WLI

Negotiated cash fed cattle trade staggered ahead Wednesday with live sales in the Southern Plains mostly unevenly steady at $108/cwt. A day earlier, dressed trade in Nebraska was $10-$20 lower than last week at $165, according to the Agricultural Marketing Service.

Cattle feeders offered 1,447 head in the weekly Fed Cattle Exchange auction on Wednesday. Just one lot—228 head of Texas heifers—sold for a weighted average price of $105/cwt. for delivery at 1-17 days.

Choice steers and heifers sold $2.50-$3.00 lower at the fat auction in Tama, IA, where 120 head of Choice 2-4 steers weighing an average of 1,375 lbs. brought an average price of $106.59.

At Sioux Falls Regional in South Dakota, slaughter steers and heifers sold steady to $4 lower. There were 206 head of Choice 3-4 steers weighing an average of 1,590 lbs. and bringing an average of $105.27.

Cattle futures closed mostly lower with the softer cash tone and continued decline in wholesale beef values.

Other than 27¢ higher in spot Jun, Live Cattle futures closed an average of $1.09 lower.

Feeder Cattle futures closed an average $1.07 lower (67¢ lower at the back to $1.57 lower in spot Aug).

Choice boxed beef cutout value was $10.94 lower Wednesday afternoon at $236.06/cwt. Select was $5.11 lower at $222.84.

Corn futures closed mostly 1¢ to 2¢ lower.

Other than fractionally higher to 2¢ higher in the front four contracts, Soybean futures closed mostly 2¢ lower. 

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Major U.S. financial indices closed mixed Wednesday, with tech stocks enjoying the most support overall. Pressure likely stemmed from the Federal Open Markets Committee (FOMC) projections that reaffirm the lengthy economic recovery ahead.

The FOMC projects the median real GDP at -6.5 for this year, 5.0 in 2021 and 3.5 in 2022. Median PCE inflation is projected at 0.8 this year, 1.6 next year and 1.7 in 2022.

“The ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term,” according to an FOMC statement. “In light of these developments, the Committee decided to maintain the target range for the federal funds rate at 0.0% to 0.25%. The Committee expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.”

The Dow Jones Industrial Average closed 282 points lower. The S&P 500 closed 17 points lower. The NASDAQ closed 66 points higher.

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“Current proposals to increase the number of cattle transacted through a particular channel is unlikely to affect beef demand derived from consumers and passed along the supply chain to producers or alter the current supply of fed cattle ready for harvest,” says Elliott Dennis, Extension livestock economist at the University of Nebraska-Lincoln, in the latest issue of In the Cattle Markets.

He’s referring to recent policy proposals to mandate that packers buy a specific percentage of their weekly fed cattle needs each week in the spot cash market. One, referred to as the 50-14 rule, led by Senator Chuck Grassley (R-IA) and Senator Jon Tester (D-MT) would mandate large-scale packers procure a minimum of 50% of total cattle purchased in the cash market each week for delivery within 14 days.

“The hope is that by increasing cash trade transactions it will solve issues with price discovery, effectively increasing negotiated cash prices,” Dennis explains. “Supply of fed cattle and demand for wholesale beef determines the price of fed cattle. In order to increase fed cattle prices, the 50-14 rule would either need to reduce the supply of fed cattle or increase the demand for wholesale beef. While the rule would increase negotiated cash transactions helping in price discovery in a given week, it is unlikely to affect the underlying fed cattle market supply and demand conditions to effectively increase cash price levels.”

In the meantime, during the pandemic, Dennis points out there have been significant shifts in the percentage of cattle traded via formula and those marketed with a negotiated grid.

“In April, formula trade was 74% of total weekly transactions and negotiated grid was 4%,” Dennis explains. “In May, formula trade fell to 48% and negotiated grid was 20%. The past few weeks, cattle sold on formula steadily increased while cattle on the negotiated grid have decreased. There has been little change in the negotiated cash and forward contract trade, on average for the U.S., since January 1, 2020.”

There are regional differences

“Formula trade fell in the Texas-Oklahoma-New Mexico region but not below five-year historical levels. This was offset by trade in the negotiated grid. Formula priced cattle fell from 95% of cattle priced in April to 30% in May. This was replaced entirely by negotiated grid priced cattle,” Dennis explains. “In both the Texas-Oklahoma-New Mexico and Kansas region there was little movement in the negotiated price. Pricing in Nebraska has been somewhat more volatile. Negotiated cash fell to a historic low of 2% of transactions in May and was entirely offset by increased formula trade. Negotiated grid and forward contract transactions were historically constant.”

During this period of time, Dennis notes that heavyweight carcass discounts declined as carcass weights increased contra-seasonally, due to the backlog in market-ready fed cattle. Quality premiums also shifted since the beginning of the year.

“The underlying makeup of cattle transactions the market is seeing is likely more due to a change in the grid premiums and discounts than a fundamental shift in producer preference for the way cattle are transacted,” Dennis says.

Other than a few dressed trades reported by the Agricultural Marketing Service (AMS) in the western Corn Belt on Tuesday at $166/cwt. and too few to trend, negotiated cash fed cattle trade remained undeveloped.

Cattle futures closed mostly higher with more active trade.

Live Cattle futures closed an average of $1.09 higher through the front five contracts (10¢ higher in Feb to $2.20 higher in spot Jun), and then an average of 12¢ lower. 

Feeder Cattle futures closed an average 73¢ higher (32¢ higher toward the back to $1.17 higher in spot Aug).

Choice boxed beef cutout value was $7.58 lower Tuesday afternoon at $247.00/cwt. Select was $3.17 lower at $227.95.

As of Tuesday morning, beef packing facilities were operating at 98% of their average capacity, compared to the same time last year, according to USDA. Pork facilities were at 95%, and poultry facilities were operating at 98%.

Corn futures closed 3¢ to 6¢ lower through May ’21 and then mostly 1¢ lower.

Soybean futures closed mostly 1¢ to 4¢ lower through Jly ‘21 and then mainly 7¢ to 8¢ lower.

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Major U.S. financial indices gave back some of the recent gains on Tuesday, on likely profit taking.

The Dow Jones Industrial Average closed 300 points lower. The S&P 500 closed 25 points lower. The NASDAQ closed 29 points higher.

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Major restaurant chain customer transactions continue to improve as a growing number of restaurant dine-in services reopen, according to the NPD Group (NPD).

For the week ending May 31, U.S. restaurant chain transactions declined by 18% compared to same period a year ago, which represented a 3% week-over-week improvement, according to NPD’s CREST^®Performance Alerts.

That same week, transactions at major full service restaurant chains, which were hardest hit by the dine-in closures, were 37% less than a year ago, a 15% increase from the prior week. Quick service restaurant chain transactions, which represent the bulk of industry transactions, declined by 16% compared to a year ago, versus an 18% decline for the week ending May 24.

More than 68% of all restaurant units are in states, counties, or municipalities where they are permitted to reopen their on-premise dining service, according to NPD’s ReCount^®restaurant census. Although that doesn’t mean all restaurants in those areas reopened, it is an indicator of loosening regulations.

“The U.S. foodservice industry today remains solidly in the re-start phase as restaurants begin to reopen their on-premise operations,” says David Portalatin, NPD food industry advisor. “The industry will move to the recovery phase when all states reopen on-premise dining and we can begin to make a detailed assessment of how many permanent restaurant closures there are and how that will affect what the industry will look like as it re-emerges.” 

Cattle futures softened to start the week, extending losses from the previous session. Pressure included last week’s softer cattle prices, light trade and demand uncertainty.

Other than 7¢ to 22¢ higher in the front three contracts, Live Cattle futures closed an average of 66¢ lower (15¢ lower to $1.10 lower at the back). 

Feeder Cattle futures closed an average $1.17 lower.

Choice boxed beef cutout value was $6.90 lower Monday afternoon at $254.58/cwt. Select was $15.30 lower at $231.12.

Corn futures closed 2¢ higher.

Soybean futures closed mostly 1¢ lower through Aug ‘21 and then mainly 3¢ higher.

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Major U.S. financial indices closed higher on Monday, extending gains from the previous session’s strong performance. Support included carryover optimism from last Friday’s bullish employment report.

The Dow Jones Industrial Average closed 461 points higher. The S&P 500 closed 38 points higher. The NASDAQ closed 110 points higher.

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The weighted average five-area direct live fed steer price was $3.32 lower week to week on Friday at $112.39/cwt. The dressed price was $4.79 lower at $179.04. Prices were $113.76 and $184.21 at the same time last year.

However, the range in negotiated cash fed cattle prices continued across a broad range, with live prices in the Southern Plains at mostly $105-$117/cwt., $110-$118 in Nebraska and $108-$114 in the western Corn Belt. Dressed prices were at $175-$185.

“This wide range in prices is largely due to regional supply and demand. Regions with a large supply of market ready cattle and limited demand are seeing the lowest prices, while regions with strong demand and a relatively smaller supply are seeing higher prices,” explains Andrew P. Griffith, agricultural economist with the University of Tennessee, in his weekly market comments. “This may not be the only reason for the disparity in prices as other factors are at play, but supply and demand are generally what push prices one way or the other. It is difficult to predict what prices will be as the market moves through the glut of cattle, but there is sure to be downward pressure throughout the summer and fall. The market is attempting to align itself with supply and demand.”

On the other hand, Griffith says price expectations for late-summer and early fall feeder cattle continue to improve.

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.”