WLI

Cattle futures closed limit-lower amid light trade and declining open interest and pressured by mounting concerns about beef packing production amid COVID-19 (see below).

Live Cattle futures closed limit-down $3.00

Feeder Cattle futures closed limit-down $4.50.

Wholesale beef values were higher on good demand and moderate to heavy offerings, according to AMS.

Choice boxed beef cutout value was $1.93 higher Monday afternoon at $225.86/cwt. Select was $3.07 higher at $211.40.

Corn futures closed mostly fractionally lower.

Soybean futures closed 5¢ to 9¢ lower through Mar ’21 and then mostly 2¢ to 3¢ lower.

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Major U.S. financial indices closed mixed on Monday, amid another volatile day of trade. On the one hand, investors continued to show optimism concerning COVID-19 progress. On the other, there’s plenty of wariness as quarterly corporate earnings season ramps up.

The Dow Jones Industrial Average closed 328 points lower. The broader S&P 500 closed 28 points lower. The NASDAQ closed 38 points higher.

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JBS closed its Greeley, CO plant on Friday for a deep cleaning, and will be closed for two weeks, according to the Colorado governor’s office. With the information available at the time, Cattle Current reported yesterday JBS intended to be closed for two days this week.

According to a statement, “The Colorado Department of Public Health and Environment (CDPHE) and Weld County Public health are working with JBS to design an aggressive testing and containment strategy, so they can continue their critical work which ranchers and consumers rely on. Gov. Polis has prioritized the Colorado National Guard to provide logistical support for testing so the plant can safely start up again.”

“The U.S. meat industry faces unprecedented threats as COVID-19 sweeps through labor forces at meat processing facilities nationwide,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “Production of beef, pork and poultry are simultaneously threatened as COVID-19 infections affect labor availability and processing capacity in multiple facilities across all meat industries. Reduced processing capacity could cause backups in live animal supplies if animals cannot be processed in a timely fashion. The severity of impacts will depend on specific situations and locations but could include costly delays in holding animals until slaughter, backlogs in production facilities, or even disposal of animals.”

Peel points to last week’s estimated cattle slaughter as an indication that production was already beginning to slow. USDA estimated slaughter for the week ending Apr. 11 at 536,000 head, which was more than 14% less than the previous week and almost 16% less than the same week last year, according to Peel. Fed cattle slaughter was down, as was cow and bull slaughter.

“This predicament could result in a situation not previously seen in the beef industry,” Peel says. “It may simply not be possible to slaughter animals in a timely manner. Last summer, the loss of a single packing plant in Kansas resulted in relatively little decrease in overall cattle slaughter as production was shifted to other plants; increased Saturday slaughter largely offset the loss of the fire-damaged plant. In the current situation, closure or reduced chain speeds across multiple plants may make it impossible to keep up with slaughter.”

Negotiated cash fed cattle prices ended up $7 lower on a live basis last week at $105/cwt. in the Southern Plains, according to the Agricultural Marketing Service. Dressed trade in Nebraska and the western Corn Belt was $7-$12 lower at $168. A light test was noted in all regions. At least part of the pressure likely stems from slowing packing plant production, due to COVID-19 (see below).

Futures and equities markets were closed in observance of Good Friday.

Week to week on Thursday, Live Cattle futures closed an average of $6.33 higher, from $1.17 higher in spot Apr to $8.82 higher.

Week to week on Thursday, Feeder Cattle futures closed an average of $9.98 higher, from $8.85 to $11.75 higher.

Wholesale beef values were higher on moderate to fairly good demand and light offerings on Friday, according to AMS.

Choice boxed beef cutout value was $1.26 higher Friday afternoon at $223.93/cwt. Select was 76¢ higher at $208.33. Week to week, Choice was $6.51 lower and Select was $7.51 lower.

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Major U.S. financial indices were closed in observance of Good Friday.

Week to week on Thursday, the Dow Jones Industrial Average was 2,305 points higher, the broader S&P 500 was 262 points higher and the NASDAQ was up 666 points.

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Supply chain disruptions, due to COVID-19, are mounting in the packing sector.

Smithfield Foods, Inc. announced Sunday that its Sioux Falls, SD facility will remain closed until further notice. The plant is one of the largest pork processing facilities in the U.S., representing 4-5% of U.S. pork production. It employs 3,700 people. More than 550 independent family farmers supply the plant.

“The closure of this facility, combined with a growing list of other protein plants that have shuttered across our industry, is pushing our country perilously close to the edge in terms of our meat supply. It is impossible to keep our grocery stores stocked if our plants are not running. These facility closures will also have severe, perhaps disastrous, repercussions for many in the supply chain, first and foremost our nation’s livestock farmers. These farmers have nowhere to send their animals,” said Kenneth M. Sullivan, president and chief executive officer, for Smithfield.

Likewise, Noel White, Tyson Foods, Inc. CEO explained last week, “Our meat and poultry plants are experiencing varying levels of production impact, due to the planned implementation of additional worker safety precautions and worker absenteeism.

“For example, out of an abundance of caution, we have suspended operations at our Columbus Junction, Iowa, pork plant due to more than two dozen cases of COVID-19 involving team members at the facility. In an effort to minimize the impact on our overall production, we’re diverting the livestock supply originally scheduled for delivery to Columbus Junction to some of our other pork plants in the region.”

According to various news sources, JBS is closing its beef packing plant in Greeley, CO through Tuesday of this week, for deep cleaning facilities and screening new workers. Reportedly, 36 JBS workers tested positive for COVID-19 infections through the end of last week.

“Unfortunately, COVID-19 cases are now ubiquitous across our country. The virus is afflicting communities everywhere. The agriculture and food sectors have not been immune,” Sullivan explained. “Numerous plants across the country have COVID-19 positive employees. We have continued to run our facilities for one reason: to sustain our nation’s food supply during this pandemic. We believe it is our obligation to help feed the country, now more than ever. We have a stark choice as a nation: we are either going to produce food or not, even in the face of COVID-19.”

Cattle futures closed mixed to lower Thursday with pressure from Lean Hogs, as well as likely profit taking and position squaring heading into the long weekend; futures and equities markets are closed in observance of Good Friday.

Except for $1.17 higher in spot Apr and 20¢ lower in the back contract, Live Cattle futures closed an average of $1.42 lower.

Feeder Cattle futures closed mixed, from an average of 33¢ lower in four contracts to an average of 77¢ higher.

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

Choice boxed beef cutout value was 33¢ higher Thursday afternoon at $222.67/cwt. Select was $4.20 lower at $207.57.

The average dressed steer weight for the week ending Mar. 28 was 891 lbs., according to USDA’s Actual Slaughter Under Federal Inspection report. That was 7 lbs. lighter than the previous week, but 26 lbs. heavier than a year earlier. The average dressed heifer weight was 825 lbs., which was 11 lbs. lighter than the previous week, but 19 lbs. heavier than the prior year.

Corn futures closed 1¢ to 3¢ higher.

Soybean futures closed mostly 7¢ to 9¢ higher.

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Major U.S. financial indices closed higher Thursday with the Federal Reserve announcing it will provide up to $2.3 trillion in loans to support the economy.

“Our country’s highest priority must be to address this public health crisis, providing care for the ill and limiting the further spread of the virus,” explained Federal Reserve Board Chair Jerome H. Powell. “The Fed’s role is to provide as much relief and stability as we can during this period of constrained economic activity, and our actions today will help ensure that the eventual recovery is as vigorous as possible.”

According to the Fed, funding will assist households and employers of all sizes and bolster the ability of state and local governments to deliver critical services during the coronavirus pandemic.

The Dow Jones Industrial Average closed 285 points higher. The S&P 500 closed 39 points higher. The NASDAQ was up 62 points.

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USDA reduced expected commercial beef production for this year to 27.4 billion lbs., in the latest monthly World Agricultural Supply and Demand Estimates (WASDE).That was 255 million lbs. less than the previous month’s estimate but would be 294 million lbs. more than the prior year.

“The beef production forecast is reduced as lower expected steer and heifer slaughter more than offsets higher cow slaughter. However, beef production declines are partially offset by heavier carcass weights,” say analysts with USDA’s Economic Research Service (ERS). “Total red meat and poultry production for 2020 is reduced from last month as sectors at all levels adjust to COVID-19 and economic uncertainty.”

Total red meat and poultry production for this year is estimated at 108.3 billion lbs., which is 1.1 billion lbs. less than the prior month’s projection, but would be 3.0 billion lbs. more than last year.

USDA reduced the estimated annual fed steer price by $3.50 to $111/cwt. It was $116.78 last year. The average fed steer price is projected to be $105 in the second quarter, $109 in the third quarter and $112 in the fourth quarter.

Cattle feeders offered 7,561 head in the weekly Fed Cattle Exchange Auction Wednesday and sold 1,443 head for a weighted average price of $105/cwt.–746 head for delivery at 1-9 days and 697 head for delivery at 1-17 days. Except for one lot from Iowa, sales were from the Southern Plains, where last week’s negotiated price was mostly $112. Country trade in the region so far this week is also at $105.

Even so, Cattle futures continued higher in active trade, following outside markets, despite growing concerns about the potential of COVID-19 to reduce harvest capacity utilization. If that happens to any degree, then logic and last summer’s packing plant fire suggest higher beef prices and lower fed cattle prices.

Live Cattle futures closed an average of $2.21 higher, (40¢ higher in the back contract to $4.50 higher in spot Apr).

Feeder Cattle futures closed an average of $4.72 higher, ($1.22 higher at the back to $6.55 higher).

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

Choice boxed beef cutout value was $5.54 lower Wednesday afternoon at $222.34/cwt. Select was $5.98 lower at $211.77.

Corn futures closed fractionally lower to 1¢ lower.

After fractionally higher to 4¢ higher through May ’21, Soybean futures closed mostly 6¢ to 7¢ higher.

The monthly World Agricultural Supply and Demand Estimates are scheduled to be released Thursday.

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Major U.S. financial indices closed sharply higher Wednesday. Support included increasing optimism that COVID-19 may be near a positive turning point, as well as announcement that Bernie Sanders dropped out of the 2020 race for the U.S. presidency. Minutes from the most recent meeting of the Federal Open Markets Committee (FOMC) also indicated intentions to maintain interest rates at current levels for the foreseeable future.

“With regard to monetary policy beyond this meeting, these participants judged that it would be appropriate to maintain the target range for the federal funds rate at 0.0% to 0.25% until policymakers were confident that the economy had weathered recent events and was on track to achieve the Committee’s maximum employment and price stability goals,” according to the FOMC minutes.

The Dow Jones Industrial Average closed 779 points higher. The S&P 500 closed 90 points higher. The NASDAQ was up 203 points.

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Quick service restaurant transactions were 40% less year over year for the week ending Mar. 29, according to the NPD Group (NPD). Transactions at full service restaurants were 79% less. Total restaurant customer transactions were down 42%.

“The transaction declines partially reflect the struggle of on-premise restaurants to pivot to off-premise models,” says David Portalatin, NPD food industry advisor and author of Eating Patterns in America. “Many restaurants that are attempting to make the move are doing so with limited menu offerings and without the benefit of drive-thru lanes. Anecdotally, some operators are giving up the cause and closing altogether.” 

About 97% of U.S. restaurants are now under some level of restrictions, with most prohibiting dine-in service, according to NPD’s restaurant census, ReCount®. Prior to the COVID-19 outbreak, on-premise dining represented 52% of restaurant industry dollars, and off-premise, like carryout, drive thru, and delivery, represented 48% of dollars. Carryout represented the largest dollar share at 53% of off-premise modes, drive-thru 38%, and delivery 9% of dollars. As of year ending February 2020, digital orders represented 13% of all off-premise dollars.

“Wholesale and retail beef markets have endured enormous upheaval since mid-March,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “Starting Mar. 16, the surge in retail grocery buying put huge demands on retail supply chains resulting in dramatic and immediate spikes in wholesale beef prices. The overall cutout price jumped by nearly 19% in a matter of three days. Wholesale prices continued to push higher until Mar. 23, peaking at $257.32 cwt., up 23.6% from Mar. 13 levels. Since then, the cutout dropped over 10% to $230.44/cwt. on Apr. 3. It is not clear exactly where the boxed beef cutout will settle out in the coming days.”

All of that shifting also impacts demand for various wholesale beef cuts.

From the beginning of March to the early part of April, Peel says prices for most steak items declined: down 29% for the tenderloin, for example and down 7.7% for the ribeye.

“Prices for loin strips, a popular summer grilling steak that is normally increasing seasonally at this time, is up over 22%. Top sirloin, a multi-purpose steak used in both restaurants and at retail grocery is priced nearly 13% higher,” Peel explains. 

“At the same time, end meat prices, which are typically declining into the summer, are higher, driven by grocery demand for value cuts and ground beef.” 

Negotiated cash fed cattle trade was undeveloped through Tuesday afternoon. USDA’s Agricultural Marketing Service did report a few early trades in Kansas at $105/cwt., but too few to trend. Prices in the region last week were at $112.

Live Cattle and Feeder Cattle futures were limit-up across the board Tuesday, building on what was mostly modest to strong gains in the previous session. Higher outside markets (for most of the session), tied to hopefulness about peak coronavirus infections coming sooner rather than later, provided support. However, declining wholesale beef values, iffy demand patterns going forward, relative to supplies, and early indications of lower cash fed cattle prices this week make it hard to square the move with anything fundamental.

Live Cattle futures closed expanded limit-up $4.50 higher, in light trade.

Feeder Cattle futures closed limit-up $4.50 higher, also amid light trade.

Wholesale beef values were lower on Choice and higher on Select with light to moderate demand and moderate to heavy offerings, according to the Agricultural Marketing Service.

Choice boxed beef cutout value was $2.17 lower Tuesday afternoon at $227.88/cwt. Select was $2.72 higher at $217.75.

Corn futures closed 2¢ to 3¢ higher.

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

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Major U.S. financial indices gyrated wildly Tuesday: sharply higher for much of the session amid continued positive signs that the spread of COVID-19 is slowing; selling off toward the end as investors took money back off the table.

The Dow Jones Industrial Average closed 26 points lower. The S&P 500 closed 4 points lower. The NASDAQ was down 25 points.

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Concerns about the impact of the global coronavirus pandemic on the agricultural economy drove the Purdue University/CME Group Ag Economy Barometer 47 points lower to 121 in March–the steepest month-to-month decline since the barometer began.

The Ag Economy Barometer is based on a midmonth survey of 400 U.S. agricultural producers and was conducted March 16-20, as the coronavirus crisis escalated in the U.S. and around the world.

“While originally it was thought that the coronavirus effect would be limited to trade with China, now it appears producers are bracing for challenging financial times leading into the 2020 planting season,” says James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture.

Both sub-indices of the Ag Economy Barometer also recorded their largest one-month declines since the data series began in 2015. The Index of Current Conditions fell 43 points to 111. The Index of Future Expectations dropped 49 points to 126. That’s the lowest since September 2019, when weak commodity prices and an unresolved trade dispute left many farmers concerned over their financial futures.

Among the highlights:

• 74% of respondents said they were either fairly worried (34%) or very worried (40%) about the impact of the virus on their farm’s profitability this year. That sentiment also spilled over into their perceptions of financial performance, with 40% of respondents expecting a worse year compared with 2019.
• 47% of respondents expected the soybean trade dispute with China to be resolved soon, down from a January peak of 69%.
• 68% of respondents expected the trade dispute with China to be resolved in a way that’s ultimately beneficial to U.S. agriculture. An average of 80% of respondents thought so in January and February.
• 62% of survey respondents anticipated USDA providing Market Facilitation Program payments to U.S. farmers for the 2020 crop year, compared to 45% in February.