Weekly Market Highlights

Calf and feeder cattle prices diverged last week as wide temperature swings become the seasonal norm, adding cattle stress.

“Calves are split into two groups: the long-time weaned calves with vaccination programs selling mostly steady to firm with some sales up to $5/cwt. higher,” explain analysts with the Agricultural Marketing Service (AMS). “The other side of the coin are the un-weaned calves, fleshy bawlers in many cases, reported trading $3-$8 lower or with a sharply lower undertone. Discounts on these un-weaned calves will more than likely increase as we head into fall or until we get a good hard freeze.”

“Calf prices seasonally soften in the fall with the calf run, but the feeder cattle market has done very little to support calf prices,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “Based on Tennessee weekly auction price averages, a 525-lb. steer was worth $727 per head while the same weight heifer was worth $643 per head this week. These are not highly profitable prices that make a producer want to purchase bred heifers or keep back more heifers for breeding. Nor are these prices low enough to result in cow culling, because a 525-lb. steer this time last year was valued about $20 less than this week’s price and few producers culled very hard a year ago.”

Long yearlings coming off grass continued to command the most buyer attention, according to AMS, selling steady to $5 higher at mostly 850-1,000 lbs., with instances of $8 higher.

Feeder Cattle futures closed an average of $1.53 higher week to week on Friday (15¢ higher at the back to $2.25 higher).

Looking further ahead, USDA’s Economic Research Service (ERS) left projected feeder cattle prices unchanged from the previous month—Livestock, Dairy and Poultry Outlook (LDPO)–as higher feed costs and the slower expected pace of marketing outweigh declining supplies.

The average feeder steer price (basis Oklahoma City) is projected at $140/cwt. in the third and fourth quarters for an annual average of $135.70. The projected feeder steer price is $131 for the first quarter of next year, $134 for the second quarter and at $137 for the 2021 average.

“The result of greater placements in second-half 2020 without increased marketings in the second half will likely keep cattle in feedlots above year-ago levels through the remainder of 2020,” say ERS analysts. “Because of this, anticipated feeder cattle supplies will diminish in 2021. However, the increase in fed cattle prices will likely offset higher corn prices forecast for next year.”

Week to week on Friday, Corn futures closed an average of 7¢ higher through the front six contracts. That’s an average of 18¢ higher in the last two weeks.

Fed Cattle Prices Increase

Negotiated cash fed cattle trade ended the week $4-$5 higher on a dressed basis in Nebraska at $165/cwt. and $2-$3 higher in the western Corn Belt at $163. On a live basis, prices were $1.50-$2.00 higher in the Southern Plains at $103.00-$103.50, $2.50 higher in Nebraska at $103.50 and $2-$4 higher in the western Corn Belt at $104-$105.

Live Cattle futures closed an average of $1.47 higher week to week on Friday ($1.15 to $1.95 higher).

“Cattle feeders will be looking for the finished cattle market to slowly gain some steam heading toward the holiday marketing timeframe, but this will be a slow process, as prices are expected to be stagnant the next couple of weeks,” Griffith says.

For broader perspective, in the latest LDPO, ERS projects the average five-area direct Choice fed steer price at $101/cwt. for the third quarter, $104 for the fourth quarter and at $107.30 for the annual average, the same as the previous month.

“The reduction in slaughter capacity in the second quarter continues to show up in the year-over-year higher number of cattle on feed over 150 days (although diminishing since June) and in the carcass weights of steers and heifers,” say ERS analysts. “The improved pace of slaughter, combined with an ample supply of fed cattle at heavier weights, led to higher expected beef production in third-quarter 2020 relative to 2019, which is likely putting pressure on cattle prices.”

Heading into 2021, however, ERS forecast average Choice steer prices $2 higher than the previous month’s estimate at $107 in the first and second quarters with an annual average price of $112.

That’s based on expectations that a larger proportion of available feeder cattle supplies available July 1 were placed on feed, which will limit supplies available for placement in the first half of next year.

“This pulls feedlot marketings, and consequently steer and heifer slaughter, forward from the latter quarters of 2021,” say ERS analysts. “With fewer steers and heifers in the slaughter mix and higher forecast feed costs affecting the length of time on feed, carcass weight gains next year will be limited.”

In the meantime, wholesale beef values continued their seasonal decline.

Choice boxed beef cutout value was $4.25 lower week to week on Friday at $215.64/cwt. Select was $3.16 lower at $203.94.

“The main determinant of how fed cattle prices move will be associated with consumers’ willingness to pay for beef moving forward,” Griffith explains. “Has the pandemic changed consumption patterns? It is doubtful that it has, but discretionary spending may continue to be altered.”

Friday to Friday Change

Weekly Auction Receipts

CME Feeder Index

*Thursday-to Thursday for CME Feeder Index

Cash Stocker and Feeder

North Central

South Central

Southeast

(AMS National Weekly Feeder & Stocker Cattle Summary)

Wholesale Beef Value

Futures

Equities

Nationwide, steers and heifers sold from $2/cwt. lower to $2 higher during the holiday-shortened week, according to the Agricultural Marketing Service (AMS).

“Bunched-up yearlings that have been on summer grazing programs and forced off grass due to drought, especially in the Western regions of the U.S., have dampened feeder cattle prices (e.g., 700-to 800-pound steers). That may spill back into the calf market (e.g., 500-to 600-pound steers),” say analysts with the Livestock Marketing Information Center (LMIC), in the most recent Livestock Monitor.

As for calves, Andrew P. Griffith, agricultural economist at the University of Tennessee points out both the increased volume of fresh-weaned calves and the associated health risk will likely pressure prices.

“The large temperature swings that are typical of late September and October tend to result in increased health issues with highly stressed animals, which means buyers are not willing to bid those animals higher,” Griffith explains, in his weekly market comments.“This means there is likely value in weaning and preconditioning the spring calf crop before marketing them.” He notes Tennessee prices last week suggested an $8-$10/cwt. advantage for weaned calves versus non-weaned peers. Weight gain and cost of gain during weaning and preconditioning typically determine whether that price difference offers producers opportunity.

Cattle futures gained week to week, with support from resurgent Lean Hog futures, which climbed higher after a wild boar carcass in Germany tested positive for African Swine Fever, prompting South Korea to ban German pork imports.

Feeder Cattle futures closed an average of $1.63 higher week to week on Friday (97¢ to $2.35 higher).

Fed Cattle Prices Weaker

Negotiated cash fed cattle prices were mainly $2-$3 lower on a live basis at $101/cwt. in the Southern Plains ($102 in the Texas Panhandle Friday) and Nebraska and at $100-$101 in the western Corn Belt, according to the Agricultural Marketing Service. Dressed trade was $2-3 lower at $160-$161.

“The market has the potential to move as high as $115/cwt., but it will take a few months to get there,” Griffith says.

USDA’s Economic Research Service (ERS) pegged the average fed steer price (five-area direct) at $101/cwt. on a live basis for the third quarter this year, followed by an average of $104 in the fourth quarter and $107 in the first quarter of 2021. In the latest World Agricultural Supply and Demand Estimates (WASDE), ERS increased the forecast annual price next year by $2 to $112.

The monthly five-area direct weighted average fed steer price in August was $104.60/cwt., which was $8.03 higher than the previous month, but $4.78 lower than the same time last year. The average dressed steer price of $167.82 was $10.50 higher than the previous month, but $7.24 less than the previous year.

Live Cattle futures closed an average of $1.47 higher week to week on Friday (37¢ higher at the back to $1.97 higher).

Futures gains came in the face of the outlook for stronger grain prices (see below).

Wholesale Beef Prices Soften

Wholesale beef values continued their seasonal decline last week.

Choice boxed beef cutout value was $5.96 lower week to week on Friday at $219.89/cwt. Select was $2.20 lower at $207.10.

“Boxed beef prices will not find much support until end-of-the-year holiday purchasing begins,” Griffith says. “The seasonal pressure in the beef market is not expected to influence cattle prices as negatively as is typical due to the strong margins already present in the beef packing industry.”

Estimated total cattle slaughter for the holiday-shortened week ending Sept. 12 was 59,000 head fewer than the previous week at 574,000; 62,000 head fewer than the same week last year. USDA estimates year-to-date cattle slaughter at 22.2 million head, which is 1.06 million head fewer (-4.6%) than a year earlier. Estimated beef production for the week of 479.7 million lbs. was 47.6 million lbs. less than the prior week. Year-to-date beef production of 18.37 billion lbs. is 356.6 million lbs. less (-1.9%) than the same time last year.

Net beef export sales of 15,500 metric tons (2020) for the week ending Sept. 3 were 37% more than the previous week and 14% more than the prior four-week average, according to the weekly U.S. Export Sales report from USDA’s Foreign Agricultural Service. Increases were primarily for South Korea, Japan, Mexico, China and Hong Kong.

Grain Prices Strengthen

Improving exports added support to corn and soybean prices in recent weeks. Those prices likely will receive even more support from the latest Crop Production report from the National Agricultural Statistics Service (NASS).

Corn production for grain was projected 2% less at 14.9 billion bu. That’s 378 million bu. less than the previous estimate, based on reducing harvested corn acres by 550,000 acres, due to the late-summer derecho. Estimated production would still be 9% more than last year.

Although 3.3 bu./acre less than the previous moth’s projection, forecast yield of 178.5 bu./harvested acre would be record large and 11.1 bu./acre more than last year. That’s based on conditions as of Sept. 1

With a smaller crop more than offsetting increased beginning stocks–mostly due to lower estimated exports for 2019-20–the September WASDE reduced projected ending stocks by 253 million bu. and increased the season-average corn price by 40¢ to $3.50/bu.

As for soybeans, production for beans is forecast at 4.31 billion bu., down 3% from the previous forecast, but up 21% percent from last year, according to the Crop Production report. Expected average yield is a record high 51.9 bu./harvested acre, down 1.4 bu. from the previous forecast but 4.5 bu. more than in 2019. Area harvested for beans in the United States is forecast at 83.0 million acres, unchanged from the previous forecast and 11% more than last year.

WASDE forecasts the U.S. season-average soybean price at $9.25/bu., up 90¢ cents from last month. The soybean meal price is projected at $315 per short ton, up $25 dollars. The soybean oil price forecast is 32.0¢/lb., up 2¢.

Friday to Friday Change

Weekly Auction Receipts

CME Feeder Index

*Thursday-to Thursday for CME Feeder Index

Cash Stocker and Feeder

North Central

South Central

Southeast

(AMS National Weekly Feeder & Stocker Cattle Summary)

Wholesale Beef Value

Futures

Equities

Softer cash fed cattle prices, seasonally weakening wholesale beef values and a break in equity markets later in the week all added bearishness to Cattle futures for most of the week. Calves and feeder cattle traded mixed but followed suit overall.

Steers and heifers sold $1-$5/cwt. lower, according to the Agricultural Marketing Service (AMS).

Except for $1.55 higher in Aug, Feeder Cattle futures closed an average of $1.05 lower week to week on Friday (40¢ lower at the back to $2.37 lower in spot Sep).

“It is evident the calf and feeder cattle market has softened the past couple of weeks which seems rather early,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “The summer feeder cattle market generally holds strength into the middle of September while the calf market does not begin to come under severe pressure until October. However, factors beyond the control of cattle producers are putting pressure on the market.”

Drought is part of the story. Griffith points out some form of drought covers more than 85% of the Western United States; severe drought or worse over 50% of the region. Similarly, he says drought covers 77% of the High Plains; severe or worse in 31% of the region.

“The dry conditions led to many producers marketing calves early this year, whether that be from summer grazing programs or having to wean calves early,” Griffith explains. “The evidence of these animals moving early was seen in the August cattle on feed report. July placements were up 11% compared to last year with most of that increase coming from the lighter weight categories.”

Recently updated five-year price projections from the Food and Agricultural Policy Institute (FAPRI) at the University of Missouri peg feeder steer prices (600-650 lbs., Oklahoma City) for this year at $144.46/cwt., $150.54 next year and rising to $179.03 in 2025.

Fed Cattle Prices Droop

Negotiated cash fed cattle prices were $2-$3 less than the previous week in the Southern Plains and Nebraska at $102-$103/cwt. Live trade was steady to $3 lower in the western Corn Belt at $103-$104. Dressed sales were $3-$5 lower at $162-$164.

Through Thursday, the average five-area direct weighted average fed steer price was $103.18/cwt. on a live basis, which was $1.94 less than the previous week. The average dressed steer price of $163.11 was $3.41 less than the previous week.

“Late summer and early fall are consistently a tough time period for cattle exiting the feedlot, as beef demand softens and so does demand for finished cattle,” Griffith says. “This soft demand will persist for several weeks, but it is hard to imagine cattle prices re-testing the lows they have already experienced earlier in the summer. The one thing that should support finished cattle prices is the hole that was created by reduced placements into feedlots during March and April. Many of the animals that would have been placed in March and April would be coming off feed now, but the delay in placing those cattle should result in fewer cattle being marketed the next several weeks.”

Live Cattle futures closed mixed, from an average of 26¢ lower to an average of 68¢ higher week to week on Friday.

Estimated cattle slaughter for the week ending Sept. 5 was 633,000 head, which was 21,000 head fewer than the previous week but 62,000 head more than the same week a year earlier. Beef production for the week of 527.3 million lbs. was 17.3 million lbs. less than the previous week.

FAPRI projects the five-area direct average fed steer price at $113.15/cwt. next year, compared to an estimated $109.84 this year. After 2021, projected prices increase steadily from $119.94 in 2022 to $130.91 in 2025.

Year to date, estimated total cattle slaughter of 21.63 million head is 998,000 head fewer (-4.4%) than the same time last year. Beef production year to date of 17.89 billion lbs. is 320.6 million lbs. less (-1.8%) than the same time last year.

Wholesale Beef Values Decline

Choice boxed beef cutout value was $3.55 lower week to week on Friday at $225.85/cwt. Select was $5.56 lower at $209.30.

“Given that Labor Day purchases are behind the market, wholesale beef prices are remaining fairly strong,” Griffith says. “The lower fed cattle prices and the strong boxed beef prices are continuing to offer strong margins for packers who still hold most of the leverage in the marketplace. The expectation is for beef prices to start softening as summer ends and fall begins, but that has not been the case thus far.”

According to Griffith, loin and rib prices continue on par with a year a year earlier, as do prices for most end cuts.

“The trim market is the one running into some weakness, as 50% lean beef is down more than 50% compared to year-ago prices,” Griffith says. “This is somewhat surprising, given that the ground beef market has been on a tear through the pandemic and that 90% lean beef is at year-ago price levels. The expectation is for beef to soften moving through September and October, but softening prices will not take all the profits out of the business.”

Friday to Friday Change

Weekly Auction Receipts

CME Feeder Index

*Thursday-to Thursday for CME Feeder Index

Cash Stocker and Feeder

North Central

South Central

Southeast

(AMS National Weekly Feeder & Stocker Cattle Summary)

Wholesale Beef Value

Futures

Equities

More feedlot placements in July than expected and expectations for wholesale beef values to decline seasonally set the stage for lower Cattle futures last week, pressuring cash fed cattle prices, as well as calves and feeders.

Nationwide, steers and heifers sold steady to $4/cwt. lower, according to the Agricultural Marketing Service (AMS).

Feeder Cattle futures closed an average of $4.34 lower week to week on Friday ($3.07 lower at the back to $5.10 lower toward the front).

“The feeder cattle market has been on a tear since the second week of April, when the market lows were set during the peak of the coronavirus pandemic,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “Since April, the fall feeder cattle futures contracts have increased about $30/cwt. to their recent highs. However, the market has taken a little breather the past couple of weeks as Feeder Cattle futures prices lost approximately $6. This price movement provides some semblance of normalcy as it relates to supply and demand of feeder cattle. It would appear the market is attempting to find the longer-term supply and demand of feeder cattle compared to the short-run shocks that seem to have become so common the past year.”

Given seasonal pressure and what appear to be ample calves and feeder cattle, Griffith says it will be difficult for prices to climb beyond their recent peak for the remainder of the year.

The outlook for grain prices also applied pressure to calves and feeder cattle.

“Grain markets found support with dry weather providing the majority of the strength to the market,” AMS analysts explain. “Soybean markets were especially strong with traders growing concerned about the dry conditions across Nebraska, Iowa, and parts of Illinois. December corn retraced up to the highest prices seen in a month and a half.” 

Week to week on Friday, Corn futures closed an average of 15¢ higher through the front six contracts. Soybean futures closed an average of 43¢ higher through the front six contracts.

Fed Cattle Prices Soften

Negotiated cash fed cattle prices ended the week $1 lower in the Southern Plains at $105/cwt. on a live basis, $1.50 lower in Nebraska at $105 and $2 lower in the western Corn Belt at $104-$107. Dressed trade was $2-$3 lower at mostly $167.

Through Thursday, the five-area direct weighted average steer price was $105.12/cwt. on a live basis, which was $1.50 lower than the previous week. The weighted average dressed steer price of $166.52 was $2.59 less.

Live Cattle futures closed an average of $2.38 lower week to week on Friday ($1.35 lower at the back to $3.65 lower toward the front).

“Prices in the fed cattle market will be under pressure during September and October before demand for beef begins to pick back up leading into end of the year holidays,” Griffith says. “…the market will be steady to soft compared to simply declining in late summer and moving into the fall months. The market is not expected to go back below $100 and should be well supported at $102-$103.”

On the up side, Derrell Peel, Extension livestock marketing specialist at Oklahoma state University notes data and anecdotal indications suggest the backlog of fed cattle is rapidly diminishing and may be nearly erased. 

“Going forward, the 1 million head decrease in feedlot placements in February, March and April suggests that front-end feedlot supplies will be relatively tight at least through September,” Peel explained, in his early-week market comments.

Wholesale Values Plateau

Wholesale beef values appeared to reach their pre-Labor Day zenith, with support from post-holiday re-stocking.

Choice boxed beef cutout value was $3.46 higher week to week on Friday at $229.40/cwt. Select was $5.87 higher at $214.86.

Estimated total cattle slaughter for the week ending Aug. 29 of 654,000 head was 2,000 more than the previous week’s estimate and 1,000 head more than the same time a year earlier. Year-to-date cattle slaughter is estimated at 20.99 million head, which would be 1.06 million fewer (-4.80%) than the same time last year. Estimated beef production so far this year is 17.36 billion lbs., which is 381.2 million lbs. less (-2.1%) than last year.

Friday to Friday Change

Weekly Auction Receipts

CME Feeder Index

*Thursday-to Thursday for CME Feeder Index

Cash Stocker and Feeder

North Central

South Central

Southeast

(AMS National Weekly Feeder & Stocker Cattle Summary)

Wholesale Beef Value

Futures

Equities

Firm to higher negotiated cash fed cattle prices and blooming wholesale beef values continued to support calf and feeder cattle markets last week.

Steers and heifers sold from $1 lower to $2/cwt. higher, according to the Agricultural Marketing Service (AMS), with continued strong demand for yearlings and spring calves making their first seasonal appearance at auctions.

“There are still plenty of yearlings on offer at sales this year due to the elongation of the marketing period as producers were more inclined to wait to sell after the spring’s auction price decline,” say AMS analysts. “Breakevens on fed cattle coming out of feedyards at today’s prices are tempting producers to make another turn on feeding those yearlings.” 

Feeder Cattle futures closed an average of $1.56 lower week to week on Friday (80¢ lower at the back to $2.32 lower).

“The summer and fall feeder cattle futures contracts have been trading above the $140/cwt. mark since the middle of July with only a few instances of prices being below that level. This price level has provided some stability to the market and has provided cattle producers an opportunity to either market cattle at favorable prices or use a price risk management strategy to hedge a strong price for a future sell,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “The stronger feeder cattle prices have helped support the calf market as well.”

Feedlot Placements Up 11%

Placements in feedlots (feedlots with 1,000 head or more capacity) during July of 1.89 million head were 188,000 more (+11.03%) than a year earlier, according to the monthly Cattle on Feed report. That was significantly more than pre-report expectations of a 6% increase. In terms of placement weight, 38.83% went on feed weighing less than 699 lbs., 47.17% went on feed weighing 700-899 lbs. and 14.0% weighed more than 900 lbs.

Marketings in July of 1.99 million head were 12,000 head fewer than last year (-0.60%), about in line with average analyst estimates ahead of the report.

Total cattle on feed Aug. 1 numbered 11.28 million head, which was 172,000 head more (+1.5%) than the same time a year earlier, a little more than expectations and the largest inventory for the month since the data series began in 1996.

Fed Cattle Steady to Higher

Based on reports from the Agricultural Marketing Service, negotiated cash fed cattle prices ended the week $2 higher in the Southern Plains at $106/cwt. on a live basis, steady to 50¢higher in the Northern Plains at $106.00-$106.50 and $2 higher in the western Corn Belt at $107-$109. Dressed trade was unevenly steady at $169.

Through Thursday, the five-area direct weighted average steer price was $106.62/cwt. on a live basis, which was $2.13 more than the previous week and $2.19 less than the same time last year, keeping in mind the market was dealing with the aftermath of the Tyson plant fire in 2019. The dressed steer price of $169.11 was $1.05 higher than the prior week, but $5.91 less the same time a year earlier.

“The difference in price between the Northern and Southern Plains has been advantageous for packers in the North to procure cattle in the South and truck them a distance,” AMS analysts explain. “Typically, cattle in the South would not be grading as well as they are now, due to a lengthened feeding period.”

Live Cattle futures closed an average of $1.32 lower week to week on Friday (55¢ lower at the back to $1.80 lower in spot Aug).

Wholesale beef values continued higher, receiving lift from retail buying ahead of Labor Day.

Choice boxed beef cutout value was $11.70 higher week to week on Friday at $225.94/cwt. Select was $9.70 higher at $208.99.

“From January through the first week of April (14 weeks), Federally Inspected (FI) beef production was 6.6% higher than the same time period in 2019. The next nine weeks had year-over-year declines in beef production to the tune of 17.9%. Each of the past 10 weeks has had year-over-year increases in beef production with a total increase of 1.8% over that time period. This resulted in 2020 beef production being down 1.7% year to date,” Griffith says.

Total estimated cattle slaughter for the week ending Aug. 22 was 652,000 head, according to USDA. That was 8,000 head more than the previous week’s estimate, but 17,000 head fewer than the same week last year. Estimated beef production for the week of 542.9 million lbs. was 10.5 million lbs. more than the previous week and 7 million lbs. more than the prior year.

Total cattle slaughter of 632,968 head was 3,336 head fewer than the prior week and 13,735 fewer than the same time last year.

The average dressed steer weight of 906 lbs. was 1 lb. heavier than the previous week and 28 lbs. heavier than a year earlier. The average dressed heifer weight of 832 lbs. was 4 lbs. heavier than the previous week and 26 lbs. heavier than the prior year.

CME to Expand Price Limits

CME Group announced proposed changes to daily and expanded daily price limits for Live Cattle and Feeder Cattle futures. Pending approval by the Commodity Futures Trading Commission, daily price limits for Feeder Cattle will increase to $5/cwt. from $4.50; expanded daily price limits will increase to $7.50, from the current $6.75. For Live Cattle, the daily limit will increase to $4/cwt. from $3; the expanded limit will become $6, compared to the current $4.50. Changes are scheduled to begin Oct. 5.

Friday to Friday Change

Weekly Auction Receipts

CME Feeder Index

*Thursday-to Thursday for CME Feeder Index

Cash Stocker and Feeder

North Central

South Central

Southeast

(AMS National Weekly Feeder & Stocker Cattle Summary)

Wholesale Beef Value

Futures

Equities

Resurgent wholesale beef values and stronger negotiated cash fed cattle prices continued to support market optimism last week.

Nationwide, calves and feeders traded from $1/cwt. lower to $3 higher, according to the Agricultural Marketing Service (AMS). Those analysts note that many of the receipts in the Northern Plains were coming off summer grass, with the yearlings reported in excellent condition. 

Feeder Cattle futures closed an average of 96¢ higher week to week on Friday (27¢ higher at the back to $1.45 higher toward the front).

“Feeder cattle prices are fairly strong right now. It does not hurt to market cattle earlier than normal if a profit can be achieved, and current prices appear profitable,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in is weekly market comments. “The markets to be wary of are the calf market and the slaughter cow market. The prices for both lighter-weight calves and slaughter cows are expected to come under pressure the next few months. Prices for both classes of animals have held up well thus far, but seasonal trends will likely pressure both of them as more of these classes make their way to the market. There may be some advantages for some producers to early wean calves and market their cull slaughter cows in the near term instead of waiting until October or November.”

Nearer-term, last week’s devastating derecho—a widespread, long-lasting, straight-line wind storm—that swept across the Midwest could add pressure to calf prices from the corn side of the equation.

For instance, based on MODIS satellite imagery and Storm Prediction Center preliminary storm reports, the Iowa Department of Agriculture and Land Stewardship believes 36 counties in Iowa were hardest hit by the derecho. Within those 36 counties, the storm likely had the greatest impact on 3.57 million acres of corn and 2.5 million acres of soybeans.

Corn futures were an average of 15¢ higher through the front six contracts, week to week on Friday, recovering a little more than what was lost the previous two weeks. Part of the that was the derecho and weather outlook and part was due to ending corn stocks in the World Agricultural Supply and Demand Estimates (WASDE) coming in lower than the trade expected.

Fed Cattle Prices Up Again

Negotiated cash fed cattle prices last week were mostly $4 higher on a live basis in the Southern Plains at $104/cwt., $3 higher in the Northern Plains at $106 and $2.50-$4.00 higher in the western Corn Belt at $106.50-$107.00. Dressed trade was $2 higher in Nebraska at $165 and $2-$7 higher in the western Corn Belt at $165-$170.

Through Thursday, the five-area direct weighted average steer price was $104.49/cwt. on a live basis, which was $3.21 more than the previous week, and just 91¢ less than the prior year, keeping in mind that the Aug. 9 Tyson fire last year slammed cattle markets. In the beef, the weighted average steer price was $168.06, which was $4.87 more than the previous week, and $2.40 less than the prior year.

Live Cattle futures closed an average of $2.23 higher week to week on Friday (60¢ higher at the back to $4.80 higher in spot Aug).

USDA’s Economic Research Service (ERS) increased the expected annual fed steer price for this year 50¢ from the previous month’s projection to $107.30/cwt., in the latest WASDE. Forecast prices are $101 in the third quarter, $104 in the fourth quarter and $105 in the first two quarters next year.

Overall wholesale beef values continued to gain ground for the second consecutive week. Choice boxed beef cutout value was $8.77 higher week to week on Friday at $214.24/cwt. Select was $6.54 higher at $199.29.

“Boxed beef prices are at their highest level since the middle of June. Much of this rebound is likely due to the upcoming Labor Day holiday as many grocery stores are making their final purchases for the last grilling holiday of the year,” Griffith says. “Choice prices are only $2/cwt. lower than the same week one year ago, while Select prices are about $7 higher than the same week last year. There may be some additional Labor Day beef buying, as it is still three full weeks down the road, which provides grocery stores a little more time to get product on the shelf. The beef market will continue to be supported as grocery stores make purchases to restock the meat counter following holiday purchases.”

Estimated total cattle slaughter last week of 640,000 was 7,000 head more than the previous week’s estimate, but 13,000 fewer than the same week a year earlier. Year-to-date estimated total cattle slaughter is 5.1% less than the same period last year at 19.69 million head. Estimated year-to-date total beef production is 2.4% less at 16.27 billion lbs.

Friday to Friday Change

Weekly Auction Receipts

CME Feeder Index

*Thursday-to Thursday for CME Feeder Index

Cash Stocker and Feeder

North Central

South Central

Southeast

(AMS National Weekly Feeder & Stocker Cattle Summary)

Wholesale Beef Value

Futures

Equities

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

*Thursday-to Thursday for CME Feeder Index

Cash Stocker and Feeder

North Central

South Central

Southeast

(AMS National Weekly Feeder & Stocker Cattle Summary)

Wholesale Beef Value

Futures

Equities

Calf prices continued to move contra-seasonally last week, seeking post-COVID fundamental levels, while strong demand continued for yearlings, with more optimism for fed cattle values.

Nationwide, steers and heifers sold steady to $4/cwt. higher, with the most advance on yearlings weighing more than 800 lbs., according to the Agricultural marketing Service (AMS).

“Calf prices are holding their own, and this is most likely due to how low prices were in the spring. Thus, it is not that calf prices are strong. They are simply trying to find where they should be, given today’s market,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “This class of cattle will start to see some pressure towards the end of summer and moving into the fall months.”

As for feeder cattle, Griffith says there is plenty of market optimism, but suggests, “Producers should take advantage of the marketing opportunity being made available to them right now. If the cattle will make money with a sale today, then move them. If the cattle need a few more days of growing, then try to forward contract the cattle.”

Feeder Cattle futures closed an average of $3.34 higher week to week on Friday, supported by the outlook for favorable corn prices.

“With improving corn conditions at this time of year, yields will no doubt improve, keeping the corn market under pressure, regardless of demand,” say AMS analysts. “Big crops usually get bigger and yields will be no exception. This makes it hard to convince anyone, especially farmer-feeders, that we will have any corn production problems. Thoughts that the size of the corn crop will overshadow demand has many producers willing to walk a lot of corn to town.”

Corn crop progress is ahead of last year and the five-year average, with 72% rated in Good or Excellent condition, in the USDA Crop Progress report for the week ending July 26.

Corn futures were an average of 7¢ lower through the front six contracts, week to week on Friday.

Griffith also notes demand continues to be contra-seasonally strong for packer cows and bulls. “This is likely due to the demand for lean grinding beef that has skyrocketed during the COVID-19 pandemic as consumers are pulling ground beef off meat counter shelves rapidly,” he says.

Fed Cattle Prices Edge Higher

Negotiated cash fed cattle prices ended the week generally $1-$2 higher on a live basis at $97/cwt. in the Southern Plains, $100 in Nebraska, $98 in Colorado and steady at $101-$102 in the western Corn Belt. Dressed prices were $2 higher at $160.

Through Thursday, the average five-area direct weighted steer prices was $98.49/cwt. on a live basis, which was $1.26 more than the previous week, but $15.48 less than the same time last year. The average dressed steer price of $160.02 was $1.92 higher than the previous week, but $24.49 less than the previous year.

There are still plenty of backlogged market-ready fed cattle to work through, but it appears progress is being made, says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments.

“The calculated estimates of cattle on feed over 120 days are still very large compared to last year, but the difference has decreased by some 160,000 head since May,” Peel says, referring to the latest monthly Cattle on Feed report. “It appears that the backlog is decreasing but a sizable number of cattle remain to be cleaned up before feedlots will be current.”

Estimated total cattle slaughter for the week ending Aug. 1 was 638,000 head, which was 8,000 fewer than the previous week, but 5,000 head more than the same week last year. Year-to-date estimated total cattle slaughter of 18.4 million head is 1.02 million head fewer (-5.26%) than last year.

Live Cattle futures closed an average of $1.81 higher week to week on Friday. Along with firming wholesale beef values, support included a more positive weekly export outlook. U.S. beef export net sales for the week of July 23 totaled 29,500 metric tons (mt)—a market year high—up 89% from the previous week and up 81% from the previous four-week average. That’s according to the U.S. Export Sales report from USDA’s Foreign Agricultural Service.

AMS analysts note the weaker U.S. dollar is helping exports, with the dollar index at its lowest level in two years.

“At this point in the game, it would appear the summer low is in for finished cattle. That likely means a slow grind to higher prices, because the Labor Day holiday is the only grilling holiday remaining and December is several months down the road,” Griffith says. “It is tough to predict how strong this market will be, but there is a chance of reaching $115 in December.”

Wholesale Beef Values Firm

Choice boxed beef cutout value closed higher week to week for the second consecutive week, suggesting the ebb is established and the market will proceed along more fundamental lines.

Choice boxed beef cutout value was $1.49 higher week to week on Friday at $203.26/cwt. Select was 74¢ lower at $189.39.

“Hopefully, price levels should be attractive for retail interest and to consumers with some of the lowest beef prices seen for the month of July,” say AMS analysts. 

The average dressed steer weight the week ending July 18 of 899 lbs. was 3 lbs. less than the prior week but 33 lbs. more than the same week a year earlier, according to USDA’s Actual Slaughter Under Federal Inspection report. The average dressed heifer weight of 829 lbs. was the same as a week earlier but 34 lbs. heavier than the prior year.

“Federally inspected beef production has been above year-ago levels since the second week of June, while federally inspected cattle slaughter is down nearly 70,000 head over the same timeframe, compared to last year,” Griffith explains. “The increase in beef production stems from heavier cattle that spent more days on feed than was anticipated. However, it is not only total beef production that is being influenced by more days on feed. The increased number of days on feed is likely the reason more cattle are grading Choice.”

Friday to Friday Change

Weekly Auction Receipts

CME Feeder Index

*Thursday-to Thursday for CME Feeder Index

Cash Stocker and Feeder

North Central

South Central

Southeast

(AMS National Weekly Feeder & Stocker Cattle Summary)

Wholesale Beef Value

Futures

Equities

Recently increased feedlot turnover and the availability of grass yearlings helped lift calf and feeder cattle prices last week. Nationwide, steers and heifers sold steady to $4/cwt. higher, according to the Agricultural Marketing Service (AMS).

Feeder Cattle futures closed an average of 93¢ lower week to week on Friday (32¢ lower at the back to $1.42 lower).

“The strength that has been evident in the futures market the past couple of weeks is beginning to become evident in the cash feeder cattle and calf markets,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “The calf market price movement could be considered contra-seasonal because the calf market tends to soften during the heat of summer and moving into the fall. However, the coronavirus pandemic depressed the calf market through the spring months and the first part of summer. The calf market is now trying to realign based on fundamental supply and demand. It is going to be extremely difficult to predict where this market will go over the next several months, but there is a good possibility that fall prices will be better than the fall of 2019.”

As for feeder cattle, Griffith notes the seasonal tendency of increasing prices through the summer seems to be intact.

“The market is offering producers an opportunity to sell calves at higher prices, and there is more upside potential,” Griffith says. “However, the market is so fragile that any negative news within the beef industry, such as news of higher feed costs or something negatively associated with coronavirus, could turn the feeder cattle market on its head.”

Get through August and net feedlot returns grow significantly more positive, according to the most recent Historical and Projected Kansas Feedlot Net Returns (HPK) from Kansas State University.

Fed Cattle Prices Edge Higher

Through Thursday, the average five-area direct fed steer price was $97.23/cwt. on a live basis, which was 91¢ higher than the previous week, but $18.20 less than the same time last year.

Regionally, negotiated cash fed cattle trade for the week was generally $1-$2 higher on a live basis at $96/cwt. in the Southern Plains, $98 in the Northern Plains and $99-$100 in the western Corn Belt. Dressed trades were mostly $1 higher at $158.

Live Cattle futures closed an average of 95¢ lower week to week on Friday (12¢ lower at the back to $1.95 lower in spot Aug).

Total estimated cattle slaughter for the week ending July 25 of 646,000 head would be 4,000 head fewer than the prior week and 6,000 head fewer than the same week a year earlier, according to USDA’s Estimated Weekly Meat Production Under Federal Inspection report.  

Year to date, through June, fed cattle slaughter of 12.08 million was 772,600 head fewer (-6.01%) than the same time last year, according to the monthly USDA Livestock Slaughter report.

Boxed Beef Price Might be Established

“There is a very good chance boxed beef prices have hit their summer low,” Griffith says. “If they have hit their low, then there is a good chance they will be somewhat stagnant for a while before a slow grind higher leading up to holidays at the end of the year. How high boxed beef prices move through the end of the year may depend on how holidays are celebrated if coronavirus remains a concern.”

Choice boxed beef cutout value was $1.30 higher week to week on Friday at $201.77/cwt. Select was 32¢ higher at $190.63.

“The expectation of strong beef production through the end of the year will temper wholesale beef values to some degree, simply due to the quantity supplied to the market,” Griffith explains. “Despite this strong production, Choice boxes have the potential to move back to the $225 to $230/cwt. range as an apex before the end of the year.”

Year to date through June, beef production under federal inspection of 12.78 billion lbs. was 279.7 million lbs. less (-2.14%) than the same time last year, according to the Livestock Slaughter report.

Heavier carcass weights continue to close the gap between beef production and the number of cattle harvested.

Year to date through June, the average dressed steer weight of 897 lbs. is 33 lbs. heavier. The average dressed heifer weight of 829 lbs. is 25 lbs. heavier. Both are record high, according to AMS.

“Beef production will be higher year over year for the remainder of the year,” explained Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his early-week market comments. “This may combine with limited demand to keep wholesale beef prices under pressure going forward.

“Longer term, beef demand may be affected by the economic recession. Impacts have not been obvious thus far but unemployment is still high and some unemployment benefits will end this month. With COVID-19 far from controlled, considerable uncertainty remains regarding how school schedules, sporting activities and business travel could affect beef demand this fall.”

USDA Reports on Price Investigation

USDA released its investigation into cattle and beef price reactions to last summer’s fire at the Tyson plant in Holcombe, KS and to disruptions wrought by COVID-19.

The report—Boxed Beef & Fed Cattle Price Spread Investigation Report—details market conditions and prices before, during and after those events, although the pandemic continues.

Keep in mind this USDA investigation does not examine potential violations of the Packers and Stockyards Act. USDA continues to cooperate with the Department of Justice Antitrust Division in that agency’s current investigation.

Instead, the report provides the logic and details behind the price reactions of the two black swan events: higher wholesale beef prices and lower fed cattle prices spawned by disruption to packing capacity and by altered demand flow, in the case of the pandemic.

“Frankly speaking, the report released by USDA did not reveal anything that was not already known,” Griffith says. “It appeared to be less of an investigation and more of a simple analysis and report of the data. Something further could come of this report, but it is highly unlikely any type of investigation is going to result in findings of the packers doing something illegal. Packers were taking advantage of what the market was offering.”

Friday to Friday Change

Weekly Auction Receipts

CME Feeder Index

*Thursday-to Thursday for CME Feeder Index

Cash Stocker and Feeder

North Central

South Central

Southeast

(AMS National Weekly Feeder & Stocker Cattle Summary)

Wholesale Beef Value

Futures

Equities

Renewed optimism continued in cattle markets last week, bolstered by strong week-to-week gains in Cattle futures prices. Traders are apparently looking beyond the current backlog of fed cattle.

Calves and feeder cattle sold mixed. Steers and heifers in the South Central region traded $3-$4/cwt. higher, according to the Agricultural Marketing Service (AMS). In the North Central and Southeast regions, though, they sold from $3 lower to $1 higher.

AMS analysts note, “There was a big increase in North Central prices last week, due to some annual specials that bring high-quality, reputation, one-iron brand strings of cattle to town.” 

Feeder Cattle futures closed an average of $4.44 higher week to week on Friday ($2.95 higher to $6.95 higher in spot Aug).

“The market for heavier feeder cattle is beginning to gain some steam, which is a typical seasonal pattern,” explains Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “The August Feeder cattle contract traded to its highest level since March 4 and has gained more than $6 since the Independence Day holiday. The August Feeder Cattle contract is still $14 lower than its contract high set in early January, but it is also $26 higher than its contract low set in early April. It is probably not feasible for the market to move back above the $150 mark for the August contract, but it could still have some upside potential given its slow and steady ascent back to its current level.”

On the other hand, Griffith notes summer heat and seasonality are weighing on calf prices. “The prices will continue to be pushed lower in the fall as the run of spring born calves make their way to market,” he says.

In the latest monthly Livestock, Dairy and Poultry Outlook (LDPO), analysts with USDA’s Economic Research Service (ERS) say expected higher fed cattle slaughter and increased feedlot marketings should improve demand for feeder cattle heading into the third quarter.

ERS projects the average feeder steer price (basis Oklahoma City) at $133/cwt. in the third quarter and $131 in the fourth quarter for an annual average of $131.70. Prices are projected at $129 in the first quarter of next year and at $132 in the second.

Of course, dry conditions could have plenty to say about late-summer markets.

“For the first time this year, over 50% of the country is in some sort of drought designation,” say AMS analysts. “The last time that occurred was the week ending Sept. 18, 2018, when the country was coming off a historical drought.”

Specifically, 51.4% of the continental U.S. was designated from abnormally dry to Extreme Drought, according to the U.S. Drought Monitor for July 14. At the same time last year, it was 9.79%.

For the week ending July 12, 36% of the nation’s pasture and range was rated in Good or Excellent condition, which was 32% less than last year, according to USDA’s Crop Progress report. Conversely, 30% was rated in Poor or Very Poor condition, compared to 8% at the same time last year.

Fed Cattle Prices Firm

Negotiated cash fed cattle prices were mainly steady last week.

The weighted average five-area direct fed steer price through Thursday was $96.32/cwt. on a  live basis, which was 35¢higher than the previous week, but $16.70 less than the same week last year. The average steer price in the beef was $157.58, which was 9¢less than the previous week and $25.39 less than a year earlier.

Live Cattle futures closed an average of $1.89 higher week to week on Friday ($1.05 higher to $3.27 higher in spot Aug).

“The October Live Cattle futures contract gained $6 since the beginning of July, while the December Live Cattle contract gained about $5.50 over that same timeframe,” Griffith says. “These prices still do not put finished cattle where cattle feeders want them, but there is a lot of time between now and the fall marketing time period for cattle to keep creeping higher. Another point of optimism is the fact that current cash prices have found a steady state instead of continuing to decline. The steep decline through the spring did not bode well for summer market prices, but they are holding their ground well given seasonal pressure.”

However, ERS lowered forecast fed steer prices by $4 to $100/cwt. in the third quarter and by $3 in the fourth quarter to $103.

“Despite slaughter rates having stabilized near year-ago levels, there continues to be a large volume of market-ready cattle supplies available for slaughter,” say ERS analysts, in the LDPO. “Based on the USDA Cattle on Feed report for June, the number of cattle that have been on feed over 150 days grew to 971,000 head, or 42% more than last year. Further, wholesale beef prices declined rapidly from recent peaks to below year-ago levels, marking a sharp turnaround.”

Retail Beef Prices Still Elevated

Choice boxed beef values last week sank to the lowest levels since December of 2017, according to AMS.

Choice boxed beef cutout value was $4.03 lower week to week on Friday at $200.47/cwt. Select was $3.98 lower at $190.31.

Renewed packing capacity and cattle slaughter is behind normalizing wholesale values, while heavier carcasses are adding extra pressure.

ERS increased forecast beef production for this year by 260 million pounds, compared to the prior month, to 26.9 billion lbs., just about 1% less than last year.

At the same time, retail beef prices remain high, relative to current production, following the price surge in the wake of coronavirus disruptions.

Retail Choice beef value in June was nearly $7.56/lb.. That was a tick lower than in May but $1.05 higher than in January, according to Griffith. The all fresh retail beef price was around $7.38/lb., up 34¢ from May and $1.46 more compared to January.

“Retailers were forced to push prices higher rather rapidly in April and May due to reduced supply of beef from lower cattle slaughter,” Griffith explains. “Though prices escalated quickly at the retail level, it is doubtful they will decline as quickly. Retailers are looking to make up for the losses they likely incurred during late March and April. Therefore, it will be a long slow march through the rest of the year as retail beef prices soften. There is no guarantee the prices will be back to pre-COVID-19 levels by the end of the year.”

Friday to Friday Change

Weekly Auction Receipts

CME Feeder Index

*Thursday-to Thursday for CME Feeder Index

Cash Stocker and Feeder

North Central

South Central

Southeast

(AMS National Weekly Feeder & Stocker Cattle Summary)

Wholesale Beef Value

Futures

Equities