Through late Friday afternoon, the only established negotiated cash fed cattle trade for the week remained the $105/cwt. paid in the Southern Plains, which was $5 less than the previous week. Although too few to trend, there were a few trades in Nebraska Friday at $106/cwt. on a live basis and at $172 in the beef.
Through Thursday the 5-area direct steer price was $105.40 on a live basis (7,941 head) and $170.46 in the beef (4,172 head). Week to week that was $8.71 less on a live basis and $12.11 less dressed.
Cattle futures were unable to hold early-session support Friday as another trip lower in Lean Hogs provided pressure.
After unchanged in spot Aug, Live Cattle futures closed an average of 57¢ lower (17¢ to 87¢ lower).
Feeder Cattle futures closed an average of 84¢ lower, (57¢ lower at the back to $1.20 lower in spot Aug).
Wholesale beef values were sharply higher on good demand and moderate offerings, according to the Agricultural Marketing Service.
Choice boxed beef cutout value was $2.57 higher Friday afternoon at $238.69/cwt. Select was $2.59 higher at $213.26.
Corn and Soybean futures grained support from the dryer weather outlook for the Corn Belt.
Corn futures closed 8¢ to 10¢ higher through Jul ’20 and then mostly 4¢ to 5¢ higher.
Soybean futures closed mostly 9¢ higher.
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Major U.S. financial indices rallied Friday, on the back of resurgent bond yields, apparently allaying recession fears among investors. It was inversion of the yield curve earlier in the week that drove steep losses, along with continued anxiety about global economic growth.
The Dow Jones Industrial Average closed 306 points higher. The S&P 500 closed 41 points higher. The NASDAQ was up 129 points.
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Although cattle markets had a firmer feel, albeit lower, at the end of the week,
plenty of market uncertainty remains following the fire at Tyson Foods beef slaughter plant at Holcombe, KS Aug. 9.
Among what’s known:
“The plant operated at about 6,000 head of fed cattle per day, leaving a shortfall in the national packing capacity of 30,000 head for a five-day work week,” said representative of the Kansas Livestock Association (KLA), in a Monday assessment for its members. “According to CattleFax, that amounts to 6% of total U.S. fed cattle packing capacity the rest of the processing industry will need to absorb.”
“According to CattleFax, in order to compensate for the loss of capacity at Holcomb, the major packing plants in Texas, Kansas, Colorado, Nebraska, and Iowa, which represent 83 percent of U.S. fed slaughter capacity, would need to slaughter 8.2% more cattle per week, or run 3.3 more hours per week, to make up the production lost in Holcomb,” explained Colin Woodall, senior vice president of government affairs for the National Cattlemen’s Beef Association (NCBA) in a Tuesday letter to Greg Ibach USDA Under Secretary for Marketing and Regulatory Programs. “While we expect other processing facilities to take more cattle, the shortfall created by the Holcomb fire will be incredibly difficult to make up based on the current packing infrastructure.” On behalf of NCBA, Woodall requested, “…that APHIS and FSIS inspectors, along with AMS graders, be provided the flexibility needed to move to other plants and work expanded shift hours, including weekends, in order to help the packing segment of our industry process the cattle headed to harvest… we ask that Packers and Stockyards Division staff remain vigilant against any effort to illegally capitalize on the current market situation.”
In another letter, NCBA asked the U.S. Department of Transportation to declare an emergency suspension of Hours of Service for cattle haulers. The organization also sent a letter to the Commodity Futures Trading Commission, requesting that the agency, “…keep an even closer eye on the cattle markets to ensure that no market participant tries to use the uncertainty to manipulate or illegally take advantage of the situation…”
Tyson will rebuild the plant. At a late-week new conference, Tyson officials explained the area impacted by the fire was relatively small, in terms of square footage, but large in terms of the plant’s electric and hydraulic infrastructure. Officials said rebuilding will likely be a matter of months, rather than weeks.
As long suspected, beef packing capacity shuttered during historically long beef cowherd liquidation, fueled by historic drought, increased market vulnerability.
Live Cattle and Feeder Cattle futures were limit-down last Monday, then down the expanded limit in some contracts Tuesday as traders panicked and liquidated long positions. Part of the panic stemmed from seasonally and cyclically large fed cattle supplies at a time when beef packer capacity utilization was, by most accounts, already running historically high.
On the surface at least, lots of beef buyers were relying on the spot market for their immediate supply. There seems no other way to explain the massive surge in wholesale beef prices.