Last week’s five-area direct weighted average steer price was $98.66/cwt. on a live basis, which was $1.42 more than the previous week. The average dressed steer price was $160.03, which was $1.93 more than the prior week.
Cattle futures continued to maintain and extend recent gains Monday, except for the back months of Feeder Cattle. Support includes cash strength, thoughts of increased food service demand when schools resume this fall and the highest level of open interest since the middle of March.
Live Cattle futures closed an average of 42¢ higher.
Feeder Cattle futures closed mixed, from an average of 47¢ higher across the front half of the board to an average of 65¢ lower across the back half.
Choice boxed beef cutout value was $1.40 higher Monday afternoon at $204.66/cwt. Select was 51¢ higher at $190.40.
Corn futures closed 1¢ to 2¢ higher through Jly ’21 and then mostly fractionally higher.
Soybean futures closed 1¢ to 3¢ higher.
Major U.S. financial indices closed higher Monday, fueled by the continued rally in big tech stocks, as well as positive manufacturing news.
Economic activity in the manufacturing sector grew in July, with the overall economy notching a third consecutive month of growth, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.
Specifically, the July PMI® rose 1.6 percentage points month to month in July to 54.2%.
The Dow Jones Industrial Average closed 236 points higher. The S&P 500 closed 23 points higher. The NASDAQ closed 157 points higher.
“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.
As for any product, Peel explains beef demand is generally a function of consumers’ willingness and ability to purchase specific quantities of the product at various price levels.
Consumer ability to purchase a product is related to the level of consumers’ discretionary income. Generally, Peel says macroeconomic conditions, including overall GDP levels, along with unemployment, are indicative of income levels.
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 June was 11.1%.
“This highlights questions about the impact of the pandemic on beef demand in the first half of the year and, more importantly, beef demand for the remainder of the year,” Peel says.
Ability aside, Peel explains consumer willingness to purchase beef has to do with underlying preferences, which tend to be relatively stable, evolving over long periods of time.
“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.”