WLI

As expected, slowing beef production ended up hammering fed cattle prices.

Keeping in mind it was a light test, negotiated cash fed cattle trade ended last week steady to sharply lower. Live trades were mostly steady in the Southern Plains at mainly $105/cwt. They were steady to $11 lower in the north at $94-$105 in Nebraska and at $95-$105 in the western Corn Belt. Dressed sales were steady to $18 lower at $155-$165 in Nebraska and at $150-$168 in the western Corn Belt.

Cattle feeders offered 5,778 head in the weekly Fed Cattle Exchange auction held Friday. Just six lots–898 head–sold for a weighted average price of $105/cwt. for delivery at 1-17 days. Except for one lot from Nebraska, all cattle sold came from the Southern Plains.

Even so, cattle futures closed mostly higher Friday, supported by recent stability. 

Except for 85¢ and 17¢ lower in the front two contracts, Live Cattle futures closed an average of 95¢ higher (45¢ higher to $1.27 higher).

Except for 22¢ lower in Aug, Feeder Cattle futures closed an average of 68¢ higher.

Wholesale beef values continued higher to end the week.

Choice boxed beef cutout value was $3.12 higher Friday afternoon at $238.99/cwt. Select was $1.22 higher at $227.20.

Corn futures closed mostly 1¢ to 2¢ higher.

Soybean futures closed mostly 2¢ to 3¢ lower. 

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Major U.S. financial indices closed higher Friday, supported by continued indications at least part of the economy might be on the cusp of reopening.

“Our experts say the curve has flattened and the peak in new cases is behind us. Nationwide, more than 850 counties, or nearly 30% of our country, have reported no new cases in the last seven days,” said President Donald Trump, in a Thursday evening press briefing. “…my administration is issuing new federal guidelines that will allow governors to take a phased and deliberate approach to reopening their individual states.”

The Dow Jones Industrial Average closed 704 points higher. The S&P 500 closed 75 points higher. The NASDAQ closed 117 points higher.

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U.S. restaurant customer transactions declined by 41% the week ending Apr. 5, compared to a year earlier, according to The NPD Group (NPD). That follows a decline of 42% the previous week.

“The 41% decline in restaurant transactions is similar to last week and may indicate a bottom. We also need to be aware that further erosion could occur if consumers’ economic situations worsen,” says David Portalatin, NPD food industry advisor. “To date, many consumers have continued to buy restaurant meals through delivery, takeout, and drive-thru to the degree allowed by the restrictive environment; but with rising unemployment, payroll reductions, and temporary furloughs, consumers may begin to think differently about their food budgets overall.”

More specifically, quick service restaurant transaction declines were 38% for the week ending Apr. 5, according to 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. 

Customer transactions at full service restaurants–already challenged prior to COVID-19–were down 79%.

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A new USDA program–the Coronavirus Food Assistance Program (CFAP)–will provide $16 billion in immediate, direct support to farmers and ranchers, where prices and market supply chains have been impacted and will assist producers with additional adjustment and marketing costs resulting from lost demand and short-term oversupply for the 2020 marketing year caused by COVID-19. 

That’s according to U.S. Agriculture Secretary Sonny Perdue, in a late Friday afternoon announcement

“During this time of national crisis, President Trump and USDA are standing with our farmers, ranchers, and all citizens to make sure they are taken care of,” explained Secretary Perdue, when making the announcement. “The American food supply chain had to adapt, and it remains safe, secure, and strong, and we all know that starts with America’s farmers and ranchers.”

For what it’s worth, between the announcement and a press briefing late Friday evening, I was unable to figure out if portions of the $16 billion are part of the previously announced $9.5 billion allocated for direct support to farmers and ranchers in the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Either way, Secretary Perdue emphasized this was not an end to COVID-19 assistance from USDA. He said USDA will make the money available as quickly and efficiently as possible, but not how, exactly. Details will be forthcoming no doubt.

CFAP also includes $3 billion, in addition to the $16 billion, to purchase fresh produce, dairy, and meat. USDA will partner with regional and local distributors, whose workforce has been significantly impacted by the closure of many restaurants, hotels, and other food service entities, to make the purchases. USDA will begin with procurement of an estimated $100 million per month in fresh fruits and vegetables, $100 million per month in a variety of dairy products, and $100 million per month in meat products. The distributors and wholesalers will then provide a pre-approved box of fresh produce, dairy, and meat products to food banks, community and faith based organizations, and other non-profits serving Americans in need.

Negotiated cash fed cattle trade remained undeveloped through Thursday afternoon, according to the Agricultural Marketing Service (AMS). There were a few dressed trades reported in Nebraska and the western Corn Belt at $155/cwt., but too few to trend. The price there last week was at $168. Given the surge in wholesale beef prices this week, some are betting on at least steady money.

Choice boxed beef cutout value was $5.34 higher Thursday afternoon at $235.87/cwt. Select was $3.76 higher at $225.98. That’s $10.01 more for Choice since Monday and $14.58 more for Select.

The average steer dressed weight for the week ending Apr. 4 was 889 lbs., which was 2 lbs. lighter than the previous week, but 24 lbs. heavier than the prior year, according to USDA’s Actual Slaughter Under Federal Inspection report. The average dressed heifer weight was 825 lbs., the same as the prior week but 21 lbs. heavier than the same week last year.

Cattle futures closed higher Thursday, building on stability from the previous session. Trade and open interest continued to creep higher. 

Weekly beef export Sales (Apr. 3-9) reported by USDA’s Foreign Agricultural Service were also supportive. Net sales of 20,200 metric tons (mt) reported for 2020 were up 28% from the previous week and 16% from the prior four-week average. Increases came primarily from Japan, South Korea, Hong Kong, China and Taiwan.

Live Cattle futures closed an average of 92¢ higher (70¢ higher to $1.65 higher).

Feeder Cattle futures closed an average of $1.97 higher ($1.42 higher at the back to $2.90 higher toward the front).

Corn futures closed mostly 1¢ to 2¢ lower.

Soybean futures closed 5¢ to 6¢ lower through Mar ’21 and then 3¢ to 4¢ lower.

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Major U.S. financial indices wobbled higher Thursday as investors balanced negative economic impact from COVID-19 with hopefulness that plans are forthcoming for the nation to get back to work.

The Dow Jones Industrial Average closed 33 points higher. The S&P 500 closed 16 points higher. The NASDAQ closed 139 points higher.

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“As fed cattle prices fall and feedlot margins decline, feedlot operations will likely reduce placements and reduce bids for feeder calves,” say analysts with USDA’s Economic Research Service (ERS), in the monthly Livestock, Dairy and Poultry Outlook. “Relatively good pasture conditions might allow producers to keep cattle on grass and other pasture until prices begin to recover. To that end, these calves will likely be placed in feedlots at heavier weights, and expected average slaughter weights will be higher. Recent price data and expectations of weaker feedlot demand underpins a decrease in this year’s expected feeder calf prices.”

ERS projects the annual average feeder steer price (basis Oklahoma City) at $130.50/cwt., which would be $11.73 less (-8.25%) than in 2019. Average price in the first quarter of this year was $136.42. Prices are forecast at $123 in the second quarter, $128 in the third quarter and $135 in the fourth quarter.

“Slower demand and potentially slower rates of slaughter are expected to pressure cattle prices. However, prices are expected to improve through the rest of the year but remain well below year-ago levels,” say ERS analysts.

ERS projects the annual fed steer price (five-area direct) at $111/cwt. this year, which would be $5.78 less (-4.95%) than last year. Average fed steer price in the first quarter of this year was $118.32. Prices are forecast at $105 in the second quarter, $109 in the third quarter and $112 in the fourth quarter.

With decreased cattle feeding returns, uncertainty and feedlot placements in mind, ERS reduced projections for beef production in the third and fourth quarters. However, ERS analysts also say increased non-fed cattle slaughter and higher average dressed weights will partly offset the reduction in fed cattle.

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.”