Cattle Current Daily—Dec. 29, 2020

Cattle Current Daily—Dec. 29, 2020

Negotiated cash fed cattle trade was mostly inactive on very light demand in the western Corn Belt through Monday afternoon, according to the Agricultural Marketing Service. Elsewhere, it was at a standstill.

Last week, prices in the Southern Plains were $2 higher on a live basis at $110/cwt., $5 higher in Nebraska at $110 and $1-$5 higher in the western Corn Belt at $106-$110. Dressed trade was $7 higher at $172.

The five-area direct weighted average steer price last week was $109.19/cwt. on a live basis, which was $3.07 more than the previous week. The average steer price in the beef was $6.51 more at $171.80, according to USDA’s weekly report.

The five-area direct weighted average fed heifer price was $109.68/cwt. on a live basis, which was $3.25 more week to week. The average dressed heifer price was $6.74 more at $171.91.

Choice boxed beef cutout value was 21¢ higher Monday afternoon at $207.82/cwt. Select was $1.28 lower at $196.65.

Estimated total cattle slaughter for the week ending Dec. 26 was 419,000 head, which was 56,000 head fewer (-11.8%) than the same time a year earlier. Year-to-date estimated total cattle slaughter of 31.7 million head was 1.1 million head fewer (-3.5%) than in 2019.

Total estimated beef production for the week of 352.5 million lbs. was 40.2 million lbs. less (-10.2%) than the same time last year. Estimated year-to-date beef production of 26.37 billion lbs. was 264.3 million lbs. less (-1%) than a year earlier.

Cattle futures closed mostly higher Monday, but off of session highs, supported by stronger cash prices late last week, higher outside markets and a winter storm aiming for the Corn Belt.

Live Cattle futures closed an average of 46¢ higher.

Feeder Cattle futures closed narrowly mixed from an average of 9¢ lower to an average of 14¢ higher.

Corn futures closed mostly 2¢ to 3¢ higher.

Soybean futures closed 7¢ to 8¢ lower through Aug ’21, and then 1¢ to 4¢ higher.

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Major U.S. financial indices bounced higher Monday, supported by President Trump’s signature on the government-spending bill, which includes an additional $900 billion in COVID-19 relief. 

The Dow Jones Industrial Average closed 204 points higher. The S&P 500 closed 32 points higher. The NASDAQ was up 94 points.

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Although signals are mixed, Derrell Peel, Extension livestock marketing specialist at Oklahoma State University says it’s likely the beef cowherd Jan. 1 will be unchanged from the prior year to 1% less.

In his weekly market comments, Peel explains cowherd expansion or liquidation depends on both heifer retention and cow culling.

At the beginning of this year, beef replacement heifers were 18.4% of the beef cow inventory.

“This was down from the peak retention in 2016 of 21.0%, when herd expansion was in full force,” Peel says. “Historically, the replacement heifer percentage drops below 18% during herd liquidation. Of course, producer plans can change during the year. The July inventory estimate for beef replacement heifers was unchanged from last year but is a low enough level to potentially suggest some herd liquidation.”

Concurrently, Peel explains heifers in feedlots in 2020, on average, were 1.1% less year over year, with an Oct. 1 estimate about equal to a year earlier. Heifer slaughter this year is projected to be down about 3.6% compared to last year. 

“Heifer slaughter as a percent of the cow inventory is not low enough to suggest herd expansion nor large enough to suggest significant liquidation,” Peel says.  “Taken together, the various heifer data seem to suggest mostly steady heifer retention, which could support a 2021 herd inventory either side of unchanged from 2020 levels.”

As for cow culling, estimated beef cow slaughter in 2020 is 2.6% higher year over year, implying a net beef cow culling rate (beef cow slaughter as a percent of herd inventory) of 10.5%, according to Peel.

“Beef cow culling has increased from the record low level of 7.6% in 2015, when herd expansion was accelerated. Herd culling above 10% is consistent with modest levels of herd liquidation, though the current level is below the culling rates (typically above 11%) that indicate significant herd liquidation. The mid-year cattle report pegged the beef cow inventory down 0.8% year over year, generally consistent with the cow slaughter data this year,” Peel says.

If beef cow numbers are the same to 1% less than the previous year, in the next Cattle report (due out Jan. 29), then Peel says it would continue the slow tightening of beef cattle numbers and beef production in 2021.

“Total 2021 cattle slaughter is forecast to be down about 1%, leading to a year-over-year decrease in beef production of 1% to 2%,” Peel says. “Herd dynamics in 2021 could affect these forecasts. If herd liquidation should accelerate, the short-term impacts would be an increase in cattle slaughter due to more heifers and cows in the slaughter totals. Conversely, should the industry move to expand cattle inventories, cattle slaughter would be reduced with fewer heifers in feedlots and fewer cows culled. There is potential for either scenario. The cattle inventory trajectory in 2021 will depend on numerous factors including control of the pandemic, U.S. macroeconomic conditions, global protein markets, drought conditions, and feed prices, among others.”

2020-12-28T18:51:02-06:00

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