WLI

Through late Friday afternoon, the only established negotiated cash fed cattle trade for the week remained the $105/cwt. paid in the Southern Plains, which was $5 less than the previous week. Although too few to trend, there were a few trades in Nebraska Friday at $106/cwt. on a live basis and at $172 in the beef.

Through Thursday the 5-area direct steer price was $105.40 on a live basis (7,941 head) and $170.46 in the beef (4,172 head). Week to week that was $8.71 less on a live basis and $12.11 less dressed.

Cattle futures were unable to hold early-session support Friday as another trip lower in Lean Hogs provided pressure.

After unchanged in spot Aug, Live Cattle futures closed an average of 57¢ lower (17¢ to 87¢ lower).

Feeder Cattle futures closed an average of 84¢ lower, (57¢ lower at the back to $1.20 lower in spot Aug).

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

Choice boxed beef cutout value was $2.57 higher Friday afternoon at $238.69/cwt. Select was $2.59 higher at $213.26.

Corn and Soybean futures grained support from the dryer weather outlook for the Corn Belt.

Corn futures closed 8¢ to 10¢ higher through Jul ’20 and then mostly 4¢ to 5¢ higher.

Soybean futures closed mostly 9¢ higher.

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Major U.S. financial indices rallied Friday, on the back of resurgent bond yields, apparently allaying recession fears among investors. It was inversion of the yield curve earlier in the week that drove steep losses, along with continued anxiety about global economic growth.

The Dow Jones Industrial Average closed 306 points higher. The S&P 500 closed 41 points higher. The NASDAQ was up 129 points.

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Although cattle markets had a firmer feel, albeit lower, at the end of the week,

plenty of market uncertainty remains following  the fire at Tyson Foods beef slaughter plant at Holcombe, KS Aug. 9.

Among what’s known:

“The plant operated at about 6,000 head of fed cattle per day, leaving a shortfall in the national packing capacity of 30,000 head for a five-day work week,” said representative of the Kansas Livestock Association (KLA), in a Monday assessment for its members. “According to CattleFax, that amounts to 6% of total U.S. fed cattle packing capacity the rest of the processing industry will need to absorb.”

“According to CattleFax, in order to compensate for the loss of capacity at Holcomb, the major packing plants in Texas, Kansas, Colorado, Nebraska, and Iowa, which represent 83 percent of U.S. fed slaughter capacity, would need to slaughter 8.2% more cattle per week, or run 3.3 more hours per week, to make up the production lost in Holcomb,” explained Colin Woodall, senior vice president of government affairs for the National Cattlemen’s Beef Association (NCBA) in a Tuesday letter to Greg Ibach USDA Under Secretary for Marketing and Regulatory Programs. “While we expect other processing facilities to take more cattle, the shortfall created by the Holcomb fire will be incredibly difficult to make up based on the current packing infrastructure.” On behalf of NCBA, Woodall requested, “…that APHIS and FSIS inspectors, along with AMS graders, be provided the flexibility needed to move to other plants and work expanded shift hours, including weekends, in order to help the packing segment of our industry process the cattle headed to harvest… we ask that Packers and Stockyards Division staff remain vigilant against any effort to illegally capitalize on the current market situation.”

In another letter, NCBA asked the U.S. Department of Transportation to declare an emergency suspension of Hours of Service for cattle haulers. The organization also sent a letter to the Commodity Futures Trading Commission, requesting that the agency, “…keep an even closer eye on the cattle markets to ensure that no market participant tries to use the uncertainty to manipulate or illegally take advantage of the situation…”

Tyson will rebuild the plant. At a late-week new conference, Tyson officials explained the area impacted by the fire was relatively small, in terms of square footage, but large in terms of the plant’s electric and hydraulic infrastructure. Officials said rebuilding will likely be a matter of months, rather than weeks.

As long suspected, beef packing capacity shuttered during historically long beef cowherd liquidation, fueled by historic drought, increased market vulnerability.

Live Cattle and Feeder Cattle futures were limit-down last Monday, then down the expanded limit in some contracts Tuesday as traders panicked and liquidated long positions. Part of the panic stemmed from seasonally and cyclically large fed cattle supplies at a time when beef packer capacity utilization was, by most accounts, already running historically high.

On the surface at least, lots of beef buyers were relying on the spot market for their immediate supply. There seems no other way to explain the massive surge in wholesale beef prices.

Other than the $105 paid in the Southern Plains a day earlier, negotiated cash fed cattle trade remained undeveloped through Thursday afternoon.

Cattle futures mostly edged higher, with plenty of uncertainty in the wake of this week’s volatile trade.

After unchanged in spot Aug, Live Cattle futures closed an average of 37¢ higher, except for 27¢ and 2¢ lower in near Dec and Feb, respectively.

Other than 10¢ and 25¢ lower in two contracts toward the back, Feeder Cattle futures closed an average of 43¢ higher, (2¢ higher to $1.30 higher in spot Aug).

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

Choice boxed beef cutout value was $3.78 higher Thursday afternoon at $236.12/cwt. Select was $4.75 higher at $210.67. That was $19.24 for Choice week to week and $18.30 more for Select, driven by the recent supply disruption.

Corn futures closed mostly fractionally higher.

Soybean futures closed mostly 6¢ to 9¢ lower.

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Major U.S. financial indices closed mixed Thursday, stemming the steep slide from the previous day. Support included more than expected retail sales in July.

Advance estimates of U.S. retail and food services sales for July were $523.5 billion, which was of 0.7% more than the previous month and 3.4% more than the previous year, according to the U.S. Commerce Department.

The Dow Jones Industrial Average closed 99 points higher. The S&P 500 closed 7 points higher. The NASDAQ was down 7 points.

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Carcass weights continue lighter year over year, according the most recent USDA Actual Slaughter Under Federal Inspection report.

The average dressed steer weight for the week ending Aug. 3 was 872 lbs., which was 3 lbs. heavier than the previous week, but 8 lbs. lighter than a year earlier. The average dressed heifer weight of 805 lbs. was 5 lbs. heavier week to week, but 4 lbs. lighter year over year.

Total cattle slaughter for the week of 632,874 head was 8,419 more than the same week a year earlier. Fed cattle slaughter was 30,613 head fewer. Beef production for the week was 1.3 million lbs. more at 510.7 million lbs.

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Count analysts with the Livestock Marketing Information Center (LMIC) among those less bullish than USDA when it comes to corn production this year.

“The challenge for this year’s crop is now focused on favorable weather conditions to reach maturity in optimal condition,” say LMIC analysts, in the latest Livestock Monitor. “Delayed planting means that the crop will have less time to develop, which elevates the risks of lower average yields per acre and fewer acres of harvestable quality when combines move through the fields later this year.”

The USDA Crop Production estimates that drove corn prices lower this week forecast 90.01 million acres planted to corn, 82 million acres harvested, and yield at 169.5 bu./acre for production of an estimated 13.9 billion bu.

Between impacts of delayed planting and the chance of an early frost, LMIC forecasts 81.5 million corn acres harvested with an average yield of 166 bu./acre.

for production of 13.5 billion bu., the least since 2012. These numbers support a an average corn price at the farm for the new crop year of slightly more than $4/bu., according to LMIC analysts.

Negotiated cash fed cattle trade sputtered back to life Wednesday, following last week’s Tyson fire. Live trade in the Southern Plains was at $105/cwt. on light to moderate trade and light demand, according to the Agricultural Marketing Service (AMS). That was $5 less than last week. Although too few to trend, there were also some early sales in the western Corn Belt at $105.00-$106.50 live and at $170-$172 in the beef.

Cattle futures surged higher, especially Feeder Cattle, as buyers took advantage of the oversold conditions created by massive selling the previous two sessions.

Other than an average of 55¢ lower in the front two contracts, Live Cattle futures closed an average of $1.61 higher.

Feeder Cattle futures closed an average of $5.18 higher, almost retracing what was lost in the previous day.

Wholesale beef values were sharply higher with good demand and moderate offerings, according to the Agricultural Marketing Service.

Choice boxed beef cutout value was $5.98 higher Wednesday afternoon at $232.34/cwt. Select was $5.34 higher at $205.92. Packers continue to benefit from the price bounce tied to the recent supply disruption.

Corn futures closed 5¢ to 7¢ lower through May ’21, and then mostly 1¢ to 2¢ lower.

Soybean futures closed 10¢ to 11¢ lower across the board.

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Major U.S. financial indices plunged steep and fast Wednesday, fueled by a brief inversion of the yield curve. That’s when the yield on the 10-year Treasury note drops below the 2-year rate. Based on history, many believe that’s the harbinger of economic recession within 18 months or so.

The Dow Jones Industrial Average closed 800 points lower. The S&P 500 closed 85 points lower. The NASDAQ was down 242 points.

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Burgers are often thought of as being more affordable than other menu items, but as prices continue to rise at a faster rate than the average entree, this view may start shifting, according to Technomic’s 2019 Burger Consumer Trend Report.

“Price increases are offering operators a form of relief as they struggle with rising labor and delivery costs, as well as limited growth through traffic,” explains Charles Winship, manager of consumer insights at Technomic. “But continued price increases for burgers could ultimately cut into perceptions around their affordability and push consumers toward other options.”

Key takeaways from the report include:

42% of consumers who eat burgers strongly agree that they have a preferred restaurant they almost always go to for burgers.

46% of consumers who eat burgers strongly agree that they’ve noticed price increases for burgers at restaurants over the past year.

44% of millennials who eat burgers expect restaurants to offer at least one plant-based burger option.

Cash cattle markets never stop completely, but plenty of folks continued to take cover Tuesday as Cattle futures sank further—limit and near-limit down in some contracts, with expanded limits—in response to fed cattle harvest disruptions caused by the fire at Tyson’s plant in Holcombe, KS.

As reported in Cattle Current yesterday, estimates suggest lost fed harvest capacity amounts to approximately 30,000 to 35,000 head per week. With industry-wide beef packing capacity utilization already running historically high before the fire, by most accounts, both cattle feeders and packers are scrambling to find solutions.

Live Cattle futures closed an average of $4.34 lower.

Feeder Cattle futures closed an average of $5.60 lower.

Wholesale beef values continued to climb Tuesday, with the shortage in immediate supplies fostered by the Tyson fire. Prices were sharply higher on good demand and moderate to heavy offerings, according to the Agricultural Marketing Service.

Choice boxed beef cutout value was $7.74 higher Tuesday afternoon at $226.36/cwt. Select was $2.79 higher at $200.58.

USDA acreage numbers continued to weigh on corn Tuesday. Corn futures closed 8¢ to 19¢ lower through Jul ’20, then mostly fractionally mixed.

Soybean futures gained, though, after ignoring the previous day’s positive acreage news. Soybean futures closed 8¢ to 10¢ higher through Jul ‘20, and then mostly 4¢ to 5¢ higher.

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Major U.S. financial indices closed sharply higher Tuesday. Stocks rebounded after the U.S. Trade Representative (USTR) announced removing some items from the list of Chinese imports that are subject to an additional 10% tariff beginning Sept. 1.

“Further, as part of USTR’s public comment and hearing process, it was determined that the tariff should be delayed to December 15 for certain articles,” according to a USTR statement. “Products in this group include, for example, cell phones, laptop computers, video game consoles, certain toys, computer monitors, and certain items of footwear and clothing.”

All told, the news buoyed investor hopes that the U.S. and China can resolve their trade differences.

The Dow Jones Industrial Average closed 372 points higher. The S&P 500 closed 42 points higher. The NASDAQ was up 152 points.

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Analysts with USDA’s Economic Research Service (ERS) increased the anticipated average fed steer price for this year by $1 to $116.50/cwt., in the most recent monthly World Agricultural Supply and Demand Estimates. That was based on recent price strength, before the Tyson fire. Average price for the third quarter is forecast to be $110 and then $112 in the fourth quarter.

Estimated beef production for this year was reduced by 86 million lbs. to 27.04 billion lbs., compared to the previous month’s forecast. That’s based on the expected slower pace of cattle slaughter in the third quarter and lighter expected carcass weights through the remainder of this year.

For next year, though, ERS analysts say, “The beef production forecast is raised from the previous month on a higher expected pace of first-half marketings. However, the 2019 calf-crop estimated in the July 19 Cattle report implies lower-than-previously expected marketings in the latter part of 2020.”

Beef production for 2020 is forecast at 27.57 billion lbs. WASDE has next year’s average fed steer price at $119.

Forecast total red meat and poultry production was forecast 107 million lbs. higher for this year at 104.62 billion lbs., based on increased broiler and turkey production.

Total red meat and poultry production estimates were higher for next year, too, at 106.48 billion lbs., with increased beef and poultry production.

Cattle and grain markets were plumb ugly Monday.

The fire that partly destroyed the Tyson Foods beef plant in Holcomb, KS (near Garden City) on Friday took Cattle futures limit down as traders tried to assess what the lost packing capacity means to markets.

Live Cattle futures closed limit down $3.00, except for $2.67 lower in the back contract.

Feeder Cattle futures closed limit down $4.50.

According to the Kansas Livestock Association, in an assessment sent to its members Monday, “The Holcombe plant operated at about 6,000 head of fed cattle per day, leaving a shortfall in the national packing capacity of 30,000 head for a five-day work week. “According to CattleFax, the association says that amounts to 6% of total U.S. fed cattle packing capacity the rest of the processing industry will need to absorb.

In his weekly market comments, Derrell Peel, Extension livestock marketing specialist at Oklahoma State University  explains, “The loss of 30,000-35,000 head of slaughter capacity per week will disrupt both boxed beef and fed cattle markets, at least initially and potentially longer, depending on the duration of the plant closure.” He adds that, “The disruptions will add costs for both fed cattle and boxed beef as additional logistics are needed to adjust flows of slaughter cattle and boxed beef. There are many unknowns for Tyson and the industry going forward, he says, including the possibility that this sets the stage for new investment in beef packing.

According to KLA, “Based on CattleFax analysis, shifting the supply to other plants in Kansas, Texas, Colorado, Nebraska and Iowa will mean capacity in those regions needs to run 8% to 8.5% higher, which will be difficult to make up based on current packing industry infrastructure.            

“Potential market impacts predicted by CattleFax include a possible loss of currentness in the cattle feeding segment, possibly some lost market leverage by cattle feeders and possibly more price risk for all classes of cattle.

Likewise, Stephen Koontz, agricultural economist at Colorado State University, says in the latest In the Cattle Markets, “The impact of this event on fed cattle markets will be substantial. The market is in the middle of the third quarter: supplies are heaviest, slaughter weights are ramping up, and competing meat supplies will begin their fall increase. This is the quarter with the highest volume of beef supplies and forecasts are for sustained supplies into the fourth quarter.”

Koontz expects the rest of this month will be difficult, as plenty of uncertainty will surround the largest annual fed cattle supplies being moved around temporally and spatially to make up for the capacity loss in the Southern Plains.

By all measures, though, beef packing capacity utilization has been running historically high as consumer beef demand and packer economics encourage timely harvest of record large fed cattle supplies.

“This disruption will maintain incentives for a packer to run as many hours as possible,” Koontz explains. “Market-ready inventories of cattle are strong but are being depleted through the summer and this will persist into the fall. Further, prices for fed cattle have been reasonable through the summer—after early summer collapses—and feeding costs have been declining. Also, margins for retailers have been very strong and some of the strongest in recent years.”

Tyson plans to rebuild the Holcombe plant at the same location, though it’s way too early to know when a revamped facility will be up and running.

In the meantime, Steve Stouffer, group president of Tyson Fresh Meats explains, “We’re taking steps to move production to alternative sites. Tyson Foods has built in some redundancy to handle situations like these and we will use other plants within our network to help keep our supply chain full.”

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The same uncertainty about supply disruptions that cratered cattle futures helped boost Wholesale beef values Monday, with good demand and heavy offerings, according to the Agricultural Marketing Service.

Choice boxed beef cutout value was $2.25 higher Monday afternoon at $218.62/cwt. Select was $3.98 higher at $197.79.

Negotiated cash fed cattle traded ended up $1 lower last week in the Southern Plains and Nebraska at $110/cwt. and $113, respectively. Live prices were steady to $2 lower in the western Corn Belt at $113-$115. Dressed sales were steady to $5 lower in Nebraska at $180-$185. Prices in the western Corn Belt were $4-$5 lower at $180-$181.

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Grain futures collapsed on Monday, too, beneath the weight of bearish USDA numbers the latest World Agricultural Supply and Demand Estimates and the August Crop Production report.

Revised acreage estimate for corn of 90.01 million acres was above the top end of the range for pre-report estimates and only 1.84% less than the estimate in the June Acreage report. Estimated yield of 169.5 bu./acre was 3.5 bu. more than the previous estimate. Corn production of 13.9 billion bu. is 26 million bu. more than the July estimate and just 500 million bu. less than last year. The season average corn price received by producers was lowered 10¢ to $3.60/bu.

Corn futures closed mostly 25¢ limit-lower through Jul ’20, then 7¢ to 15¢ lower through Jul ’21; mostly 3¢ lower the rest of the way.

Even though acreage numbers were positive, Soybean futures closed 10¢ to 12¢ lower through May ‘20, and then mostly 4¢ to 9¢ lower.

U.S. soybean acres were estimated at 76.70 million acres, which was 3.3 million acres fewer than in the June Acreage report and below pre-report estimates. Estimated yield of 48.5 bu./acre would be 3.1 bu./acre less than last year. U.S. soybean production was forecast at 3.68 billion bu., which would be 165 million bu. less than the previous estimate and 860 million bu. less than the previous year. The U.S. soybean average price for 2019-20 was unchanged at $8.40/bu. Forecast prices for soybean meal and oil were also unchanged at $300/short ton and 29.5¢/lb., respectively.

Incidentally, Agricultural producers reported they were unable to plant crops on more than 19.4 million acres, according to the most recent USDA data. This marks the most prevented plant acres reported since USDA’s Farm Service Agency began releasing the report in 2007 and 17.49 million acres more than reported at this time last year.

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Major U.S. financial indices closed sharply lower Monday, driven by declining bond yields and rising geopolitical uncertainty with the protests in Hong Kong.

The Dow Jones Industrial Average closed 391 points lower. The S&P 500 closed 35 points lower. The NASDAQ was down 95 points.