WLI

Cattle futures closed lower on Thursday for the second consecutive session.

Live Cattle futures closed an average of $1.51 lower, except for 25¢ higher in spot Jun,

Feeder Cattle futures closed an average of $1.77 lower.

Choice boxed beef cutout value was $15.07 lower Thursday afternoon at $450.92/cwt. Select was 16¢ higher at $437.40.

Corn futures closed fractionally lower across the front half of the board, and then mostly unchanged to fractionally higher.

Soybean futures closed mostly fractionally lower to 1¢ lower.

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Major U.S. financial indices closed higher Thursday, helped long by higher crude oil prices, and despite another 2.98 million initial jobless claims, according to the U.S. Labor Department.

The Dow Jones Industrial Average closed 377 points higher. The S&P 500 closed 32 points higher. The NASDAQ closed 80 points higher.

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Lingering tailwinds from government relief payments and the lifting of dine-in restrictions in states like Georgia, Florida, and Texas helped to improve U.S. restaurant chain transactions the week ending May 3, according to The NPD Group (NPD).

Total restaurant transactions were 26% less than a year earlier, compared to declines of 32% and 43% the previous two weeks. That’s from NPD’s CREST® Performance Alerts, which provides a rapid weekly view of chain-specific transactions and share trends for 70 quick service, fast casual, midscale, and casual dining chains.

More specifically, transactions at quick service restaurant chains were down 24% in the week ending May 3 versus a year earlier; they were down 30% the previous week. For the same two weeks, full service restaurants transactions declined 67% a 71%, respectively.

Restaurant dine-in restrictions were lifted for nearly 192,000 restaurant units or about 29% of all units since May 1, based on an analysis using NPD’s ReCount® restaurant census. Keep in mind that required social distancing limits can reduce dining room capacity by as much as 75% in some areas.

“Many restaurant operators have weighed the value of limited operations versus the cost of opening, health risks, or other factors, and chose to remain closed or continue with a takeout-only model,” says David Portalatin, NPD food industry advisor. “The most recent week’s performance suggests we’ve achieved about 30% of the potential volume in states where restrictions were lifted. Looking ahead to next week, another 46,000 restaurants could come back online.”

Negotiated cash fed cattle prices continued higher across a broad range Wednesday. Live sales in Nebraska were $15 higher than last week at $110/cwt. on a live basis and $20-$30 higher in the beef at $170-$180. Live sales in the western Corn Belt were mostly $12 higher than last week at mainly $115. Dressed trade was steady to $5 higher at $170-$185.

In the Southern Plains so far this week, live prices in Kansas are at $115, steady with the top of the previous week’s wide range. The price in the Texas Panhandle is at $110, compared to $95-$115 last week.

Similar gains were seen at Wednesday fed cattle auctions.

Choice steers and heifers sold $10 higher in the fat auction at Tama, IA, where 95 Ch 2-4 steers weighing an average of 1,466 lbs. brought an average price of $117.55/cwt.

At Sioux Falls in South Dakota, slaughter steers sold $17-$22 higher and fed heifers sold $10-$18 higher. There were 215 Ch 2-3 steers weighing an average of 1,446 lbs., bringing an average price of $111.78. “More packer buyers were present and willing to chase the market to get cattle bought after buying cattle in

the country at sharply higher prices on Monday and Tuesday,” according to the AMS reporter.

Cattle feeders also offered 4,601 head in the weekly Fed Cattle Exchange auction, selling 1,272 head for a weighted average price of $110. Money was the same on 450 head sold for delivery at 1-9 days and for 822 head sold for delivery at 1-17 days. Sold lots were from Texas and Nebraska.

Cattle futures continued the week’s volatile rollercoaster, though, giving back most of what was gained in the previous session.

Live Cattle futures closed an average of $2.24 lower (60¢ lower at the back to $3.30 lower in spot Jun).

Feeder Cattle futures closed an average of $2.49 lower.

Wholesale beef values declined sharply Wednesday, perhaps suggesting the Covid-skewed top is at least near.

Choice boxed beef cutout value was $9.40 lower Wednesday afternoon at $465.99/cwt. Select was $13.73 lower at $437.24

Grain futures lost some ground, with pressure from the previous day’s monthly World Agricultural Supply and Demand Estimates.

Corn futures closed mostly 3¢ lower through May ‘21, and then 1¢ lower to fractionally higher.

Soybean futures closed 11¢ to 13¢ lower through Jan ‘21 and then 5¢ to 7¢ lower.

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Major U.S. financial indices closed sharply lower Wednesday, for the second consecutive session. At least part of the pressure seemed to stem from remarks made by Federal Reserve Chair Jerome Powell, via webcast, to the Peterson Institute for International Economics. Investors were apparently hoping for a more optimistic outlook, relative to economic recovery, in the wake of COVID-19.

“While the economic response has been both timely and appropriately large, it may not be the final chapter, given that the path ahead is both highly uncertain and subject to significant downside risks,” Powell said. “Economic forecasts are uncertain in the best of times, and today the virus raises a new set of questions: How quickly and sustainably will it be brought under control? Can new outbreaks be avoided as social-distancing measures lapse? How long will it take for confidence to return and normal spending to resume? And what will be the scope and timing of new therapies, testing, or a vaccine? The answers to these questions will go a long way toward setting the timing and pace of the economic recovery. Since the answers are currently unknowable, policies will need to be ready to address a range of possible outcomes.”

The Dow Jones Industrial Average closed 516 points lower. The S&P 500 closed 50 points lower. The NASDAQ closed 139 points lower.

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Although fed cattle prices continue lower than pre-COVID projections, forecast feed costs are also lower, providing some cow-calf producers with potential opportunity to retain ownership through the feedlot.

More specifically, analysts with the Livestock Marketing Information Center point out feedlot cost of gain is declining.

“As reported by the monthly Kansas State University survey (Focus on Feedlots), the average steer cost of gain for March was $83.41/cwt. Kansas feedlot projections for mid-April averaged $74, the lowest since August 2018. If grain and hay costs continue to slip, as expected, that number is headed even lower,” say LMIC analysts, in the latest Livestock Monitor.

Since February, the LMIC folks explain corn prices declined counter-seasonally. For the week ending May 8, they say prices in the Texas Triangle and Omaha were the lowest since late November of 2016.

For perspective, LMIC calculates the breakeven price for a steer placed in a Southern Plains feedlot and sold in April was $115-$117. For one placed in April and sold in September, breakeven is $97-$98.

The organization calculates monthly projected breakeven sale prices with feedstuff costs when a 750-lb. steer is placed, assuming typical feeding conditions (including weather) in a commercial Southern Plains feedlot. LMIC also calculates adjusted monthly breakevens based on changes in feedstuff costs.

“As this summer unfolds, producers running summer stockers and even cow-calf operations may want to carefully evaluate retained ownership,” says LMIC analysts. “Some pre-planning and attention to projected cost of gain may pay off.”

Cattle futures closed sharply higher Tuesday, regaining much of what was lost in the previous session. Support included stronger cash fed cattle prices, the ongoing heft of wholesale beef values and perhaps USDA’s latest projections of less total red meat and poultry production this year (see below).

Other than 25¢ lower in the back contract, Live Cattle futures closed an average of $2.66 higher ($1.32 to $4.50 higher).

Feeder Cattle futures closed an average of $2.93 higher ($2.22 higher at the back to $3.65 higher in spot May).

Choice boxed beef cutout value was $6.81 higher Tuesday afternoon at $475.39/cwt. Select was $2.00 lower at $450.97; the first day-to-day decline since Apr. 8.

Corn futures closed fractionally higher to 1¢ higher, except for 2¢ to 5¢ higher in the front three contracts.

Soybean futures closed 2¢ to 3¢ higher in the front four contracts and then mostly fractionally higher to 1¢ higher.

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Major U.S. financial indices closed lower Tuesday, with continued jitters about how reopening the economy will impact the spread of COVID-19.

The Dow Jones Industrial Average closed 457 points lower. The S&P 500 closed 60 points lower. The NASDAQ closed 189 points lower.

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USDA projects beef production at 25.76 billion lbs. this year, according to the latest monthly World Agricultural Supply and Demand Estimates (WASDE). That’s 1.68 billion lbs. less (-6.12%) than the April forecast and would be 1.39 billion lbs. less (-5.12%) than last year.

Even so, WASDE estimates the annual fed steer price (five-area direct) at $104.10/cwt., which is $6.90 less than the April projection. That would be $12.68 less than last year’s average of $116.78. By quarter, USDA pegs the average price in the first quarter at $118.32, at $99 in the second and third quarters and at $100 in the fourth quarter.

Forecast total red meat and poultry production this year of 103.57 billion lbs. is 4.73 billion lbs. less (-4.36%) than the April projection and would be 1.69 billion lbs. less (-1.61%) than in 2019.

Next year, though, USDA projects total beef production (27.49 billion lbs.) and total red meat and poultry production (107.34 billion lbs.) to be higher than in 2019.

Cattle futures closed sharply lower Monday with pressure likely including the significant decline in open interest at the end of last week and disappointment that week-to-week gains in estimated cattle slaughter were not more significant (see below).

Live Cattle futures closed an average of $2.31 lower (97¢ lower at the back to $3.00 lower).

Feeder Cattle futures closed an average of $3.61 lower ($2.45 to $4.27 lower)

Choice boxed beef cutout value was $7.70 higher Monday afternoon at $468.58/cwt. Select was $3.98 higher at $452.97.

Corn futures closed fractionally lower to 1¢ lower.

Soybean futures closed 2¢ to 3¢ higher.

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Major U.S. financial indices closed mixed on Monday, with strength in tech stocks counterbalanced by jitters about how reopening the economy will impact the spread of COVID-19.

The Dow Jones Industrial Average closed 109 points lower. The S&P 500 closed fractionally higher. The NASDAQ closed 71 points higher.

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“It will likely take many weeks for slaughter rates to catch up with the growing backlog of fed cattle and get the industry current once again,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his latest market comments. “Meantime, all sectors of the industry are responding to the need to slow cattle down and hold them longer in a variety of production settings before proceeding to finish in feedlots. Fed cattle weights are increasing and pushing carcass weights higher counter-seasonally.”

With that said, Peel sees a glimmer of hope in last week’s estimated cattle slaughter. Although still 32.2% less than the same week the previous year, estimated slaughter of 425,000 head was 6.4% more than the previous week.

“This hopefully indicates the beginning of recovery of packing capacity in the coming weeks,” Peel says. “Risks remain, however, and it is not clear how fast packing plant capacity will recover. New safety measures and work protocols likely mean that effective maximum capacity in beef packing plants will be reduced compared to pre-COVID-19 levels.” 

In a webinar last week, Glynn Tonsor, agricultural economist at Kansas State University suggested that 85% of pre-COVID 19 packing capacity might be a reasonable ballpark for where it lands in a post-pandemic world.

“The timing during the year is drastically altered with second-quarter beef production forecast down 13.3% year over year. Beef production will be pushed into the third quarter, which is forecast to be up 5.4% compared to last year. Fourth-quarter beef production is currently forecast to be just slightly higher year over year,” Peel says.