WLI

Cattle futures, continued to lose ground Thursday amid light demand, continued declines in open interest and concerns about beef demand relative to growing supplies.

For the week ending Mar. 14, the average dressed steer weight was 2 lbs. lighter than the previous week at 901 lbs., but 36 lbs. heavier than the a year earlier, according to USDA’s Actual Slaughter Under Federal Inspection report. The average dressed heifer weight of 835 lbs. was 5 lbs. heavier than the previous week and 30 lbs. heavier than the prior year.

Live Cattle futures closed an average of $2.56 lower ($1.92 lower at the back to $3.00 in spot April).

Feeder Cattle futures closed an average of $3.45 lower ($1.27 lower in expiring Mar to $4.50 lower at the back of the board).

Wholesale beef values were lower on light demand and moderate offerings, according to the Agricultural Marketing Service.

Choice boxed beef cutout value was $1.73 lower Thursday afternoon at $253.57/cwt. Select was 92¢ lower at $242.17.

Corn futures closed mostly fractionally higher to 1¢ higher.

After mostly fractionally higher to 2¢ higher through Jan ‘21, Soybean futures closed 4¢ to 5¢ higher.

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Major U.S. financial indices closed sharply higher Thursday, on the heels of the U.S. Senate passing a $2 trillion COVID-19 relief package and despite the fact that weekly jobless claims were far and away the most in U.S. history.

For the week ending Mar. 21, the advance figure for seasonally adjusted initial jobless claims was 3,283,000, an increase of 3,001,000 from the previous week’s revised level, according to the U.S. Department of Labor. The previous high was 695,000 in October of 1982.

The Dow Jones Industrial Average closed 1,351 points higher. The S&P 500 closed 154 points higher. The NASDAQ was up 413 points.

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You already know that agriculture is one of this nation’s critical infrastructures, with its essential nature magnified by the COVID-19 fallout. A new economic impact study released yesterday puts numbers to it, indicating one-fifth of the nation’s economy and one-fourth of American jobs are linked to the food and agriculture sectors, either directly or indirectly, accounting for a total economic impact of $7.63 trillion.

“This research helps shore up something we already knew: food and agriculture is critical to all Americans and the economic prosperity of our country,” says Dr. Barb Glenn, CEO of the National Association of State Departments of Agriculture. She adds that recent events are testing the resiliency of our agriculture and food system.

An example of that resilience and creativity beyond the ranch gate can be seen in helping retailers restock in the wake of the surge in consumer demand for food, water and cleaning products in recent weeks.

An ad-hoc partnership between the International Foodservice Distributors Association and FMI-Food Industry Association connects foodservice distributors with excess capacity (products, transportation services, warehousing services) to assist food retailers and wholesalers requiring additional resources.

The study was commissioned by 21 food and agriculture groups and can be found at feedingtheeconomy.com.

Negotiated cash fed cattle prices roared higher Wednesday with moderate trade and good demand in all regions. Live prices were $8-$10 higher than last week at $119-$120/cwt. Dressed sales were $15-$20 higher at $190.

Likewise, fed cattle prices were significantly higher in the weekly Fed Cattle Exchange auction Wednesday, with 1,614 head for current delivery (1-9 days) selling for a weighted average price of $119.77/cwt. Most of those were from the Southern Plains. Another 837 head sold for delivery at 1-17 days for a weighted average price of $117.73. There were 5,886 head offered.

Cattle futures, though, closed mixed but mostly lower on likely profit taking and squeamishness about what happens with beef demand after the initial flood of consumer stockpiling runs its course (see below).

Except for $2.30 higher in spot Apr, Live Cattle futures closed an average of $1.46 lower (87¢ to $2.52 lower).

Except for $1.85 higher in spot Mar and 5¢ higher in Aug, Feeder Cattle futures closed an average of $1.02 lower (40¢ to $1.60 lower).

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

Choice boxed beef cutout value was $1.01 lower Wednesday afternoon at $255.30/cwt. Select was $2.39 lower at $243.09.

Corn futures closed mostly 1¢ to 2¢ higher.

After 1¢ to 5¢ lower in the front three contracts, Soybean futures closed mostly 5¢ to 8¢ higher.

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Major U.S. financial indices closed mixed Wednesday, higher on expectations the massive government economic stimulus package was close at hand, but soured by the fact that Congress was still at the wrestling stage.

The Dow Jones Industrial Average closed 495 points higher. The S&P 500 closed 28 points higher. The NASDAQ was down 33 points.

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Although the recent surge in boxed beef prices could continue this week, as retailers restock shelves, Brenda Boetel, livestock economist at the University of Wisconsin—River Falls says, “There is no evidence that consumers are eating more beef currently, and as such the demand will likely decrease significantly once the supply system catches up with the rush demand of the last few weeks.”

Further, in the latest issue of In the Cattle Markets, Boetel explains significant long-term value comes from consumers eating high-quality beef cuts at restaurants. Restaurant traffic continues to lag, of course, in the wake of COVID-19.

“Luckily, the grilling season is right around the corner and that should help alleviate some of the expected drop in prices,” Boetel says.

Although there was too little negotiated cash fed cattle trade through Tuesday afternoon for AMS to report a trend, signs point to higher prices this week.

For instance, the five-area direct dressed steer and heifer price on Monday was $10 more than Friday at $185/cwt. Wholesale beef values remain elevated. Plus Cattle futures were limit-up again Tuesday, with expanded limits.

Live Cattle futures closed limit-up $4.50.

Except for $5.00 higher in spot, Apr, Feeder Cattle futures closed limit-up $6.75.

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

Choice boxed beef cutout value was $1.01 lower Tuesday afternoon at $256.31/cwt.; it was $229 at the same time last year. Select was 34¢ higher at $245.48.

Corn futures closed mostly 1¢ to 2¢ higher.

Soybean futures closed mostly 2¢ to 4¢ higher through Aug ‘21, and then mostly unchanged to fractionally higher.

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Major U.S. financial indices rebounded Tuesday, fueled by expectations that Congress was close to passing a massive economic stimulus package.

The Dow Jones Industrial Average closed 2,112 points higher. The S&P 500 closed 209 points higher. The NASDAQ was up 557 points.

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“Disruptions in normal activities due to COVID-19 have produced a surge in at-home food demand. Recent reports indicate a 77% year-over-year increase in grocery meat sales in mid-March,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “The spike in grocery demand has overwhelmed the retail meat supply chain, resulting in temporary shortages of meat in many grocery stores.  The shortages are due to the tremendous logistical challenges of shifting meat supplies from food service channels to retail grocery channels.”

There is no shortage of meat, of course. Peel points out beef, pork and poultry production was record large in the first quarter and is projected to be record large this year at 109.3 billion lbs., 4.3% more than last year.

“Beef production is projected to be 1.9% higher year over year in 2020, totaling 27.7 billion lbs.,” according to Peel. “Increased beef production is concentrated in the first half of the year. Total steer and heifer slaughter is up 3.9% year over year for the year to date. Steer carcass weights for the year to date are up over 21 lbs. year over year with heifer carcass weights up over 12 lbs. First-quarter beef production is estimated to increase 6.6% over last year.”

Beef in freezers is also 5% more than last year, as of Feb. 29, according to the most recent USDA monthly Cold Storage report. It was 3% more than the previous month.

Frozen pork supplies were up 6% from the previous month and up 7% from last year.

Total red meat supplies in freezers were up 3% from the prior month and up 5% from last year.

Total frozen poultry supplies were slightly more than the previous month, but down 4% from a year earlier.

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Progress continues in implementing the agriculture-related provisions of the U.S.-China Phase One Economic and Trade Agreement, according to Tuesday’s announcement from the U.S. Department of Agriculture (USDA) and the Office of the U.S. Trade Representative (USTR).

Among the recent actions:

*China notified the United States of proposed maximum residue levels for three hormones commonly used in U.S. beef production. This recognition by China of safe and science-based U.S. production methods particularly benefits trade with China in beef, a fast-growing market that imported $8.4 billion worth of beef products in 2019. China also removed all references to age restrictions on the beef and beef products list. For the first time since 2003, U.S. beef producers will have access for nearly all beef products into China. USDA estimates American cattlemen could export up to $1 billion per year under this improved trading environment.

*Both countries signed a regionalization agreement that will allow U.S. poultry exports from unaffected regions of the country to continue, in the event of a detection of highly pathogenic avian influenza or virulent Newcastle disease in a particular region of the United States. This action will help protect the increased access American farmers have gained in China’s poultry market. U.S. poultry exports have the potential to exceed $1 billion per year.

*China updated its list of U.S. facilities eligible to export distillers dried grains with solubles (DDGS). In 2015, U.S. producers exported $1.6 billion worth of DDGS to China. This action, if coupled with the removal of other trade barriers, will allow U.S. exporters to recapture this market.

“These steps show that China is moving in the right direction to implement the Phase One agreement,” says Agriculture Secretary, Sonny Perdue. “We will continue to work with China to ensure full implementation of its commitments and look forward to seeing further improvement and progress as we continue our ongoing bilateral discussions.”

Although trade was light, Cattle futures closed limit up Monday, higher for the third consecutive session— higher in four of the last five sessions. Support included sky-rocketing wholesale beef values, Tyson’s announcement last week of a one-time support payment for cattle it harvests this week—$5/cwt. on a live basis and $7.94/cwt. in the beef—as well as the friendly Cattle on Feed report. China buying U.S. grain last week also helped.

Live Cattle futures closed limit-up $3.00. At $101.60, spot Live Cattle remains hugely discounted to cash.

Feeder Cattle futures closed limit-up $4.50.

Choice boxed beef cutout values were sharply higher on good demand and heavy offerings.

Choice boxed beef cutout value was $3.57 higher Monday afternoon at $257.32/cwt. Select was $4.97 higher at $245.14.

Corn futures closed mostly fractionally higher to 1¢ higher.

Soybean futures closed 10¢ to 21¢ higher through Jan ‘21, and then 1¢ higher to mostly 2¢ lower.

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Major U.S. financial indices closed lower Monday as the U.S. Senate failed for a second time to agree to legislation for massive economic stimulus, in the wake of COVID-19.

The Dow Jones Industrial Average closed 582 points lower. The S&P 500 closed 67 points lower. The NASDAQ was down 18 points.

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Glynn Tonsor, agricultural economist at Kansas State University estimates economic losses in the cattle industry, due to COVID-19, at $7.98 billion to $9.44 billion, representing two broad approaches for approximating damages for the U.S. cattle sector.

Up front, Tonsor emphasizes the estimates are not to be taken as final, precision estimates, but as a timely broad approximation to offer the industry context.

Tonsor arrived at the $7.98 billion estimate by considering recent price estimates and cattle inventory.

For prices, Tonsor utilized estimates updated last week by the Livestock Marketing Information Center (LMIC).

Compared to January:

LMIC reduced the first-quarter price estimate for fed cattle (1,400 lbs.) by $7 to $117/cwt.; $18 less in the second quarter to $103.50.

LMIC reduced the first-quarter price estimate for feeder cattle (750 lbs.) by $5 to $140.50/cwt.; $23.50 less in the second quarter to $124.50.

LMIC increased the first-quarter price estimate for calves (550 lbs.) by $4 to $170/cwt., but reduced second-quarter expectations by $20 to $149.50.

You can find price estimates for the other quarters in Tonsor’s factsheet.

Bottom line, Tonsor estimates per-head damage for the year at $126 for fed cattle, $98 for feeder cattle, and $58 for calves.

“Moving from damages per head to an economic impact estimate requires an inventory-impacted number,” Tonsor explains. “USDA NASS estimated the total beef cow inventory to be 31.32 million head in their January Cattle report. If we approximate that for every 100 cows we ultimately have 92 offspring sold, this would suggest, for a full calendar year, 28.81 million calves will be sold by the cow-calf sector. Proceeding forward, presuming 2% death loss rates for subsequent sectors, results in 28.24 million feeder cattle and 27.67 million fed cattle being sold, subsequently.”

The other approach Tonsor took, which arrives at $9.44 billion in losses, considers declining Feeder Cattle and Live Cattle futures prices. Again, you can see Tonsor’s path to the calculation in the factsheet.