Calves and feeder cattle continued to trend higher last week, helped along by stronger cash fed cattle prices.
Nationwide, steers and heifers sold steady to $3/cwt. higher, according to the Agricultural Marketing Service (AMS).
“Every year, producers try to get long or short yearling cattle marketed before the Labor Day holiday and this year has been no exception,” say AMS analysts. “The first full week in August brought around 11% more cattle to the sale barns than a year ago.”
Except for 15¢ higher in Nov, Feeder Cattle futures closed an average of 98¢ lower week to week on Friday (25¢ to $1.95 lower).
“Extremely unique market dynamics are driving the cattle market to price levels that may not have been imaginable just a few weeks ago,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “The feeder cattle market is being driven by expectations for higher finished cattle prices. The February live cattle contract price increased $7 since July 1, which would be nearly a $100 per head increase in value for a 1,400 lb. animal. The increase in the live cattle contract has pushed the August feeder cattle contract $10 higher, which would be an $80 per head value increase.”
The CME Feeder Cattle Index was $3.34 higher week to week on Thursday at $141.92.
Griffith notes that cattle feeders must expect fed cattle prices to continue increasing, given the current buy-sell margin of locking in a price currently and how much more they’re willing to pay for feeder cattle.
At the same time, AMS analysts point out deepening drought in some parts of the country is beginning to force some management and marketing decisions.
For the week of Aug. 4, the U.S. Drought Monitor classified 54.01% of the continental United States from abnormally dry to extreme drought. That’s the fourth consecutive week that more than half of the nation was enduring designated dryness or drought conditions, according to AMS.
“One region of note would be in Wyoming and creeping into Northwest Nebraska. Some producers in those areas are contemplating early weaning of calves,” AMS analysts explain.
The most recent USDA Crop Progress report pegged 30% of the nation’s pasture and range condition as Poor or Very Poor, which was 17% more than the same time last year.
Cash Fed Cattle Trade Higher
Negotiated cash fed cattle trade for the week was mainly $3 higher through Friday afternoon at $103/cwt. on a live basis and at $163 in the beef.
Through Thursday, the five-area direct weighted average steer price was $101.28 on a live basis, which was $2.79 higher than the previous week. The average dressed steer price was $163.19, which was $3.17 higher than the prior week. Compared to the same time last year, though, those prices were $12.83 less and $19.38 less, respectively.
According to AMS, slaughter cattle numbers remain tighter in the Northern Plains, while supplies continue to outpace packing capacity in the Southern Plains.
Griffith points out it has been a year since the Tyson packing plant fire in Kansas roiled markets.
“The market has essentially been in a funk for 52 weeks, due to the fire and coronavirus. The market appears to be trying to shake all the tough times over the last year, but there are more rivers to forge before anyone is comfortable,” Griffith says.
Except for 47¢ and 57¢ higher in Apr and away Dec, Live Cattle futures closed an average of 55¢ lower week to week on Friday (2¢ to $1.47 lower).
“Sideways action at the CME could be viewed as a friendly,” say AMS analysts. The largest single-day move this week on any of the six front Cattle contracts was $1.33 lower.”
Wholesale Values Bump Higher
Wholesale beef prices continued to edge higher from the recent bottom.
Choice boxed beef cutout value was $2.21 higher week to week on Friday at $205.47/cwt. Select was $2.86 higher at $192.75.
Estimated cattle slaughter for the week ending Aug. 8 was 633,000 head, which would be 5,000 head fewer than the previous week and 14,000 head fewer than the same week last year.
Year to date, total cattle slaughter was 1.04 million less (-5.2%) than the same period last year at 19.05 million head.
Estimated beef production for the week was 527.2 million lbs., which was 3.1 million lbs. less than the previous week, but 5.6 million lbs. more than the prior year.
Year to date, estimated beef production of 15.74 billion lbs. is 405 million lbs. less (-2.5%) than last year.
“Beef supply conditions have stabilized, albeit at higher levels of production year over year in the second half of 2020. Beef demand will be critical in determining overall beef prices and, subsequently, cattle prices going forward,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments.
The advance estimate for U.S. real GDP in the second quarter was a staggering -32.9%, according to the U.S. Bureau of Economic Analysis. The nation’s unemployment rate in July was 10.2%.
“In the short run, willingness to purchase beef will depend on the relative prices of other products, particularly substitute products that may be consumed in place of a particular product,” Peel says. “For specific beef products, this is a complicated consideration, including other proteins such as pork and poultry, as well as the multitude of other beef products that may be chosen by consumers. In periods of low income, beef consumers may trade down from high cost beef products to lower valued products. Food service demand, which remains diminished, will emphasize this impact going forward.”
Friday to Friday Change
Weekly Auction Receipts
CME Feeder Index
|CME Feeder Index*||Aug. 6||Change|
*Thursday-to Thursday for CME Feeder Index
Cash Stocker and Feeder
|600-700 lbs.||$156.39||+ $2.81|
|700-800 lbs.||$146.59||+ $1.36|
|800-900 lbs.||$144.49||+ $3.63|
|500-600 lbs.||$158.38||+ $4.16|
|600-700 lbs.||$149.82||+ $1.72|
|700-800 lbs.||$142.57||+ $2.37|
|400-500 lbs.||$149.64||+ $0.82|
|500-600 lbs.||$40.90||+ $1.00|
|600-700 lbs.||$133.11||– $1.15|
(AMS National Weekly Feeder & Stocker Cattle Summary)
Wholesale Beef Value
|Boxed Beef (p.m.)||Aug. 7 ($/cwt)||Change|
|Ch-Se Spread||$12.72||– $0.65|
|Feeder Cattle||Aug. 7||Change|
|Jan ’21||$144.200||– $0.400|
|Live Cattle||Aug. 7||Change|
|Feb ’21||$113.800||– $0.750|
|Mar ’21||$3.326||– $0.056|
|Oil CME-WTI||Aug. 7||Change|
|Jan ’21||$42.48||+ $0.99|
|Equity Indexes||Aug. 7||Change|
|Dow Industrial Average||27433.48||+1005.16|
|S&P 500||3271.12||+ 80.16|
|Dollar (DXY)||93.46||– 0.07|