Weekly Market Highlights

At least shades of normalcy returned to calf and feeder cattle markets last week, with auction receipts of 219,200 head being more year over year for the first time in 10 weeks, according to the Agricultural Marketing Service (AMS).

Renewed volume, relative to the continued packing bottleneck and slowed feedlot turnover, went a long ways in explaining some weaker auction prices week to week, despite gains in Cattle futures.

Nationwide, steers and heifers sold steady to $4 /cwt. lower, according to AMS. The exception was $2-$4 higher for heifers weighing 700-900 lbs. in the North Central and South Central regions.

Not counting recently minted away-Apr, Feeder Cattle futures closed an average of 68¢ higher week to week on Friday (10¢ to $1.25 higher), except for $1.62 lower in Mar.

Given ongoing market uncertainty, Andrew P. Griffith, agricultural economist at the University of Tennessee says he continues to receive questions from producers about whether to sell calves now or wait.

“There are very few, if any, acceptable outcomes, given the current environment,” Griffith says, in his weekly market comments. “Determining the true value of the cattle is nearly impossible in this environment, given the risk that the buyer is taking. That is not to say the current marketing environment is any riskier than it was in January, but buyers’ perceptions of risk have changed, which means they are not going to be as willing to bid up for cattle. Not knowing when anything will improve may mean that many producers just have to take their losses today and hope the next round is more profitable.”

It’s also worth noting that cattle are starting to move to market from wheat pasture.

Fed Prices Battle for Steady

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 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.

Live Cattle futures closed an average of $2.79 higher week to week on Friday ($1.55 higher at the back to $4.62 higher in spot Jun), not counting newly minted away Oct.

“Cash cattle continue to trade with a strong basis compared to the June Live Cattle futures price, which is trading near $87-$88, which means hedged cattle can still make some money for the feedlot operator,” Griffith says. “The rather large basis points to a disconnect between the cash and futures market at this time, but that disconnect is largely the risk of the unknown. The one known fact is that cattle feeders still have cattle that need to be marketed and they can only slow growth so much.”

Support for the fed cattle market last week included the Executive Order signed by President Trump mandating that meat packing and processing facilities remain open. At the time, estimated daily hog and cattle slaughter were both down about 40% compared to the same 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 to begin correcting it,” says Colin Woodall chief executive officer of the National Cattlemen’s Beef Association.

“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 U.S. Agriculture Secretary Sonny Perdue.

Of course, there can be a Grand Canyon’s worth of difference between packing and processing plants remaining open and operating at capacity. Until something approaching normalcy returns to beef packing, risk premiums will likely continued to be applied to fed cattle prices and paid for available beef.

“Estimated slaughter under federal inspection for the week was reported at a miniscule 425,000 head, which was 40,000 head less than last week and 248,000 head less than last year,” say AMS analysts. “During this week, fed steer and heifer slaughter was estimated some days at 50,000 head, which would be almost half of what can be done when plants are running at full capacity.”

Choice boxed beef cutout value was $84.08 higher week to week (+28.7%) on Friday at $377.45/cwt. Select was $78.11 higher (+28.0%) at $357.13.

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

Increased auction volume returned this week amid narrowly mixed trade as markets tried to sort through slowing beef production and volatile outside markets, in search of when and how the U.S. economy can reopen.

Nationwide, calves and feeders sold from $2 lower to $2/cwt. higher, according to the Agricultural Marketing Service (AMS).

“Grazing calves have started to see their demand wane this week as turnout dates have come and gone. Bigger feeders seem to have stabilized and found some footing,” say AMS analysts.

Except for 27¢ higher in spot Apr and 47¢ lower in Aug, Feeder Cattle futures closed an average of $1.35 lower week to week on Friday (32¢ lower at the back to $2.15 lower).

“The soft prices (calves and feeders) primarily stem from the cattle market assembly line backing up or bottlenecking at the packer level,” explains Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “The reduced slaughter levels are backing finished cattle up in the feedlot, which means there is limited pen space for new feeder cattle placements. Since there is little space to put feeder cattle, feedlot managers are not willing to bid very hard to pull those cattle out of the country and into their yards because then they have more mouths to feed and nowhere to go with the animals that need to be leaving. This also puts a strain on the calf market because some stocker and backgrounding operations are at capacity and not able to move their heavy feeders to the feedlot.”

Normally, the monthly Cattle on Feed report published Friday would be hailed as more than bullish with 22.69% fewer placements in March than the previous year, 13.11% more marketings in the month and an on-feed inventory Apr. 1 (11.20 million head) 5.49% less. Of course, the notion of normal left a ways back.

Fed Prices Crumble

The choke point of packing capacity grew last week as COVID-19 sidelined workers. According to AMS, the past three weeks of cattle slaughter account for three of the four sparsest weeks since mandatory price reporting began in 2001.

USDA estimated last week’s cattle slaughter at 469,000 head, which would be 6.6% less than the prior week and 26.9% less than the same week a year ago. Year to date, estimated cattle slaughter is 1.9% less than in 2019 at 10.16 million head.

“A backlog of fed cattle at this level will be impossible to eliminate in a timely fashion, resulting in fed supplies remaining above slaughter capacity for several months,” say AMS analysts. “Anecdotes of fed cattle being pulled ahead for slaughter by two to three weeks–around the beginning to middle of February– have now disintegrated to being two to three weeks behind. That is what happens when daily slaughter for the five-day workweek averages 85,000 head compared to 120,000 head.”

“There are no indications this situation will get better moving through the month of May, but the hope is the economy begins to reopen and health is not an issue,” Griffith says. “These are the only two things this market cares about right now. If these two things do not change, then prices will remain depressed, as will cattle feeders’ attitudes. If the economy does start to reopen, then it will be hitting grilling season square in the nose, which should provide support for finished cattle.”

Negotiated cash fed cattle trade for the week through Friday afternoon 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.

Live Cattle futures closed an average of $2.83 lower week to week on Friday ($1.50 lower at the back to $9.67 lower in spot Apr).

On the other side of the trade, wholesale beef values screamed higher as buyers scrambled for declining supplies on the cusp of grilling season.

Choice boxed beef cutout value was $54.38 higher week to week on Friday at $293.37/cwt. Select was $51.82 higher at $279.02.

“At this time, plant reductions are mostly resulting in some product disruptions and perhaps temporary shortages of fresh meat,” explained Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly comments. “Barring a catastrophic combination of plant closures or extended periods of plant disruptions, significant shortages of meat are not expected. However, the combination of processing disruptions and the continuing challenges of supply chain disruptions means that consumers will likely experience limited meat supplies and selection in grocery stores in the coming weeks.”

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 traded steady to higher last week as a sense of stability returned to Cattle futures and as hopes grew for the U.S. economy opening sooner rather than later as COVID-19 appeared to plateau.

Steers and heifers traded $5-$10/cwt. higher in the South Central region, according to the Agricultural Marketing Service (AMS). Prices were steady to $4 higher in the North Central and Southeast regions.

Auction receipts continued lighter than normal as some producers hold cattle, hoping markets will improve. Auction volume was less than 100,000 head for the third time in five weeks, according to AMS–about 18.5% less than in 2019 so far this year.

Except for unchanged in spot Apr and 47¢ lower in Aug, Feeder Cattle futures closed an average of $1.14 higher on Friday, compared to the previous Thursday (57¢ to $2.10 higher).

“The recommendation for most producers has been to hold on to cattle and try to lengthen the potential marketing window, and that recommendation holds today,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “Unfortunately, there are producers that can no longer hold on to cattle, which limits their flexibility. One alternative some producers could consider is shipping cattle to the feedlot. This is a potential solution for producers who can afford to hold on to cattle and do not need the cash flow to sustain business operations. Several producers will need the cash flow, given they have been purchasing feed all winter, and fertilizer bills will be due sooner rather than later. These are the producers who are in the toughest position because there are very few alternatives. Many producers will simply have to make the best decision for today, given the available information. There is no reason to look back a month from now and wish the decision was different.”

Packing Constraints Pressure Fed Cattle Prices

Slowing beef packing and processing, due to COVID-19, pressured negotiated cash fed cattle prices amid a light test.

Live trades were mostly steady in the Southern Plains at mainly $105/cwt. They were steady to $11 lower in the north at $94-$105 in Nebraska and at $95-$105 in the western Corn Belt. Dressed sales were steady to $18 lower at $155-$165 in Nebraska and at $150-$168 in the western Corn Belt.

“The reduction in production means there is not as much need for cash cattle purchases to fill in production holes throughout the week, as many of these facilities are trying to make sure they get all of their contracted cattle processed with a limited labor resource in many instances,” Griffith explains. “What few cattle trade in the cash market will mean lower prices week-over-week, which will play into lower formula prices as well.”

“This predicament could result in a situation not previously seen in the beef industry,” explained Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his Monday market comments. At the time, JBS had closed its Greeley, CO plant for two weeks, according to the Colorado governor’s office.

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

Negotiated cash trade for the week was slightly less than 10,000 head (noon Friday), according to AMS. Those analysts say that would be the sparsest volume since mandatory livestock reporting began in 2001.

Except for 52¢ and 42¢ lower in Oct and Dec, Live Cattle futures closed an average of 90¢ higher from the previous Thursday through Friday (22¢ to $1.92 higher).

Between slower production and anemic returns, feedlot placements are likely to be lower year over year for the next several months, perhaps significantly lower. David Anderson, Extension livestock economist with Texas A&M University provided his outlook for the next Cattle on Feed report, in a webinar hosted by the Texas and Southwestern Cattle Raisers Association Friday afternoon. He sees March placements 20% less than the previous year, March marketings up near 13% and the Apr. 1 cattle on feed inventory being 5% less.

“One of the key factors moving forward will be pasture and range conditions,” say analysts with the Livestock Marketing Information Center, in the latest Livestock Monitor. “Good forage conditions will allow cattle to gain weight outside the feedlot and buy time, which at this point looks like a pivotal hedge/risk management option. If drought becomes an issue, it will force placements into feedlots even if economic conditions for feeding animals is weak. Cattle feeding returns are expected to be negative until fall 2020. Producers selling feeder animals in a drought market will likely face prices sharply below a year ago.”           

On the other side of the equation, reduced production from supply chain disruptions continues to lift wholesale beef values.

Choice boxed beef cutout value was $15.06 higher week to week on Friday at $238.99/cwt. Select was $18.87 higher at $227.20.

“From a consumer perspective, there is concern about meat availability at the local grocery store, while slaughter facilities are trying to manage around employee health and the agricultural producers who are supplying live animals to the facility. When slaughter levels are reduced then animals will start backing up in the feedlot or finishing barn,” says Griffith. “This means cattle feeders and hog finishers have to decide what to do with these animals. Most cattle feeders will feed cattle to heavier weights until they can physically move them to the slaughter facility. This means pen space is not opening up, which backs up feeder cattle and calves.”

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

Auction receipts continued lighter last week as sellers of calves and feeder cattle sort their options amid bearish COVID-19 markets.

Feeder steers and heifers sold $3-$7/cwt. lower, according to the Agricultural Marketing Service (AMS).

Even though equity markets surged higher on increasing optimism about COVID-19 reaching a peak in this country, helping to drag Cattle futures higher, it had an overanxious, unrealistic feel.

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

Andrew P. Griffith, agricultural economist at the University of Tennessee emphasizes and illustrates COVID-19 market volatility, in his weekly market comments.

“In three weeks, the price of the May Feeder Cattle contract declined from $135 to less than $110/cwt. It then took just five days for the contract price to jump back over $130. The sudden increase in price was then followed by eight days of struggling prices that actually saw some contracts trade below $105 at the first of this week,” Griffith explains. “The market price will likely continue this rollercoaster ride, but it will not be a fun one for most participants. The plan for most producers should be to remain calm and keep doing what is being done. There is no reason to have any kneejerk reactions at this time.”

Fed Cattle Prices Sag

Negotiated cash fed cattle prices ended up $7 lower on a live basis last week at $105/cwt. in the Southern Plains, according to AMS. Dressed trade in Nebraska and the western Corn Belt was $7-$12 lower at $168. A light test was noted in all regions.

“Last week’s negotiated purchases of slaughter steers and heifers nationwide (28,923 head) was the second smallest volume reported since mandatory reporting started in 2001,” say AMS analysts.“Slaughter levels were lower than in recent weeks as several facilities have been affected by worker attendance. Cattle slaughter under federal inspection was estimated at 536,000 head for the week, 90,000 less than the previous week and 103,000 less than a year ago.”

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

“The strong basis continues to provide cattle feeders incentive to market cattle in a timely manner,” Griffith says, noting the wide discount of futures to cash.

“It looks like cattle trading this week will be trading at least $10/cwt. higher than the April Live Cattle contract, while the June Live Cattle contract is trading $9 lower than the April price. It is hard to imagine live cattle cash trade dipping into the mid to upper $80 area in the next two months, but that is what the futures market is predicting,” Griffith says.

Boxed Beef prices continued to decline. Choice boxed beef cutout value was $6.51 lower week to week on Friday at $223.93/cwt. Select was $7.51 lower at $208.33.

“One would expect these prices to continue to moderate in the coming weeks as the beef supply chain continues to adjust to the current situation of more retail beef buying and less food service purchases,” Griffith says. “However, the change in consumption patterns of retail versus food service is not the only hurdle to overcome. There have been several packing facilities that are reducing production or shutting down due to the coronavirus, which will most likely reduce production.”

Smithfield Foods, Inc. announced Sunday that its Sioux Falls, SD facility–one of the largest pork processing facilities in the U.S.–will remain closed until further notice.

“The closure of this facility, combined with a growing list of other protein plants that have shuttered across our industry, is pushing our country perilously close to the edge in terms of our meat supply,” explained Kenneth M. Sullivan, Smithfield president and CEO.

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

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

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

Seemingly bottomless Cattle futures prices cast a pall over cash markets last week, amid continued COVID-19 uncertainty.

Feeder steers sold $5-$17/cwt. lower in the North Central and South Central areas, according to the Agricultural Marketing Service (AMS). Feeder heifers in the same regions traded $7-$15 lower. Calves in the Southeast sold from steady to $5 higher early in the week to steady to $5 lower later in the week.

“Prices are tracking $10-$20 lower than a year ago,” say AMS analysts. “Demand was reported as moderate to good in auctions this week as buyers did want to procure cattle, just at lower price levels. Some backgrounders who sold yearlings did not recoup the first cost of those calves.”

Feeder Cattle futures closed an average of $11.36 lower week to week on Friday, ($7.45 lower at the back to $12.82 lower toward the front).

“Maybe even worse than the fact that prices (cash) are struggling is the extreme volatility in the futures market,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “In the past six weeks, the April Feeder Cattle futures contract traded from $142/cwt. down to $108. It then traded back over $130 before going back under $110. Such volatility makes it difficult for anyone to physically want to trade cattle.”

The AMS reporter on hand for this week’s sale at Green City Livestock Auction in Missouri aptly summed up the current market situation: “Volatile doesn’t seem a strong enough word to describe the situation anymore, as daily limit up and down moves at the CME are almost expected…Those big moves take all the confidence out of a cash market and make it difficult for producers to decide when to turn loose as well as for buyers to figure what one is worth.”

Fed Cattle Prices Sink

Negotiated cash fed cattle trade remained largely undeveloped through Friday afternoon. However, according to the Agricultural Marketing Service (AMS), there was a light test of live sales in all regions Wednesday at mostly $112/cwt. and at $175-$180 in the beef. That was $6-$8 less than last week on a live basis and $10-$15 less dressed.

“Last week’s prices were wildly higher and this week’s prices were wildly lower,” Griffith says. “The unknowns of the coronavirus are enough to result in huge price swings in the market but those movements would still imply market efficiency. Where the inefficiency comes in is when government officials begin telling people what to do and how to act…Technically, the market is still acting as efficiently as it can, but there are cattle producers being caught in the whiplash.”

Live Cattle futures closed an average of $6.47 lower week to week on Friday, from $4.00 lower at the back to $12.62 lower in spot Apr.

“A lot more market volatility is likely to come as the effects of COVID-19 ripple through our economy,” says David Anderson, Extension livestock economist at Texas A&M University, in the latest issue of In the Cattle Markets. “While we come to grips with all the demand implications it’s worth recognizing that it is occurring in the time of cyclically peak beef supplies.”

With two days left in the first quarter, Anderson explained, year over year: fed steer and heifer slaughter was up 5.4%; cow and bull slaughter was 4.5% higher; average steer dressed weights were 22.5 lbs. heavier; average heifer dressed weights were 13.7 lbs. heavier; cow weights were up 2.6 lbs. 

Wholesale beef values sank lower as it appeared the initial onslaught of increased retail demand was coming to an end.

Choice boxed beef cutout value was $22.40 lower week to week on Friday at $230.44/cwt. Select was $26.54 lower at $215.84.

“More and more states are ordering residents to stay at home, which means more meals are being prepared and consumed at home instead of away from home. One would think this change would influence meat consumption and meat disappearance,” Griffith says. “Boxed beef prices are still extremely strong, but they are likely to decline further and the extent of the price decline will likely depend on how long the current situation persists. Things are likely to get worse before they get better.”

Feed Prices Appear Friendly

Corn planted area for all purposes in 2020 is estimated at 97.0 million acres, which would be 8% more or 7.29 million acres more than last year. That’s according to USDA’s Prospective Plantings report. If realized, this will be the highest planted acreage since 2012, according to the National Agricultural Statistics Service. Acreage increases from last year of 800,000 or more are expected in Indiana, Illinois, Ohio, and South Dakota.

“Weather delays may change that number to the downside; reduced demand from ethanol will also be a contributing factor,” say AMS analysts. “As expected, U.S. ethanol production dramatically declined last week and reported the largest week-to-week decline ever recorded. Ethanol blender demand decreased again this week and is the lowest blender demand on record since they started collecting the data in 2010.”

As demand for oil declines and as oil prices declined further with the price war between the U.S. and Russia, ethanol demand follows suit, pressuring corn prices.

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

Oversold conditions and atypically high wholesale beef prices, tied to the shift in more consumers eating at home, helped lift Cattle futures and negotiated cash fed cattle prices last week. In turn, cash calf and feeder cattle prices found some traction.

Steers and heifers sold $8-$15/cwt. higher, according to the Agricultural marketing Service (AMS). Auction receipts continued sparser than normal, stalled by understandable producer caution.

“Much of this stronger undertone is likely associated with the strong week that feeder cattle futures experienced and the strong week for live cattle sales,” explains Andrew P. Griffith, agricultural economist the University of Tennessee, in his weekly market comments.

Feeder Cattle futures closed an average of $2.12 higher week to week on Friday, not counting recently minted away Mar (65¢ higher at the back to $3.30 higher).

Except for 10¢ and 30¢ lower in two contracts, Live Cattle futures closed an average of 54¢ higher week to week on Friday, from 12¢ higher to $2.30 higher in spot Apr.

Extreme volatility continued, though, with limit-up and expanded limit-up moves early in the week and then limit-down and near-limit down moves toward the end of the week.

“Despite the stronger prices, the volatility in the futures market will keep many cattle producers on the sidelines as it should,” Griffith says. “…Market volatility is not a big issue for producers who do not have anything that needs to be marketed immediately, because they are only experiencing a loss in value of a commodity. Alternatively, those who must market cattle in the near term may actually experience that loss in value. As an example, a person with a load of feeder cattle two weeks ago may have been offered $10-$15/cwt. less for those animals than they may have been offered this week. That equates to a $5,000 to $7,500 difference in value over a two-week period on a 50,000 lb. load. The situation cattle producers are traversing right now is the exact reason price risk management should be included in a producer’s business plan.”

Fed Cattle Prices Climb

Wholesale beef values continued extraordinarily high last week, relative to supplies and seasonal expectations.

Choice boxed beef cutout value was 91¢ lower week to week on Friday at $252.84/cwt. Select was $2.21 higher at $242.38.

Wholesale price strength helped boost fed cattle prices. Week to week through Thursday, the five-area direct fed steer price was $9.64/cwt. higher on a live basis at $119.44. It was $16.20 higher in the beef at $189.31.

Regionally, negotiated cash fed cattle prices were mostly $8-$10 higher on a live basis at $118-$120/cwt. in the Southern Plains and $119-120 up north. Dressed sales were $15-$20 higher at $190.

“Slaughter cow prices skyrocketed early in the  week at auctions nationwide,” say AMS analysts. “Demand for boneless lean ground beef continued to move higher as cow plants needed product to move through the marketing chain to fill ground beef orders place by retailers. With most restaurants nationwide either closed or only filling carry out orders, grocery stores have had trouble finding enough protein products to fully stock their cases.”  

Earlier in the week, Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, explained in his weekly market comments, “Disruptions in normal activities due to COVID-19 have produced a surge in at-home food demand. Recent reports indicate a 77% year-over-year increase in grocery meat sales in mid-March. The spike in grocery demand overwhelmed the retail meat supply chain, resulting in temporary shortages of meat in many grocery stores. The shortages are due to the tremendous logistical challenges of shifting meat supplies from food service channels to retail grocery channels.”

Peel emphasized for consumers that there is no shortage of beef or other meats. Beef, pork and poultry production was record large in the first quarter and is projected to be record large this year at 109.3 billion lbs., 4.3% more than last year.

“Beef production is projected to be 1.9% higher year over year in 2020, totaling 27.7 billion lbs.,” according to Peel. “Increased beef production is concentrated in the first half of the year. Total steer and heifer slaughter is up 3.9% year over year for the year to date. Steer carcass weights for the year to date are up over 21 lbs. year over year with heifer carcass weights up over 12 lbs. First-quarter beef production is estimated to increase 6.6% over last year.”

Uncertain domestic demand in tandem with increasing beef supplies helped pressure Live Cattle futures at the end of the week.

As Brenda Boetel, livestock economist at the University of Wisconsin-River Falls explained in the latest issue of In the Cattle Markets, “There is no evidence that consumers are eating more beef currently, and as such the demand will likely decrease significantly once the supply system catches up with the rush demand of the last few weeks.”

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

Market carnage and uncertainty spawned by the COVID-19 panic prompted lots of calf and feeder cattle sellers last to hold cattle or offer fewer than they would otherwise. In fact, auction receipts were the least for a non-holiday week since the current report format was established in 2002, according to the Agricultural Marketing Service (AMS).

There were some week-to-week price gains for some classes at some auctions, but according to AMS, overall, steers and heifers sold $5-$10/cwt. lower, with instances of $12-$15 lower.

“It is likely feeder cattle receipts will continue to be light next week as cattle producers attempt to wait out the market suppression,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “The risk in this is that there is no way to know how short or how long market prices will remain under pressure…The best advice today is for producers to keep one eye on the market and the other eye on national and world efforts to mitigate the length of this pandemic.”

Thanks to a late-week rally, supported by the extraordinary increase in wholesale beef values, Cattle futures closed higher week to week for the first time in five weeks.

Feeder Cattle futures closed an average of $4.47 higher week to week on Friday (2.60 higher to $7.72 higher in spot Mar).

Except for 22¢ and 50¢ lower in two contracts, Live Cattle futures closed an average of $1.06 higher week to week on Friday 42¢ higher to $3.07 higher in spot Apr).

The monthly Cattle on Feed report published Friday should be supportive, mirroring pre-report expectations. February placements for feedlots with 1,000 head or more capacity were 1.71 million head, which was 7.91% less (-147,000 head) than the previous year. Marketings in February of 1.77 million head were 5.47% more (+92,000 head) than the previous year. The on-feed inventory Mar. 1 of 11.81 million head was 0.18% more (+21,000 head), compared to a year earlier.

Fed Cattle Prices Firm

When all was said and done, negotiated cash fed cattle trade last week was steady to $2 higher on a live basis at $110-$112/cwt. and fully steady in the beef at $175.

According to the Texas Cattle Feeders Association on Friday, “Tyson announced this afternoon that for all fed cattle harvested next week, they will make a one-time assistance payment to cattle feeders of $5/cwt. live and $7.94/cwt. dressed.”

Choice boxed beef cutout value was $45.61 higher week to week on Friday at $253.75/cwt. Select was $38.19 higher at $240.17.

That’s the fastest rally on record, according to AMS analysts.

“As businesses and schools continue to close, along with restaurants, consumers swarmed the meat cases to stockpile protein items. Reports of empty meat cases started last week, all over the country,” AMS analysts explain. “The magnitude of the buying caught retailers by surprise, and as this consumer-driven market rages on, it appears that the cutout will be volatile in the short term.”

“There will be a variety of impacts on markets for specific beef products,” explained Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “For example, increased demand for ground beef has resulted in local shortages of product at grocery stores, while reduced restaurant demand may result in weaker middle meat sales. We can expect significant disruptions and stress on beef supply chains given the consumption changes associated with requirements to control COVID-19.”

Should the labor forces of beef packing, processing, or shipping be directly impacted by COVID-19, Peel says supply chain disruptions could be more significant.

“The dynamics of the beef market have changed the past couple of weeks, which is what is driving market prices,” Griffith explains. “Restaurants and food retailers demand different cuts; packers have had to adjust to meet these needs because of the change in consumption patterns across the nation. Thus, packers are taking advantage of what the market is offering them at this time. The market is offering lower cattle prices and strong prices for beef cuts that go to grocery stores. The market is not offering as much value for beef cuts that would typically enter the restaurant business. The market will adjust as more and more unknowns are resolved.”

Equity Markets Continue Lower

Despite fiscal stimulus announced so far, U.S. financial markets continue to plunge lower.

Week to week on Friday, the Dow Jones Industrial Average closed 4,012 points lower. The broader S&P 500 closed 406 points lower.

Keep in mind, the collapse in crude oil prices adds to the overall economic weakness. Although already under pressure from softer demand and plentiful supplies, OPEC added undue and unexpected price pressure when it decided to increase production in retaliation against Russia.

Week to week on Friday, West Texas Intermediate Crude Oil futures on the CME were an average of $7.87 lower through the front six contracts.

“The uncertainty in the cattle market and most other markets persist as market participants try to determine the true impact from coronavirus. As more and more information becomes available, the market will continue to try to find an equilibrium point,” Griffith says. “The market will eventually find that equilibrium. However, it may take longer than some expect because market participants are treading through unfamiliar and murky water.”

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

There are market guttings, then there’s last week as panic over COVID-19 wreaked havoc.

Week to week on Friday:

Feeder Cattle futures closed an average of $17.48 lower.

Live Cattle futures closed an average of $11.32 lower.

The Dow Jones Industrial Average closed 2,679 points lower. The S&P 500 closed 261 points lower. The NASDAQ was down 700 points. And that was after a significant rally Friday.

West Texas Intermediate Crude Oil futures on the CME were an average of $8.98 lower through the front six contracts.

“The sheer uncertainty in the worldwide marketplace is driving a massive downward trend in the livestock sector,” explained analysts with the Agricultural Marketing Service (AMS). “The CME Cattle Complex has taken the brunt of losses in the ag sector, but grains have reported losses as well.”

Nationwide, steers and heifers sold $5-$10/cwt. lower, according to AMS. Declines were significantly steeper at some auctions. Producers cancelling consignments was common.

“The calf market is easily $10-$12/cwt. lower than where it was expected to be this time a couple of months ago,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “The question on every market participants mind is when the fortunes of the market will turn in favor of increasing prices. The answer is that it may take a while for the coronavirus scare to subside, which means it may take a while for the market to return to normalcy.”

As such, Griffith says it’s difficult to recommend anyone sell calves in such a market. On the other hand, he points out even more dollars will be lost by holding cattle if the market fails to rebound.

Perhaps thanks to trade taking place earlier in the week, negotiated cash fed cattle trade was established at $110/cwt. on a live basis last week, which was $3 lower in the Southern Plains and Nebraska; $2-$5 lower in the western Corn Belt. Dressed sales were $5-$7 lower at $175-$176. There were trades at lower money later in the week, but too few to trend.

Wholesale beef values continue to fade much of the market pressure. Choice boxed beef cutout value was 67¢ higher week to week on Friday at $208.14/cwt. Select was 59¢ lower at $201.98.

“As more and more events are canceled, suspended, or postponed, fewer patrons will be making their way to restaurants and eating meals away from home,” Griffith says. “As consumer movement declines, there will likely be more meals consumed at home. Will these meals include beef as the main course or will consumers move to other meats such as poultry and pork? Regardless of what meats are consumed at home, record meat production is expected in the United States this year, and clearing the market will take increased consumption domestically and moving meat overseas.”

Although no one would be surprised to see reduced U.S. beef exports in February and March, as the world deals with COVID-19, the year began positively, offering optimism once business disruptions fade.

U.S. beef exports in January were 2.5% more than a year earlier at 107,347 metric tons (mt) and export value was 5% more at $672.7 million according to data released by USDA and compiled by the U.S. Meat Export Federation (USMEF).

In fact, beef muscle cut exports were the highest ever for the month of January at 81,342 mt, up 4% from a year ago, while muscle cut value increased 5% to $589.2 million.

Export value per head of fed slaughter was $302.93, up 3% from a year ago.

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

Extreme volatility reigned in Cattle futures and equity markets again last week as folks grapple with the unknowable eventual economic impact of COVID-19.

“The main unknown that markets are concerned with is in relationship to demand for consumer goods,” explains Andrew P. Griffith, agricultural economist at the University of Missouri, in his weekly market comments. “Meat markets are trying to figure out how demand for meat in the food service industry will be influenced, and if any losses in that sector will be offset by gains at grocery stores and other similar retail food outlets. Additional unknowns about markets and the virus itself lead to even more uncertainty and the tendency to undervalue commodity goods.”

Nationwide, calves and feeders traded from $2 lower to $3 higher, according to the Agricultural Marketing Service (AMS).

That was despite another horrendous week for Cattle futures.

Except for 57¢lower in spot Mar, Feeder Cattle futures closed an average of $3.30 lower week to week. After the spot month, that makes for an average decline of $11.04 in the last two weeks.

Live Cattle futures closed an average of $1.81 lower week to week on Friday ($1.17 lower toward the front to $2.82 lower at the back). That’s an average of $8.15 lower in the last two weeks.

AMS analysts point out the April Live Cattle contract lost $18.55 since Jan. 24, while the June contract gave up $16—equivalent to more than $200 per head, basis a steer at 1,300 lbs.

Fed Cattle Prices Erode Further

Negotiated cash fed cattle trade ended up $2 lower on a live basis last week in Nebraska and the Southern Plains at $113/cwt. It was $1 higher to $2 lower in the western Corn Belt at $113-$115. Dressed trade was $5 lower in Nebraska at $180-$182; steady to $5 lower at the same money in the western Corn Belt.

Wholesale beef values appeared to turn the seasonal corner. Week to week on Friday, Choice boxed beef cutout value was $2.17 higher at $207.47/cwt. Select was $3.66 higher at $202.57.

“As the beef market wades through the uncertainty of coronavirus, it is clear that higher grading beef is taking a bigger hit than lower grading beef, while seasonal trends are also weighing heavily on beef that is grading Choice or higher,” Griffith explains. “From November 2019 through February, the monthly Prime beef cutout value declined from $256 to $224/cwt., while the branded beef cutout value slipped from $240 to $214.

“The Choice cutout responded similarly with the composite value declining from $233 to $210 over that four-month period. Alternatively, the Select cutout price in November was $212 and traded close to $207 in February, while ungraded beef was at $200 in November and $194 in February.”

One bright spot is that cattle slaughter continues at an aggressive pace.

Last week’s cattle slaughter, estimated at 647,000 head—20,000 head more than the previous week and 40,000 head more than last year—was the most for the week since 2008, according to AMS.

Looking Ahead

Near term, at least the next 30-60 days, Derrell Peel, Extension livestock marketing specialist at Oklahoma State University believes producers should expect markets to remain weak, if not weaker.

“It seems unlikely that any definitive news is forthcoming, certainly not in the next few weeks, which would allow markets to bounce back with any confidence,” Peel explains in his weekly market comments. “I don’t think we are ready yet to change the overall outlook for the year, but the prospect is growing that we might have to trim back our expectations for 2020.

“Producers probably should not make dramatic changes to production and marketing plans just yet, but it would be a good idea to think about how you will adjust things if we have to shift from offense to defense for the entire 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

Accelerating panic about the impact novel coronavirus—Coronavirus Disease 2019 (COVID-19)—will have on the domestic and global economies drove equities and futures markets steeply lower last week amid harshly volatile trade.

Wall Street folks say it was the worst week for equities since the Great Recession in 2008. Week to week on Friday: the Dow Jones Industrial Average closed 3,513 points lower; the NASDAQ was down 1,189 points and the broader S&P 500 closed 383 points lower.

West Texas Intermediate Crude Oil futures on the CME sank an average of $8.27 lower week to week, through the first six contracts.

Then there was cash cattle and futures prices.

“U.S. cattle markets were affected immediately as beef demand is expected to be hindered in the near term,” say AMS analysts. 

Cash calf and feeder cattle prices were $4-$10 lower in the North Central and South Central regions, according to the Agricultural Marketing Service (AMS). Prices in the Southeast were $2-$4 lower. Some producers cancelled consignments at various auctions, wanting to see how the dust settles.

Feeder Cattle futures closed an average of $7.74 lower week to week on Friday, from $5.50 lower at the back to $9.40 lower toward the front.

Thursday to Thursday, the CME Feeder Cattle Index sank $6.48 to $135.60. That’s a touch lower than any time since the Tyson plant fire.

Live Cattle futures closed an average of $6.34 lower week to week on Friday, from $3.70 lower at the back to $10.67 lower in new spot Apr.

“The April live cattle contract is trading at a $6.50 discount compared to the week’s cash price, which is contrary to seasonal trends for finished cattle,” explains Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “That same April contract which traded over $124 from the beginning of November until the third week of January, and actually exceeded $128 a few times, is now trading near $109/cwt.”

For perspective, the week following last August’s fire at the Tyson packing plant in Kansas:Feeder Cattle futures closed an average of $5.48 lower, the CME Feeder Cattle Index was down $4.06 at $137.60 and Live Cattle futures closed an average of $6.53 lower.

Although COVID-19 and a packing plant fire are completely different, the uncertainty spawned is similar. In the case of the former, it’s a matter of not knowing how far the virus will spread, how fast, when the likely pandemic will end and how much economic destruction will be wrought, from slowing economic growth, to displaced and delayed demand, to supply chain disruptions (see below).

“Producers must take advantage of the opportunities being offered by the market and buying is the opportunity being offered right now,” Griffith says. “In the short term, the predictability of the market, given today’s environment, is essentially null and void. However, longer-term predictability of market direction just became easier. With a total collapse in the market, the only direction the market can move with a longer term outlook is in a positive direction.”

Griffith suggests now might be a good time to consider hedging strategies related to purchasing cattle in the summer and fall months. Conversely, he emphasizes it’s not the time to hedge the sale of cattle in the summer and fall.

“There is a lot of time between March and August for this market to overcome the news of the coronavirus and bounce back to a favorable market price, when discussing feeder cattle,” Griffith says.

Fed Cattle Prices Start Lower and then Lose More Ground

Through Friday afternoon, negotiated cash fed cattle prices for the week were $4-$5 less on a live basis at $115/cwt. in the Southern Plains and Nebraska. Dressed trade was $3-$5 less in Nebraska at $185-$187 and mostly $7 lower in the western Corn belt at mainly $183.

All things considered, wholesale beef values held their own.Choice boxed beef cutout value was 21¢higher week to week on Friday at $205.30/cwt. Select was $2.79 lower at $198.91.

Moreover, Griffith points out packer cow and bull prices remain resilient.

“The market needs lean grinding beef and this need has resulted in strong slaughter cow and bull prices,” Griffith says. “Prices are expected to continue to increase the next few months, but some producers may find it advantageous to go ahead and move some of these cows that are consuming valuable hay and forage resources.”

COVID-19 Continues to Spread

COVID-19 has been front-page news since it was first identified in China in December-January. Besides its ongoing global spread last week’s heightened market panic seemed to stem from Centers for Disease Control and Prevention (CDC) reports.

In its situation summary Tuesday, CDC  officials explained, “For the general American public, who are unlikely to be exposed to this virus at this time, the immediate health risk from COVID-19 is considered low. However, it’s important to note that current global circumstances suggest it is likely that this virus will cause a pandemic…”

CDC defines a pandemic as: “A global outbreak of a new influenza A virus. Pandemics happen when new (novel) influenza A viruses emerge which are able to infect people easily and spread from person to person in an efficient and sustained way.” There were four pandemics in the last 100 years, according to CDC.

Wednesday evening, CDC confirmed an infection with the virus that causes COVID-19 in California, in a person who reportedly did not have relevant travel history or exposure to another known patient with COVID-19.

“It’s possible this could be an instance of community spread of COVID-19, which would be the first time this has happened in the United States,” according to the CDC statement. “Community spread means spread of an illness for which the source of infection is unknown. It’s also possible, however, that the patient may have been exposed to a returned traveler who was infected.” So far there are 15 confirmed COVID-19 cases in the U.S.

Over the weekend, the first Covid-19-related death was reported in the U.S. As other nation’s reported their first infections, some counties heightened travel restrictions and population movement.

Late Friday, Federal Reserve Chair Jerome H. Powell issued this statement:

“The fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity. The Federal Reserve is closely monitoring developments and their implications for the economic outlook. We will use our tools and act as appropriate to support the economy.”

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