WLI

When all was said and done, negotiated cash fed cattle trade last week was steady to $2 higher on a live basis at $110-$112/cwt. and fully steady in the beef at $175.

According to the Texas Cattle Feeders Association on Friday, “Tyson announced this afternoon that for all fed cattle harvested next week, they will make a one-time assistance payment to cattle feeders of $5/cwt. live and $7.94/cwt. dressed.”

Firmer cash prices and wholesale beef values helped Cattle futures extend gains Friday, following the previous session’s limit-up move, despite lower outside markets.

Live Cattle futures closed an average of $1.82 higher, from 60¢ higher to $3.55 higher in spot Apr. Thursday to Thursday, Open Interest declined 46,267 contracts to 285,018, the lowest level since September of 2018.

Feeder Cattle futures closed and average 0f $4.56 higher.

Choice wholesale boxed beef values were sharply higher and Select was lower with light to moderate demand and moderate to heavy offerings.

Choice boxed beef cutout value was $3.88 higher Friday afternoon at $253.75/cwt. Select was 89¢ lower at $240.17.

Corn futures closed 1¢ lower to 1¢ higher.

Soybean futures closed mostly 11¢ to 19¢ higher through Sep ‘21, and then 6¢ to 8¢ higher.

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Coronavirus fears continued to roil equity markets Friday amid another day of volatile trade that left major U.S. financial indices sharply lower. Specific pressure included, the stay-home order issued in New York and softer crude oil prices, as well as CME auctioning the portfolios of Ronin, LLC., a direct clearing firm.

“The firm was unable to meet its capital requirements going forward,” according to a statement from the CME. “Though Ronin is a direct clearing member, it does not handle customer business; and no clients were impacted by the auction.”

The Dow Jones Industrial Average closed 913 points lower. The S&P 500 closed 104 points lower. The NASDAQ was down 271 points.

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The monthly Cattle on Feed report published Friday should be supportive. Numbers came in about even with pre-report expectations.

February placements for feedlots with 1,000 head or more capacity were 1.71 million head, which was 7.91% less (-147,000 head) than the previous year. In terms of placement weights, 38.28% went on feed weighing 699 lbs. or less, 51.49% weighing 700-899 lbs. and 10.23% weighing 900 lbs. or more.

Marketings in February of 1.77 million head were 5.47% more (+92,000 head) than the previous year.

The on-feed inventory Mar. 1 of 11.81 million head was 0.18% more (+21,000 head), compared to a year earlier.

Cattle futures closed limit-up Thursday, supported by higher outside markets, the dramatic rise in wholesale beef values for the week, as well as firming cash fed cattle prices.

Live Cattle futures closed limit-up $3.00 across the board.

Feeder Cattle futures closed limit-up $4.50 across the board.

Incidentally, analysts surveyed by Urner Barry and reported in the Daily Livestock Report estimate feedlot placements in February to be 7.6% less than a year earlier, marketings in February to be 5.6% more and cattle on feed Mar. 1 to be 0.2% more. The monthly USDA Cattle on Feed report is scheduled for release Friday afternoon.

Wholesale beef values continued higher Thursday as retailers continue to re-stock.

Choice boxed beef cutout value was $2.63 higher Thursday afternoon at $249.87/cwt. Select was $2.56 higher at $241.06. Week to week, Choice was up $43.86 and Select was up $43.18.

Corn futures closed 7¢ to 10¢ higher through Sep ‘20 and then mostly fractionally higher to 4¢ higher.

Soybean futures closed 13¢ to 17¢ higher through near Aug, 3¢ to 9¢ higher through the next three contracts and then mostly 4¢ lower.

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Major U.S. financial indices closed higher Thursday, amid another day of volatile swings. Support included a COVID-19 stimulus package announced by the European Central Bank, as well as reports the U.S. Senate would soon release a third domestic relief package. Energy stocks also rebounded some.

West Texas Intermediate Crude Oil futures on the CME closed $4.33 to $4.85 higher through the front six contracts.

The Dow Jones Industrial Average closed 188 points higher. The S&P 500 closed 11 points higher. The NASDAQ was up 160 points.

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The outlook for the U.S. farm economy depends on the implementation of new trade agreements and the evolution of animal and human disease outbreaks, according to the latest analysis of national and global agricultural trends from the University of Missouri (MU).

Economists with MU’s Food and Agricultural Policy Research Institute (FAPRI) and the MU Agricultural Markets and Policy (AMAP) team release the annual U.S. Agricultural Market Outlook (USAMO) report each spring. The baseline projections for agricultural and biofuel markets were prepared using market information available in January.

“Macroeconomic assumptions are based on January forecasts by IHS Markit, which suggested moderate growth in the U.S. and global economies at that time,” says Patrick Westhoff, FAPRI director. “Those forecasts were prepared before much was known about the severity of the coronavirus (COVID-19) outbreak and before recent declines in stock market prices and interest rates.”

This year’s USAMO baseline assumes that China’s retaliatory tariffs on U.S. farm products remain in place and limit bilateral trade. FAPRI economists also explored one possible outcome of the phase-one trade deal, which assumes U.S. exports are exempt from those retaliatory tariffs and that China takes other steps to facilitate trade between the two countries.

Highlights of a baseline assuming continued trade friction with China

Cattle prices increase beginning in 2020, as exports increase and cattle inventories decline after five years of expansion.

African swine fever (ASF) continues to have large impacts on global commodity markets. China’s pork production has declined sharply and only rebounds after 2021. This provides some opportunity for increased meat imports by China, but reduces global demand for soybean meal and other feeds.

Projected 2020 corn area planted is 92.9 million acres. With trend yields, 2020 corn production increases to 15 billion bu., putting downward pressure on corn prices, which are projected to average $3.57/bu. in 2020-21.

Projected soybean area increases by more than 10 million acres to 86.5 million acres in 2020. The increase in production drops projected soybean prices to $8.48/bu. for the 2020-21 crop.

Negotiated cash fed cattle trade continued Wednesday. Live trade in the western Corn Belt was $2-$5 higher than last week at $110-$112/cwt. Dressed trade was steady at $175. Although too few to trend through the afternoon, live trade in the Southern Plains was mostly steady to $3 lower at $110-$113. In Nebraska, live prices were steady at $110; steady to $5 lower in the beef at $170-$175.

Cattle feeders offered 4,680 head in the weekly Fed Cattle Exchange auction Wednesday. Of those, 1,813 head sold: 1,415 head for delivery at 1-9 days brought an average weighted price of $112.76/cwt.; 398 head for delivery at 1-17 days brought an average weighted price of $111.00. Offerings were from the Southern Plains, Nebraska and Colorado.

Cattle futures started strong Wednesday and then turned sharply lower as equity markets tanked, basically losing what was gained in the previous session.

Live Cattle futures closed an average of $3.78 lower, from $2.55 lower at the back to $4.40 lower.

Feeder Cattle futures closed an average of $3.49 lower, from 97¢ lower in spot Mar to limit-down $4.50.

Wholesale beef values were sharply higher again, with good demand and heavy offerings.

Choice boxed beef cutout value was $7.31 higher Wednesday afternoon at $247.24/cwt. Select was $9.18 higher at $238.50.

Corn futures closed 5¢ to 8¢ lower through Jly ‘21 and then mostly fractionally lower to 1¢ lower.

Soybean futures closed fractionally higher to 1¢ higher through Sep ’20 and then fractionally lower to 3¢ lower.

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Major U.S. financial indices closed sharply lower Wednesday, giving back most of the gains from the previous session, as investors fretted over the lack of clarity regarding the COVID-19 stimulus package being prepared by Congress.

West Texas Intermediate Crude Oil futures collapsed $5.14 to $6.58 lower through the front six contracts. Spot Apr closed at $20.37. That’s the lowest level in nearly two decades, according to various sources.

The Dow Jones Industrial Average closed 1,338 points lower. The S&P 500 closed 131 points lower. The NASDAQ was down 344 points.

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“Faltering fed cattle prices, due to coronavirus developments, have ratcheted down profitability prospects for non-hedged animals to be closed out in the coming months. Feeder cattle prices may come under increased pressure. The lack of projected profitability for fed cattle to be sold this summer (breakeven sale prices above what summer Live Cattle futures are offering), is likely to be a factor dampening placements of animals into feedlots,” say analysts with the Livestock Marketing Information Center (LMIC), in the latest Livestock Monitor.

LMIC has estimated monthly cattle feeding returns since the mid-1970s. Those estimates assume feeding-out a 750-lb. steer in a commercial Southern Plains feedlot and include all costs of production. The estimates are not survey-based and presume normal weather conditions. Cash prices are used, meaning that fed cattle prices and feedstuff costs are not hedged.

“In 2019, monthly returns averaged about $9.50 per steer, ranging from $180.92 for an animal sold in December down to -$152.85 for September. Over the prior five years (2014-18), the annual average was about $23.00 per steer. The 10-year per animal average was about -$7.00,” say LMIC analysts. “For steers sold during January, the LMIC estimated profitability at $150.00 to $151.00 per head. Just over a month ago, the LMIC projected that the February number would come in at $136.00 to $140.00 per steer. If the cattle were not hedged, that turned out to be optimistic. Hedged animals will return excellent profits through June sale dates…For steers (750 lbs.) placed on feed in February, which will have a sale date of August, the breakeven price based on current feedstuff costs is $109 to 111/cwt.”

Although too few transactions to trend, there were some live negotiated cash fed cattle sales in Nebraska on Tuesday at $110/cwt. on a live basis and at $170-$175 in the beef. That was $5 higher than Monday on a live basis and steady with last week’s trade. Dressed sales were steady to $5 higher than on Monday; dressed sales last week were at mostly $175.

Elsewhere, established trends so far this week occurred on Monday, with live sales in the Texas Panhandle steady to $5 lower than last week at $105-$110 and $10 lower in Kansas at $100.

But, Cattle futures rallied Tuesday, finally. Whether a technical gasp or a step toward a turning point, harsh volatility will likely continue. Support included brighter cash prospects, soaring wholesale beef values and the bounce in equity markets, following the steep losses in the previous session.

Live Cattle futures closed an average of $3.44 higher, from $1.77 higher at the back to $4.50 higher in the front three contracts.

Feeder Cattle futures closed an average of $3.37 higher.

Wholesale beef values rocketed higher again Tuesday, with good demand and heavy offerings.

Choice boxed beef cutout value was $15.77 higher Tuesday afternoon at $239.93/cwt. Select was $12.61 higher at $229.32. Over the last two days, Choice increased $31.99 and Select was up $27.34.

Corn futures closed 6¢ to 10¢ lower in the front three contracts and then mostly 2¢ to 3¢ lower.

Other than fractionally higher to 2¢ higher in the front three contracts, Soybean futures closed mostly 5¢ lower.

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At least for a day, major U.S. financial indices closed higher, recovering a portion of the previous day’s washout, as the Federal government pledged more financial support to citizens and businesses, in the wake of coronavirus.

The Dow Jones Industrial Average closed 1,048 points higher. The S&P 500 closed 143 points higher. The NASDAQ was up 430 points.

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Response to COVID-19 continues to force everyone in the cattle and beef business to ponder potential impacts on how they operate.

For instance, according to the Livestock Marketing Association (LMA) Tuesday, “With respect to public attendance at livestock auction markets, LMA is aware that many states and areas are enforcing varied crowd size limits and have mandated restrictions on operation of cafés or other food services. LMA is working with markets on a case-by-case basis to evaluate all parameters and impacts on their sales and strongly suggests markets develop contingency plans accordingly.”

Strategies LMA provided auction market members include:

• Familiarize yourself with and follow rapidly changing local and state rules regarding assembly of crowds.
• Work with café operators to follow location-specific guidance, which may include closure or offering to-go service only.
• If you are in a situation where you need to limit crowd size, then request that consignors deliver livestock and return home rather than remaining at the facility.
• Offer consignors flexibility in picking up their checks, such as delivery or pickup from their vehicle in the parking lot.
• Instruct any employee or visitor exhibiting symptoms of illness to remain home and request that any employee or visitor who is a member of a population of heightened vulnerability to consider avoiding areas where people are gathering.
• Evaluate all options to utilize web broadcast or phone bidding.

As for USDA services, according to a statement Tuesday from the Food Safety and Inspection Service, Animal and Plant Health Inspection Service and Agricultural Marketing Service:

“In this time of much uncertainty, we know that many of you have questions about how the department will continue to ensure that grading and inspection personnel are available. We have all seen how consumers have reacted to the evolving coronavirus situation and how important access to food is to a sense of safety and wellbeing. It is more important than ever that we assure the American public that government and industry will take all steps necessary to ensure continued access to safe and wholesome USDA-inspected products.

“These agencies are prepared to utilize their authority and all administrative means and flexibilities to address staffing considerations. Field personnel will be working closely with establishment management and state and local health authorities to handle situations as they arise in your community. As always, communication between industry and government will be key. We are all relying on early and frequent communication with one another to overcome challenges as they arise.”

Markets remain firmly entrenched in the COVID-19 panic that is forcing widespread disruptions to how people go about their business, while slowing economic wheels.

Live Cattle futures showed signs of life Monday, with surging wholesale beef values, but sank hard again, as did Feeder Cattle.

Live Cattle futures closed an average of $3.73 lower.

Feeder Cattle futures closed an average of $4.47 lower, limit-down in all but one contract.

Wholesale beef values rocketed higher Monday, with heavy offerings, as retailers replenished supplies windrowed by consumers stocking up.  There was also likely some defensive buying against potential challenges in the supply chain.

Choice boxed beef cutout value was $16.22 higher Monday afternoon at $224.36/cwt. Select was $14.73 higher at $216.71.

Corn futures closed 11¢ and 10¢ lower in the front two contracts and then mostly 4¢ to 6¢ lower.

Soybean futures closed 18¢ to 27¢ lower through Jly ’21 and then mostly 14¢ to 16¢ lower.

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Major U.S. financial indices on Monday gave back everything recovered in the previous session, despite aggressive action by the Fed over the weekend and the economic support previously announced by the White House.

West Texas Intermediate Crude Oil futures on the CME closed $2.76 to $3.03 lower through the front six contracts, down to $28.70 in spot Apr.

The Dow Jones Industrial Average closed 2,997 points lower. The S&P 500 closed 324 points lower. The NASDAQ was down 970 points.

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“The cattle and beef industry, along with the rest of the U.S. and global economy is in uncharted waters with the coronavirus pandemic. There are many unknowns about the timing, severity and aftermath of the disease,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “For the beef industry, there are longer term questions about overall impact on domestic and international beef demand, with questions about a U.S. and global recession looming large. In the short run, the actions needed to manage the epidemiology of COVID-19 is having significant impacts on beef supply chains.”

Peel explains beef products flow through three primary market channels: retail (grocery), food service and exports; each using separate supply chains. Domestically, based on USDA data, he says food at home, which approximately matches retail grocery, represents about 46% of total food expenditures in the U.S. Food away from home represents about 54% of total food expenditures. 

“The immediate response to COVID-19 is to limit travel, gatherings and public activities. Reduced travel, fewer restaurant visits and school closures all impact the HRI sector (hotels, restaurants, institutions),” Peel explains. “This implies a dramatic shift of food from the food service (HRI) sector into retail grocery sales. This represents huge demands on grocery store sales and the logistics of supplying retail stores. For beef, there is immediate demand for more processing, packaging and shipping of beef for retail sale and less processing and shipping of meat through food service distribution channels.”

Moreover, Peel notes each marketing channel utilizes a different mix of beef products.

“There will be a variety of impacts on markets for specific beef products,” Peel explains. “For example, increased demand for ground beef has resulted in local shortages of product at grocery stores, while reduced restaurant demand may result in weaker middle meat sales. We can expect significant disruptions and stress on beef supply chains given the consumption changes associated with requirements to control COVID-19.”

Should the labor forces of beef packing, processing, or shipping be directly impacted by COVID-19, Peel says supply chain disruptions could be more significant.