Reduced beef packing production, due to COVID-19, continues to boost uncertainty and wreak havoc on market fundamentals as cattle feeders compete for slaughter access. Consider last week’s fluctuating cash prices for fed cattle.
Through Friday afternoon, negotiated cash fed cattle trade for the week was $5-$10 lower on a live basis in the Southern Plains at $100/cwt. in Kansas and $95-$100 in the Texas Panhandle. It was up to $10 lower in Nebraska and the western Corn Belt at $95. Dressed trade was from $8 lower to $10 higher at mostly $160, compared to the previous week’s light test.
For all of the gyrations, five-area daily weighted average direct negotiated prices through Thursday were mainly steady week to week with live steers at $96.95 and dressed steers at $154.27.
So far, the packing bottleneck appears nowhere near as dire as that faced by pork producers in 1998, when the fat hog price plummeted to about $8/cwt. toward the end of the year, due to sudden and significantly reduced packing capacity. But, it’s understandable why some are recalling the memory.
Wholesale beef values are running the opposite direction, fueled by declining supplies and what seems to be at least constant demand.
Choice boxed beef cutout value was $9.08 higher Friday afternoon at a record high of $293.37/cwt. Select was $6.13 higher at $279.02.
Cattle futures mainly consolidated and hovered, other than front-month Live Cattle.
Except for 97¢ and 30¢ lower in the front two contracts, and 10¢ lower in away Apr, Live Cattle futures closed an average of 43¢ higher.
Feeder Cattle futures closed an average of 47¢ higher.
Logic suggests the market should view Friday’s monthly Cattle on Feed report as bullish to at least neutral, given the plunge in placements and spike in marketings (see below). That may not be the case, though, as it also underscores how many more cattle than normal need to be placed at some point.
Corn futures closed mostly 1¢ to 3¢ lower.
Soybean futures closed mostly 7¢ to 10¢ lower.
Major U.S. financial indices closed higher Friday, as crude oil prices continued to maintain stability.
The Dow Jones Industrial Average closed 260 points higher. The S&P 500 closed 38 points higher. The NASDAQ closed 139 points higher.
Even fewer cattle were placed and even more cattle were marketed in March than expected, according to the monthly Cattle on Feed report issued Friday.
Between depressed prices keeping more cattle outside of feedlots and the slower turnover in feedyards, plenty of folks suspected feedlot placements would be significantly fewer year over year. In fact, the 1.56 million head placed in feedlots with 1,000 head or more capacity was 22.69% less (457,000 head fewer). That was the least for the month since the data series began in 1996, according to AMS. The decline was about 4.8% more than average analyst estimates ahead of the report.
In terms of placement weights, 34.04% went on feed weighing 699 lbs. or less; 52.15% weighing 700-899 lbs. and 13.81% weighing 900 lbs. or more.
Marketings in March of 2.01 million head were 13.11% more (+233,000 head) than the previous year. That was the second most for the month since the data series began. Heading into the report, analysts expected, on average, marketings to increase 12.3%.
Cattle on feed Apr. 1 of 11.30 million head were 5.49% less (656,000 head fewer) than the previous year. That was about 0.7% less than pre-report estimates.