Daily Market Highlights

Cattle Current Daily—May 8, 2020

Cattle futures took another strong step higher on Thursday, lifting front months to the highest levels since early-to-mid March. Ongoing indications that the bottom in packing capacity and beef production may have been established continued to provide support, as did the week’s mostly stronger cash prices.

Except for 17¢ lower in the back contract, Live Cattle futures closed an average of $3.46 higher ($2.07 higher toward the back to $4.50 higher in the front three contracts). That’s an average of $6.39 higher in the last two sessions.

Feeder Cattle futures closed an average of $4.49 higher ($3.45 higher at the back to $6.17 higher in spot May). That’s an average increase of $8.82 in the last two sessions.

Wholesale beef values continued higher Thursday, but at a more moderate pace. Choice boxed beef cutout value was $9.36 higher Thursday afternoon at a $458.54/cwt. Select was $16.61 higher at $448.57.

The average dressed steer weight for the week ending Apr. 25 was 891 lbs., which was 2 lbs. heavier than the previous week and 37 lbs. heavier than the previous year, according to USDA’s weekly Actual Slaughter Under Federal Inspection report. The average dressed heifer weight of 818 lbs. was 5 lbs. lighter week to week but 24 lbs. heavier year over year. Fed cattle slaughter of 350,563 head was 161,914 head fewer (-31.59%). Beef production of 381.1 million lbs. was 131.7 million lbs. less (-25.68%).

Corn futures closed 2¢ to 4¢ higher through Mar ’21 and then unchanged to 1¢ higher.

Soybean futures closed 7¢ to 11¢ higher through Jan ’21 and then fractionally higher to 1¢ higher.

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Major U.S. financial indices closed higher Thursday, led by tech stocks.

The Dow Jones Industrial Average closed 211 points higher. The S&P 500 closed 32 points higher. The NASDAQ closed 125 points higher.

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As scarcer beef supplies spawn more retail and food service outlets to limit customer purchases, some consumers wonder why the U.S. continues to export beef. Similarly, as cattle prices sag and run opposite of wholesale beef values, some producers question why the U.S. continues to import beef.

“Closing off or limiting beef exports does not necessarily mean greater amounts of beef in U.S. retail grocery stores, nor does limiting imports mean greater cattle prices,” says Brenda Boetel, livestock economist at the University of Wisconsin-River Falls. “The reason is because beef exported is not the same as beef imported. Even with beef production down, the importance of keeping export markets (and import markets) open is vital to the long- term health of the cattle industry.”

More specifically, in the latest issue of In the Cattle Markets, Boetel explains the mix of U.S. beef exports add value to domestic cattle prices as international customers place a higher value on some beef products than U.S. consumers. As mentioned in Wednesday’s Cattle Current, beef export value per head of fed slaughter was $308.21 in March, according to  the most recent data released by USDA and compiled by the U.S. Meat Export Federation. For the first quarter, per-head export value was $317.06.

Likewise, importing beef–mostly lean trim–helps bolster U.S. ground beef demand and keep it more price competitive than using higher value parts of the domestic carcasses.

“Ground beef in the U.S. is typically a combination of two different products: 50% lean trimmings from grain fed cattle and 90% lean trimmings from grass fed cattle or cull cows. These two products are blended together to provide lean ground beef options for restaurants and retail grocery stores. Without these lean ground beef options, many consumers would likely turn to other leaner protein products,” Boetel says.

Cattle Current Daily—May 8, 2020 2020-05-07T21:42:06-05:00

Cattle Current Daily—May 7, 2020

Negotiated cash fed cattle prices bounced higher in some areas Wednesday, although the wide spread continues.

Live prices in the Southern Plains were mostly $5 higher than the previous week at mainly $110/cwt.

Dressed sales in the western Corn Belt were mainly $20-$30 higher than the previous week at mostly $180.

Prices in Nebraska were mostly steady at $95 on a live basis and at mostly $150 in the beef.

Cattle feeders offered 5,119 head in the weekly Fed Cattle Exchange auction on Wednesday. Of those, 679 head sold for a weighted average price of $95.05/cwt.; all from the Southern Plains and for delivery at 1-17 days.

Higher cash prices and growing optimism about packing capacity moving beyond an established low point lifted Cattle futures mostly limit higher on Wednesday.

Live Cattle futures closed an average of $2.93 higher, limit up through the front six contracts.

Feeder Cattle futures closed from an average of $4.33 higher, limit up $4.50 in the front five contracts.

Wholesale beef values took yet another step higher. Choice boxed beef cutout value was $20.19 higher Wednesday afternoon at a $449.18/cwt. Select was $21.25 higher at $431.96.

Corn futures closed 1¢ to 3¢ lower.

Soybean futures closed mostly 7¢ to 10¢ lower.

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Major U.S. financial indices closed mainly lower Wednesday, except for tech stocks, as more data quantifies the labor misery dealt by the pandemic.

Private sector employment decreased by 20.24 million jobs from March to April, according to the April ADP National Employment Report® (NER).

“Job losses of this scale are unprecedented. The total number of job losses for the month of April alone was more than double the total jobs lost during the Great Recession,” says Ahu Yildirmaz, co-head of the ADP Research Institute.  “Additionally, it is important to note that the report is based on the total number of payroll records for employees who were active on a company’s payroll through the 12th of the month.” As such, she explains the latest NER doesn’t reflect the full impact of COVID-19 on the overall employment situation.

The Dow Jones Industrial Average closed 218 points lower. The S&P 500 closed 20 points lower. The NASDAQ closed 45 points higher.

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U.S. beef exports were record high for the first quarter, according to data released by USDA and compiled by the U.S. Meat Export Federation (USMEF).

U.S. beef exports in March totaled 115,308 metric tons (mt), up 7% from a year earlier. Value was 4% more at $702.2 million. Japan, South Korea, Mexico, Canada and Taiwan drove export growth for the month.

First-quarter beef exports climbed 9% from a year earlier to 334,703 mt; valued at $2.06 billion, which was 8% higher.

“March export results were very solid, especially given the COVID-19 related headwinds facing customers in many international markets at that time,” says USMEF President and CEO Dan Halstrom. “Stay-at-home orders created enormous challenges for many countries’ foodservice sectors, several key currencies slumped against the U.S. dollar and logistical obstacles surfaced in some key markets; yet demand for U.S. red meat proved very resilient…The U.S. meat industry has spent decades developing a loyal and well-informed customer base throughout the world, which has embraced the quality and value delivered by U.S. red meat. Their commitment to U.S. products during this crisis is much-appreciated.”

Beef export value per head of fed slaughter was $308.21 in March, down 8% from the very high March 2019 average. For the first quarter, per-head export value increased 2% to $317.06.

U.S. pork export volume of 291,459 mt was 38% more than a year earlier. Pork export value was 47% more at $764.2 million. Through the first quarter, pork exports increased 40% from a year ago to 838,118 mt, valued at $2.23 billion (up 52%).

USMEF points out some recent events, including temporary closures of several U.S. processing plants, are not reflected in the first quarter export data. Halstrom cautions that April and May exports could slow as a result, but his outlook for 2020 remains positive.

Cattle Current Daily—May 7, 2020 2020-05-06T20:14:39-05:00

Cattle Current Daily—May 6, 2020

The week’s negotiated cash fed cattle trade was off to a slow start through Tuesday afternoon. Although too few transactions to trend, AMS reported sales in Nebraska and the western Corn Belt across a broad range at $95/cwt. on a live basis and at $145-$170 in the beef.

On the other end of the trade, wholesale beef values continued higher with temporary beef scarcity seen in reports of some retailers limiting beef purchases per customer and some burger joints plumb running out.

Choice boxed beef cutout value was $18.77 higher Tuesday afternoon at a $428.82/cwt. Select was $33.88 higher at $410.54.

Cattle futures closed narrowly mixed Tuesday, as traders try to make sense of all the above, relative to a few weeks and a few months down the road.

After $1.60 lower in spot Jun, Live Cattle futures closed from 65¢ lower to 50¢ higher.

Feeder Cattle futures closed from an average of 36¢ lower to an average of 21¢ higher.  

Corn futures closed fractionally higher to 2¢ higher through the front four contracts and then fractionally lower to 1¢ lower.

Soybean futures closed fractionally higher to 4¢ higher through the front five contracts and then 2¢ to 6¢ lower.

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Major U.S. financial indices extended gains Tuesday, with investors apparently more optimistic about the U.S. economy starting to crank up again, albeit ever so slowly.

Crude oil prices also suggested more confidence with West Texas Intermediate on the CME closing $2.76 to $4.17 higher through the front six contracts.

The Dow Jones Industrial Average closed 133 points higher. The S&P 500 closed 25 points higher. The NASDAQ closed 98 points higher.

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U.S. restaurant chain transactions for the week ending Apr. 26 improved for the second consecutive week with total industry customer transactions down 32% year over year, compared to a 36% decline the prior week. That’s according to The NPD Group (NPD).

More specifically, transactions at quick service restaurants that week were 30% less year over year. Full service restaurant transactions were 71% less, improving by 1% week to week, according to 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. 

“Government relief payments and overall improvement in consumer spending most likely contributed to the easing of transaction declines,” says David Portalatin, NPD food industry advisor. “Looking to next week, we might anticipate the upward trend continuing as restaurants begin to reopen their dining rooms.”

Georgia’s 20,000 restaurants were allowed to reopen on April 27.  From May 1-3, several other states followed suit, most notably Texas with almost 60,000 restaurants.  Over the next two weeks there are over 300,000 restaurants that may potentially reopen for on-premise dining.  These openings will improve industry volume but won’t return it to full capacity. In Texas, for example, reopening comes with strict social distancing guidelines, and dining rooms may not exceed 25% of their standard occupancy. 

“As states and localities reopen, many restaurants are ready to open on the first day, while others need more time to prepare. Still unknown is the number of restaurants that may never reopen,” says Portalatin. “Other considerations are that many consumers may be cautious about returning to dining rooms; and a significant percentage of the population would remain in quarantine even if restrictions were lifted.”

Cattle Current Daily—May 6, 2020 2020-05-05T20:30:51-05:00

Cattle Current Daily—May 5, 2020

Cattle futures continued to edge higher to start the week, but with plenty of continued uncertainty surrounding supply chain disruptions (see below).

Live Cattle futures closed an average of 65¢ higher.

Feeder Cattle futures closed an average of 98¢ higher, (70¢ higher at the back to $1.32 higher).

Wholesale beef values took another giant leap higher Monday as buyers chase decreased supplies.

Choice boxed beef cutout value was $32.60 higher Monday afternoon at a $410.05/cwt. Select was $19.53 higher at $376.66. That made the Choice-Select spread $33.39.

Corn futures closed mostly 2¢ to 3¢ lower.

Soybean futures closed 11¢ to 13¢ lower through near Sep and then 4¢ to 9¢ lower.

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Major U.S. financial indices bounced back from early follow-through pressure Monday, buoyed by tech stocks.

The Dow Jones Industrial Average closed 26 points higher. The S&P 500 closed 12 points higher. The NASDAQ closed 105 points higher.

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Cattle futures in recent days suggest increasing confidence that last week’s Executive Order mandating meat and processing facilities remain open will help normalize supply chain, eventually.

In the meantime, cattle slaughter and beef production continue significantly lower year over year, while the backlog of fed cattle continues to build.

Estimated cattle slaughter for the week ending May 2 was 425,000 head, which was 38% less year over year, according to Derrell Peel, Extension livestock marketing specialist at Oklahoma State University. For the past four weeks, he says total cattle slaughter averaged 26.4% less than the same weeks last year–down 689,000 head, or a little more than a week’s worth of cattle slaughter.

Similarly, in his weekly market comments, Peel explains beef production was down 35% last week, compared to a year earlier; an average of 25% less for the past four weeks. Relative to the first 14 weeks of the year, before current COVID-19 production declines began, he says the combined 520 million lbs. of reduced beef production over the last four weeks equates to losing a week’s worth of production.

“Given when packing plant workers began to be impacted and the additional attention now focused on protecting worker health, it is likely that we are currently at or very near the worst point of packing plant disruptions,” Peel says. “However, it is unclear how fast plants will resume production levels in the coming weeks. It is likely that the effective capacity will be reduced permanently or certainly for the foreseeable future because of the safety changes needed at packing plants. The impacts on cattle markets will linger for many weeks before backlogs are cleaned up and markets are current again.”

For consumers, Peel emphasizes there is no shortage of beef in the country. Any shortages encountered will be temporary.

Cattle Current Daily—May 5, 2020 2020-05-04T22:21:56-05:00

Cattle Current Daily—May 4, 2020

Negotiated cash fed cattle prices ended the week across a wide range but generally steady with the previous week with live prices at $95-$100/cwt. in the Texas Panhandle, $95-$105 in Kansas and Nebraska and at $93-$100 in the western Corn Belt. Dressed sales were at $150-$160.

Through Thursday, the negotiated five-area daily weighted average direct live steer price was $1.03 less than the previous week at $95.92/cwt. It was 23¢ more in the beef at $154.50.

Cattle futures firmed further, supported by the week’s Executive Order to keep packing and processing plants open, sky-high boxed beef prices and some states beginning to ease stay-at-home orders. Resurgent Lean Hog futures also provided support.

Live Cattle futures closed an average of 80¢ higher, (45¢ to $1.50 higher).

Except for $1.30 lower in Mar, Feeder Cattle futures closed an average of 70¢ higher, (5¢ higher at the back to $1.15 higher toward the front).

Demand continues to run well ahead of wholesale beef supplies.

Choice boxed beef cutout value was $9.89 higher Friday afternoon at a $377.45/cwt. Select was $6.97 higher at $357.13.

Corn futures closed from 1¢ lower to 2¢ higher.

Soybean futures closed 2¢ to 5¢ lower through Nov ’20 and then mostly 1¢ to 2¢ higher.

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Major U.S. financial indices closed sharply lower Friday, extending losses from the previous session. Pressure included renewed political sabre rattling between the U.S. and China.

The Dow Jones Industrial Average closed 622 points lower. The S&P 500 closed 81 points lower. The NASDAQ closed 284 points lower.

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“With boxed beef prices running wildly to records every day and live cattle prices moving lower, there is a lot of talk about packers colluding to take advantage of the market situation,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “It is nearly impossible for any outsider to know if collusion is occurring or not. However, it is easy for an outsider to see the current situation and know he or she would be trying to slaughter as many cattle as possible and market beef at record prices to fulfill the objective of being profitable. Slaughter facilities have a number of reasons to stay open and operate at as full of a capacity as possible; making money is not the least of these. Slaughter facilities are paying double time and giving bonuses to entice employees to work and produce meat while also attempting to address health concerns of employees. This is a delicate balancing act on the part of slaughter facilities, but this gets overlooked because boxed beef prices are 75% higher than where they were at the end of January. Is the packer in the wrong? Maybe or maybe not, but there must be at least two entities willing to bid the price this high.”

In the meantime, various groups are lobbying for all kinds of changes, everything from the trite and WTO-illegal mandatory Country of Origin Labeling, to calls for legislation mandating some level of weekly cash fed cattle trade to improve market transparency and price discovery. That’s while USDA investigations continue into market reactions following last summer’s beef packing plant fire in Kansas, and current market reaction in the wake of beef packing capacity reduced by COVID-19.

“Never before has the industry faced so many challenges that threaten the operation of multiple processing facilities simultaneously, along with massive disruptions to the food service supply chain severely limiting nearly half of the total beef market,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments.

Peel points out current industry structure and business practices evolved in response to economic forces driving the beef industry to be ever more competitive.

“The cost efficiencies of large-scale cattle feeding and meatpacking operations are undeniable. Some current proposals will add cost and risk to the industry and will further increase the differences between cattle and wholesale beef prices,” Peel explains. “A less efficient, higher cost beef industry will ultimately result in higher beef prices for consumers and make beef a less competitive protein industry. Simultaneously, cattle producers will face lower cattle prices and, as the industry downsizes, more will be forced out of the industry.”

Peel isn’t advocating for or against any particular change or policy prescription.

“My job is to make sure that the industry understands the implications and consequences of alternatives that are being considered,” Peel says. “Some of the proposals being promoted today will have unintended consequences that are negative for the entire industry. This industry consists of many diverse sectors and perspectives. In the end, the entire cattle and beef industry will thrive or not as a single industry. Be careful what you ask for.”

Cattle Current Daily—May 4, 2020 2020-05-02T18:48:48-05:00

Cattle Current Daily—May 1, 2020

Although too few to trend, negotiated cash fed cattle trade continued Thursday across a broad range, according to the Agricultural Marketing Service (AMS). Live sales were reported in the Southern Plains at $95-$96/cwt., $95-$100 in the western Corn Belt and $93.75-$95.00 in Nebraska. Dressed prices ranged from $147 to $160.

Live Cattle futures continued to firm, though, perhaps with hopes that capacity returns to beef packing sooner rather than later (see below), given the previous day’s Executive Order mandating that meat packing and processing facilities remain open.

Other than $4.40 higher in expiring spot Apr, Live Cattle futures closed an average of 70¢ higher, (15¢ higher at the back to $1.67 higher in new spot Jun), except for 2¢ lower in away Apr.

Feeder Cattle futures closed an average of $1.56 lower, (37¢ lower in expiring spot Apr to $1.95 lower). 

Wholesale beef values climbed by double digits again.

Choice boxed beef cutout value was $10.18 higher Thursday afternoon at a $367.56/cwt. Select was $10.25 higher at $350.16.

The average dressed steer weight for the week ending Apr. 18 was 889 lbs., which was 3 lbs. heavier than the previous week and 32 lbs. heavier than the previous year, according to USDA’s Actual Slaughter Under Federal Inspection report. The average dressed heifer weight was 823 lbs., which was 3 lbs. less than the prior week but 24 lbs. heavier than the same week a year earlier.

Beef production for the week was 395.6 million lbs., which was 36 million lbs. fewer than the prior week (-8.34%) and 118 million lbs. less (-22.98%) than the same week last year.

Weekly export sales added support to grain markets Thursday. Net corn export sales were 87% more than the previous week, led by Mexico, and 19% more than the prior four-week average, according to the U.S. Weekly Export Salesreport from UADA’s Foreign Agricultural Service. Net soybean export sales were noticeably higher than the previous week, led by China, and noticeably higher than the prior four-week average.

Corn futures closed 4¢ to 7¢ higher in the front three contracts and then 2¢ to 3¢ higher.

Soybean futures closed 12¢ to 18¢ higher through Jan ’21 and then mostly 5¢ to 8¢ higher.

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Major U.S. financial indices closed lower Thursday, with another round of massive initial jobless claims of 3.84 million, according to the U.S. Labor Department.

“Looking ahead, as workplaces reopen, we must ensure that individuals transition from unemployment back into the workforce,” says Secretary of Labor Eugene Scalia. “Key to this process will be workplace safety.”

Although still mired at the bottom, crude oil prices continued recent nascent recovery Thursday. The front six contracts for West Texas Intermediate futures on the CME were up $1.71 to $3.78. Spot Jun closed at $18.84, which was $6.50 higher than on Wednesday.

The Dow Jones Industrial Average closed 288 points lower. The S&P 500 closed 27 points lower. The NASDAQ closed 25 points lower.

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Depending on how fast packing plant production normalizes, there could be in excess of 1 million head of long-fed cattle come June 1, according to recent calculations by agricultural economists Glynn Tonsor at Kansas State University and Lee Shulz at Iowa State University.

For purposes here, long-fed refers to cattle on feed for more than 120 days and more than 150 days–the carryover of market-ready fed cattle.

“Cattle on feed for over 120 days and over 150 days is useful when evaluating the currentness of cattle supplies in feedlots,” Tonsor and Shulz explain. “Currentness refers to whether cattle are being marketed on a timely basis, or kept on feed longer. Keeping marketings current is generally positive to market prices. Currentness has implications, some short-run and some longer lasting, for price rebounds. Too many producers being forced to delay feedlot marketings can quickly cause an oversupply of both market-ready cattle and over-fed, over-finished cattle and lead to an eventual market purge of heavy cattle at some point, which can drive prices down. It is important to remember that overall feedlot numbers are not burdensome; it is the supply of market-ready or near market-ready cattle that is burdensome relative to current slaughter capacity.”

In, Fed Cattle Flows: Demonstrative Scenario Examples, Tonsor and Shulz estimate the number of cattle on feed for more than 120 days and more than 150 days, as of Apr. 1, utilizing monthly Cattle on Feed reports, which account for feedlots with 1,000 head or more capacity.

Next they present four possible scenarios, which consider various levels of reduced estimated weekly fed cattle slaughter through May 30, relative to last year, due to current disruptions wrought by COVID-19. Then they calculate accompanying fed cattle overflow for May 1 and June 1, relative to each scenario.

For recent slaughter perspective, they say cattle slaughter for the week of Apr. 25 was estimated at 469,000 head. That was down 33,000 head fewer (6.6% less) than the previous week and 173,000 head fewer (26.9% less) than the same week a year earlier. The USDA chart below offers a similar perspective in terms of weekly beef production.

Keeping the outline described above in mind, Tonsor and Shulz estimate fed cattle carryover May 1 ranges from 485,000 to 510,000 head. For June 1, it’s 1.07 million to 1.34 million head.

Rather than necessarily projecting specific numbers, this work from Tonsor and Schulz provides valuable context and insight to how quickly and far behind marketing currentness can become.

“We have no concrete ability to project fed cattle marketings given challenges presented by COVID-19,” say Tonsor and Shulz. “It should immediately be appreciated that any positive developments that lead to increased and persistent operation of packing plants will reduce cattle carryover, backup, and related impacts―which is a scenario the entire industry would welcome!”

Cattle Current Daily—May 1, 2020 2020-04-30T19:54:19-05:00

Cattle Current Daily—Apr. 30, 2020

Negotiated cash fed cattle trade so far this week is steady to mixed with live sales in the Texas Panhandle at $95-$100/cwt. and at $90-$100 in Kansas, where there were too few transactions to trend. Up north, live prices are steady in Nebraska at $95 and up to $5 higher in the western Corn Belt at mostly $100. Dressed sales are steady to $10 lower in Nebraska at $150; steady in the western Corn Belt at $150-$160.

Cattle feeders offered 4,484 head in the weekly Fed Cattle Exchange auction, selling 818 head. Of those, 174 head sold for a weighted average price of $100/cwt. for delivery at 1-9 days. Another 644 head for delivery at 1-17 days sold for a weighted average price of $96.57.

President Trump signed an executive order late Tuesday, using the Defense Production Act, to mandate that meat packing and processing facilities remain open during the COVID-19 pandemic.

“To ensure worker safety, these processors will continue to follow the latest guidelines from the Centers for Disease Control and Prevention and the Occupational Safety and Health Administration,” according to a White House Fact Sheet (see below).

Cattle futures closed narrowly mixed Wednesday, as traders weigh short-term pressure, due to current disruptions in packing and processing, against a hopeful surge in demand as the economy reopens.

Live Cattle futures closed 42¢ lower to 25¢ higher, with sluggish trade.

Except for an average of 31¢ lower in three contracts, Feeder Cattle futures closed an average of 24¢ higher, in extremely light trade.

Wholesale beef values continued to climb Wednesday.

Choice boxed beef cutout value was $26.56 higher Wednesday afternoon at a $357.38/cwt. Select was $19.03 higher at $339.91.

Corn futures closed mostly 3¢ to 4¢ higher.

Soybean futures closed mostly 5¢ to 8¢ higher.

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Major U.S. financial indices closed higher Wednesday amid reports of promising test results from a potential coronavirus treatment drug. Although expected, support also included the Federal Reserve leaving interest rates unchanged.

“The ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term. In light of these developments, the Committee decided to maintain the target range for the federal funds rate at 0.0% to 0.25%,” according to a statement from the Fed. “The Committee expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.”

Gains came despite early quantification of domestic economic damage wrought by COVID-19.

Real gross domestic product (GDP) decreased at an annual rate of 4.8% in the first quarter of 2020, according to the advance estimate released by the Bureau of Economic Analysis. In the fourth quarter of 2019, real GDP increased 2.1%.

The Dow Jones Industrial Average closed 532 points higher. The S&P 500 closed 76 points higher. The NASDAQ closed 206 points higher.

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The Executive Order signed by President Trump, mandating meat packing and processing facilities remain open during the COVID-19 pandemic should offer some stability to beef markets. It also bolsters hopes the number of delayed fed cattle marketings can ease sooner rather than later, realizing the timeline is likely counted in months rather than weeks.

“Under the order, the Department of Agriculture is directed to ensure America’s meat and poultry processors continue operations uninterrupted to the maximum extent possible,” according to a White House Fact Sheet.

“Our nation’s meat and poultry processing facilities play an integral role in the continuity of our food supply chain,” says U.S. Agriculture Secretary, Sonny Perdue. “Maintaining the health and safety of these heroic employees in order to ensure that these critical facilities can continue operating is paramount. I also want to thank the companies who are doing their best to keep their workforce safe as well as keeping our food supply sustained. USDA will continue to work with its partners across the federal government to ensure employee safety to maintain this essential industry.”

Estimated daily hog and cattle slaughter are both down about 40% compared to this time last year, according to Jayson Lusk, noted Purdue University food and agricultural economist, in his blog.

“Plant closures and slow-downs from COVID-19 have reached such levels that it will be impossible for consumers not to notice effects on meat prices or availability in the coming weeks,” Lusk says.

“While there are currently no widespread shortages of beef, we are seeing supply chain disruptions because of plant closures and reductions in the processing speed at many, if not most, beef processing plants in the United States. We thank President Trump for his recognition of the problem and the action he has taken today to begin correcting it,” says Colin Woodall chief executive officer of the National Cattlemen’s Beef Association. “American consumers rely on a safe, steady supply of food, and President Trump understands the importance of keeping cattle and beef moving to ensure agriculture continues to operate at a time when the nation needs it most.”

Likewise, Robert McKnight, Jr., president of the Texas and Southwestern Cattle Raisers Association explains the Executive Order should go a long way toward easing consumer fear, as well as preventing additional economic strain on the cattle producers who supply the beef processors.   

“The executive order will help ensure a steady, reliable supply of high-quality U.S. protein-not only for customers in the United States, but across the globe,” says Dan Halstrom, president and CEO of the U.S. Meat Export Federation (USMEF). “The U.S. meat industry is already taking extraordinary steps to ensure worker safety, including COVID-19 testing, temperature checks, use of personal protective equipment and social distancing of employees. But further action is needed to stabilize our meat supply chain, and USMEF greatly appreciates the Trump administration’s prioritization of safe and consistent meat production and processing during this difficult time.”

Under the Executive Order and the authority of the Defense Production Act, USDA will work with meat processing to affirm they will operate in accordance with the CDC and OSHA guidance, and then work with state and local officials to ensure that these plants are allowed to operate, according to Secretary Perdue.

“We understand and appreciate the difficulties facing processing plant workers during this crisis, says Woodall. “Processing plant employees play a role that is critical to the security of this nation and America’s cattle producers offer their sincere gratitude for the work they are doing to keep food shortages from compounding the complex issues we’re facing.”

Cattle Current Daily—Apr. 30, 2020 2020-04-29T19:52:12-05:00

Cattle Current Daily—Apr. 29, 2020

Volatility in negotiated cash fed cattle trade continues so far this week. Dressed prices were at $160/cwt. in the western Corn Belt Monday, then $150 on Tuesday with too few transactions to trend. Likewise, with too few transactions to trend early dressed sales in Nebraska were at $150, compared to $150-$160 the previous week.

Cattle futures edged higher Tuesday, making for a third consecutive session of mostly higher prices, underpinned by runaway wholesale beef values, while offering a glimmer of stability.

Live Cattle futures closed an average of 45¢ higher.

Except for 77¢ lower in spot Apr, Feeder Cattle futures closed an average of 67¢ higher.

Wholesale beef values continued to shatter records Tuesday.

Choice boxed beef cutout value was $18.98 higher Tuesday afternoon at a $330.82/cwt. Select was $22.10 higher at $320.88.

According to various news reports, President Trump was close to signing an executive order, utilizing the Defense Production Act to mandate packing plants remain open, in order to protect the nation’s food supply (see below).

Other than 2¢ lower and 1¢ lower in the front two contracts, Corn futures closed mainly fractionally higher to 2¢ higher.

Soybean futures closed 1¢ to 4¢ lower through Nov ’20 and then 3¢ to 8¢ higher.

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Major U.S. financial indices softened Tuesday. Pressure appeared to include skittishness over the Fed meeting Wednesday, as well as declining consumer confidence.

The Conference Board Consumer Confidence Index® declined 31.9 points from March to April to 86.9, according to The Conference Board (TCB). Although the Present Situation Index–based on consumers’ assessment of current business and labor market conditions–declined from 166.7 to 76.4, the Expectations Index–based on consumers’ short-term outlook for income, business and labor market conditions–improved from 86.8 in March to 93.8 in April.

“The 90-point drop in the Present Situation Index, the largest on record, reflects the sharp contraction in economic activity and surge in unemployment claims brought about by the COVID-19 crisis,” explains Lynn Franco, TCB Senior Director of Economic Indicators. “Short-term expectations for the economy and labor market improved, likely prompted by the possibility that stay-at-home restrictions will loosen soon, along with a re-opening of the economy. However, consumers were less optimistic about their financial prospects and this could have repercussions for spending as the recovery takes hold.”

The Dow Jones Industrial Average closed 32 points lower. The S&P 500 closed 15 points lower. The NASDAQ closed 122 points lower.

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“In small communities around the country where we employ over 100,000 hard-working men and women, we’re being forced to shutter our doors. This means one thing–the food supply chain is vulnerable,” says John Tyson, Chairman of the Board for Tyson Foods, in a letter published as an ad in Sunday’s New York Times and other newspapers. “As pork, beef and chicken plants are being forced to close, even for short periods of time, millions of pounds of meat will disappear from the supply chain. As a result, there will be limited supply of our products available in grocery stores until we are able to reopen our facilities that are currently closed.”

The United Food and Commercial Workers International Union (UFCW) estimates 22 meat packing plants closed–including union and non-union plants–at some point in the past two months. Closures reduced pork slaughter by 25% and beef slaughter by 10%, according to the organization.

“UFCW estimates have confirmed 20 worker deaths in meatpacking and food processing. In addition, at least 5,000 meatpacking workers and 1,500 food processing workers have been directly impacted by the virus,” according to a UFCW news release published Monday. “Those directly impacted include individuals who have tested positive for COVID-19, missed work due to self-quarantine, are awaiting test results, or have been hospitalized, and/or are symptomatic.”

“Tyson and every company across this vital industry, must immediately join with UFCW in calling for federal and state elected leaders to designate these frontline workers as first responders,” said UFCW International President Marc Perrone, in a Tuesday statement. “Temporary first responder status ensures these workers have priority access to the COVID-19 testing and protective equipment they need to continue doing these essential jobs. Our federal leaders must enforce clear guidelines to ensure every employer lives up to the high safety standards these workers deserve and the American people expect.”

“We have a responsibility to feed our country. It is as essential as healthcare. This is a challenge that should not be ignored,” explained Tyson, in his letter. “Our plants must remain operational so that we can supply food to our families in America. This is a delicate balance because Tyson Foods places team member safety as our top priority…The government bodies at the national, state, county and city levels must unite in a comprehensive, thoughtful and productive way to allow our team members to work in safety without fear, panic or worry.”

Cattle Current Daily—Apr. 29, 2020 2020-04-28T19:49:06-05:00

Cattle Current Daily—Apr. 28, 2020

Cattle futures started the week with modest gains, amid sluggish trade and supported by outside markets, as well as Friday’s bullish Cattle on Feed report.

Except for 17¢ lower in spot Apr, Live Cattle futures closed an average of $1.01 higher.

Feeder Cattle futures closed an average of 67¢ higher.

Wholesale beef values continued to rocket higher with the bottleneck in packer capacity disrupting the supply chain.

Choice boxed beef cutout value was $18.47 higher Monday afternoon at a record high of $311.84/cwt. Select was $19.76 higher at $298.78.

Corn futures closed 6¢ to 10¢ lower through Mar ’21 and then mostly 3¢ to 5¢ lower.

Soybean futures closed mostly 1¢ to 3¢ lower.

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Major U.S. financial indices closed higher again on Monday, with optimism that some states are nearing at least partial reopening. Gains came despite another rugged day for oil prices: West Texas Intermediate on the CME closed $1.20 to $4.16 lower through the front six contracts; spot Jun closed at $12.78.

The Dow Jones Industrial Average closed 358 points higher. The S&P 500 closed 41 points higher. The NASDAQ closed 95 points higher.

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“There will be at least several more months of this economic environment, and it could easily stretch into 2021,” say analysts with the Livestock Marketing Information Center (LMIC), in the latest Livestock Monitor.

With volatile and uncertain markets in mind, those analysts offer four suggestions to cow-calf producers.

First, LMIC analysts say to monitor forage availability on the operation, as always, but also keep track of it locally and regionally.

“Pasture conditions this year will be critical to regional and national marketing flows of calves and yearlings,” according to LMIC analysts. “Many more animals are headed to spring and summer grazing programs than in recent years because of the drop in the number of animals being placed into feedlots, a trend that may continue for several months. Poor pasture and range conditions could cause bunches of cattle to move into the markets quickly. Further, more winter feed will be required if producers who typically don’t hold over calves into the new calendar year, did so in 2020.”

As mentioned in Cattle Current last week, the start to growing season is off to a drier start than last year. According to the U.S. Drought Monitor, 26.92% of the nation was classified from D0 (abnormally dry) to D4 (exceptional drought), for the week of Apr. 21. That’s 14.57% more than the same week last year.

Next, LMIC analysts suggest keeping an eye on feedlot placements provided by the National Agricultural Service (NASS), in the monthly Cattle on Feed report. They explain the data provides some insight to how aggressive feedlots are replacing cattle and at what weights. Conversely, it offers a notion of the number of cattle left to be placed.

Third, monitor feedstuff availability and prices, especially corn.

“Be aware of trends in soybean meal and in hay prices. The two major drivers of calf and yearling prices are fed animal prices and the cost of gain in a feedlot,” LMIC analysts explain. “Critical will be the number of corn acres planted in the Midwestern states. Beginning with planting season, the markets will focus on spring and early summer growing conditions. Low feedstuff costs can become a supportive market factor for late summer and early fall yearling and calf prices. Drought will do the opposite.”

Finally, they say to pay attention to the dairy business. One option available to hard-pressed producers in that sector is cow culling, which could pressure prices further, depending on the level and timing.

“Prepare for price volatility,” say LMIC analysts. “As conditions change, be ready to adjust marketing plans. It is especially important to communicate with family, partners, and financial institutions.”

Cattle Current Daily—Apr. 28, 2020 2020-04-27T20:51:26-05:00

Cattle Current Daily—Apr. 27, 2020

Reduced beef packing production, due to COVID-19, continues to boost uncertainty and wreak havoc on market fundamentals as cattle feeders compete for slaughter access. Consider last week’s fluctuating cash prices for fed cattle.

Through Friday afternoon, negotiated cash fed cattle trade for the week was $5-$10 lower on a live basis in the Southern Plains at $100/cwt. in Kansas and $95-$100 in the Texas Panhandle. It was up to $10 lower in Nebraska and the western Corn Belt at $95. Dressed trade was from $8 lower to $10 higher at mostly $160, compared to the previous week’s light test.

For all of the gyrations, five-area daily weighted average direct negotiated prices through Thursday were mainly steady week to week with live steers at $96.95 and dressed steers at $154.27.

So far, the packing bottleneck appears nowhere near as dire as that faced by pork producers in 1998, when the fat hog price plummeted to about $8/cwt. toward the end of the year, due to sudden and significantly reduced packing capacity. But, it’s understandable why some are recalling the memory.

Wholesale beef values are running the opposite direction, fueled by declining supplies and what seems to be at least constant demand.

Choice boxed beef cutout value was $9.08 higher Friday afternoon at a record high of $293.37/cwt. Select was $6.13 higher at $279.02.

Cattle futures mainly consolidated and hovered, other than front-month Live Cattle.

Except for 97¢ and 30¢ lower in the front two contracts, and 10¢ lower in away Apr, Live Cattle futures closed an average of 43¢ higher.

Feeder Cattle futures closed an average of 47¢ higher.

Logic suggests the market should view Friday’s monthly Cattle on Feed report as bullish to at least neutral, given the plunge in placements and spike in marketings (see below). That may not be the case, though, as it also underscores how many more cattle than normal need to be placed at some point.

Corn futures closed mostly 1¢ to 3¢ lower.

Soybean futures closed mostly 7¢ to 10¢ lower.

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Major U.S. financial indices closed higher Friday, as crude oil prices continued to maintain stability.

The Dow Jones Industrial Average closed 260 points higher. The S&P 500 closed 38 points higher. The NASDAQ closed 139 points higher.

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Even fewer cattle were placed and even more cattle were marketed in March than expected, according to the monthly Cattle on Feed report issued Friday.

Between depressed prices keeping more cattle outside of feedlots and the slower turnover in feedyards, plenty of folks suspected feedlot placements would be significantly fewer year over year. In fact, the 1.56 million head placed in feedlots with 1,000 head or more capacity was 22.69% less (457,000 head fewer). That was the least for the month since the data series began in 1996, according to AMS. The decline was about 4.8% more than average analyst estimates ahead of the report.

In terms of placement weights, 34.04% went on feed weighing 699 lbs. or less; 52.15% weighing 700-899 lbs. and 13.81% weighing 900 lbs. or more.

Marketings in March of 2.01 million head were 13.11% more (+233,000 head) than the previous year. That was the second most for the month since the data series began. Heading into the report, analysts expected, on average, marketings to increase 12.3%.

Cattle on feed Apr. 1 of 11.30 million head were 5.49% less (656,000 head fewer) than the previous year. That was about 0.7% less than pre-report estimates.

Cattle Current Daily—Apr. 27, 2020 2020-04-26T15:46:01-05:00

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