

Live Cattle futures closed limit-down $3.00

Feeder Cattle futures closed limit-down $4.50.

Wholesale beef values were higher on good demand and moderate to heavy offerings, according to AMS.

Choice boxed beef cutout value was $1.93 higher Monday afternoon at $225.86/cwt. Select was $3.07 higher at $211.40.

Corn futures closed mostly fractionally lower.

Soybean futures closed 5¢ to 9¢ lower through Mar ’21 and then mostly 2¢ to 3¢ lower.

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Major U.S. financial indices closed mixed on Monday, amid another volatile day of trade. On the one hand, investors continued to show optimism concerning COVID-19 progress. On the other, there’s plenty of wariness as quarterly corporate earnings season ramps up.

The Dow Jones Industrial Average closed 328 points lower. The broader S&P 500 closed 28 points lower. The NASDAQ closed 38 points higher.

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JBS closed its Greeley, CO plant on Friday for a deep cleaning, and will be closed for two weeks, according to the Colorado governor’s office. With the information available at the time, Cattle Current reported yesterday JBS intended to be closed for two days this week.

According to a statement, “The Colorado Department of Public Health and Environment (CDPHE) and Weld County Public health are working with JBS to design an aggressive testing and containment strategy, so they can continue their critical work which ranchers and consumers rely on. Gov. Polis has prioritized the Colorado National Guard to provide logistical support for testing so the plant can safely start up again.”

“The U.S. meat industry faces unprecedented threats as COVID-19 sweeps through labor forces at meat processing facilities nationwide,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “Production of beef, pork and poultry are simultaneously threatened as COVID-19 infections affect labor availability and processing capacity in multiple facilities across all meat industries. Reduced processing capacity could cause backups in live animal supplies if animals cannot be processed in a timely fashion. The severity of impacts will depend on specific situations and locations but could include costly delays in holding animals until slaughter, backlogs in production facilities, or even disposal of animals.”

Peel points to last week’s estimated cattle slaughter as an indication that production was already beginning to slow. USDA estimated slaughter for the week ending Apr. 11 at 536,000 head, which was more than 14% less than the previous week and almost 16% less than the same week last year, according to Peel. Fed cattle slaughter was down, as was cow and bull slaughter.

“This predicament could result in a situation not previously seen in the beef industry,” Peel says. “It may simply not be possible to slaughter animals in a timely manner. Last summer, the loss of a single packing plant in Kansas resulted in relatively little decrease in overall cattle slaughter as production was shifted to other plants; increased Saturday slaughter largely offset the loss of the fire-damaged plant. In the current situation, closure or reduced chain speeds across multiple plants may make it impossible to keep up with slaughter.”

Negotiated cash fed cattle prices ended up $7 lower on a live basis last week at $105/cwt. in the Southern Plains, according to the Agricultural Marketing Service. Dressed trade in Nebraska and the western Corn Belt was $7-$12 lower at $168. A light test was noted in all regions. At least part of the pressure likely stems from slowing packing plant production, due to COVID-19 (see below).

Futures and equities markets were closed in observance of Good Friday.

Week to week on Thursday, Live Cattle futures closed an average of $6.33 higher, from $1.17 higher in spot Apr to $8.82 higher.

Week to week on Thursday, Feeder Cattle futures closed an average of $9.98 higher, from $8.85 to $11.75 higher.

Wholesale beef values were higher on moderate to fairly good demand and light offerings on Friday, according to AMS.

Choice boxed beef cutout value was $1.26 higher Friday afternoon at $223.93/cwt. Select was 76¢ higher at $208.33. Week to week, Choice was $6.51 lower and Select was $7.51 lower.

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Major U.S. financial indices were closed in observance of Good Friday.

Week to week on Thursday, the Dow Jones Industrial Average was 2,305 points higher, the broader S&P 500 was 262 points higher and the NASDAQ was up 666 points.

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Supply chain disruptions, due to COVID-19, are mounting in the packing sector.

Smithfield Foods, Inc. announced Sunday that its Sioux Falls, SD facility will remain closed until further notice. The plant is one of the largest pork processing facilities in the U.S., representing 4-5% of U.S. pork production. It employs 3,700 people. More than 550 independent family farmers supply the plant.

“The closure of this facility, combined with a growing list of other protein plants that have shuttered across our industry, is pushing our country perilously close to the edge in terms of our meat supply. It is impossible to keep our grocery stores stocked if our plants are not running. These facility closures will also have severe, perhaps disastrous, repercussions for many in the supply chain, first and foremost our nation’s livestock farmers. These farmers have nowhere to send their animals,” said Kenneth M. Sullivan, president and chief executive officer, for Smithfield.

Likewise, Noel White, Tyson Foods, Inc. CEO explained last week, “Our meat and poultry plants are experiencing varying levels of production impact, due to the planned implementation of additional worker safety precautions and worker absenteeism.

“For example, out of an abundance of caution, we have suspended operations at our Columbus Junction, Iowa, pork plant due to more than two dozen cases of COVID-19 involving team members at the facility. In an effort to minimize the impact on our overall production, we’re diverting the livestock supply originally scheduled for delivery to Columbus Junction to some of our other pork plants in the region.”

According to various news sources, JBS is closing its beef packing plant in Greeley, CO through Tuesday of this week, for deep cleaning facilities and screening new workers. Reportedly, 36 JBS workers tested positive for COVID-19 infections through the end of last week.

“Unfortunately, COVID-19 cases are now ubiquitous across our country. The virus is afflicting communities everywhere. The agriculture and food sectors have not been immune,” Sullivan explained. “Numerous plants across the country have COVID-19 positive employees. We have continued to run our facilities for one reason: to sustain our nation’s food supply during this pandemic. We believe it is our obligation to help feed the country, now more than ever. We have a stark choice as a nation: we are either going to produce food or not, even in the face of COVID-19.”

Cattle futures closed mixed to lower Thursday with pressure from Lean Hogs, as well as likely profit taking and position squaring heading into the long weekend; futures and equities markets are closed in observance of Good Friday.

Except for $1.17 higher in spot Apr and 20¢ lower in the back contract, Live Cattle futures closed an average of $1.42 lower.

Feeder Cattle futures closed mixed, from an average of 33¢ lower in four contracts to an average of 77¢ higher.

Wholesale beef values were firm on Choice and lower on Select with light to moderate demand and heavy offerings, according to the Agricultural Marketing Service.

Choice boxed beef cutout value was 33¢ higher Thursday afternoon at $222.67/cwt. Select was $4.20 lower at $207.57.

The average dressed steer weight for the week ending Mar. 28 was 891 lbs., according to USDA’s Actual Slaughter Under Federal Inspection report. That was 7 lbs. lighter than the previous week, but 26 lbs. heavier than a year earlier. The average dressed heifer weight was 825 lbs., which was 11 lbs. lighter than the previous week, but 19 lbs. heavier than the prior year.

Corn futures closed 1¢ to 3¢ higher.

Soybean futures closed mostly 7¢ to 9¢ higher.

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Major U.S. financial indices closed higher Thursday with the Federal Reserve announcing it will provide up to $2.3 trillion in loans to support the economy.

“Our country’s highest priority must be to address this public health crisis, providing care for the ill and limiting the further spread of the virus,” explained Federal Reserve Board Chair Jerome H. Powell. “The Fed’s role is to provide as much relief and stability as we can during this period of constrained economic activity, and our actions today will help ensure that the eventual recovery is as vigorous as possible.”

According to the Fed, funding will assist households and employers of all sizes and bolster the ability of state and local governments to deliver critical services during the coronavirus pandemic.

The Dow Jones Industrial Average closed 285 points higher. The S&P 500 closed 39 points higher. The NASDAQ was up 62 points.

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USDA reduced expected commercial beef production for this year to 27.4 billion lbs., in the latest monthly World Agricultural Supply and Demand Estimates (WASDE).That was 255 million lbs. less than the previous month’s estimate but would be 294 million lbs. more than the prior year.

“The beef production forecast is reduced as lower expected steer and heifer slaughter more than offsets higher cow slaughter. However, beef production declines are partially offset by heavier carcass weights,” say analysts with USDA’s Economic Research Service (ERS). “Total red meat and poultry production for 2020 is reduced from last month as sectors at all levels adjust to COVID-19 and economic uncertainty.”

Total red meat and poultry production for this year is estimated at 108.3 billion lbs., which is 1.1 billion lbs. less than the prior month’s projection, but would be 3.0 billion lbs. more than last year.

USDA reduced the estimated annual fed steer price by $3.50 to $111/cwt. It was $116.78 last year. The average fed steer price is projected to be $105 in the second quarter, $109 in the third quarter and $112 in the fourth quarter.