Futures and equity markets recovered some ground on Tuesday from the previous day’s steep selloff tied to growing fears about the global spread of novel coronavirus.
Although mainly lower, the decline in Cattle futures was soft rather than the limit and near limit-down moves in the previous session.
Live Cattle futures close an average of 38¢ lower, as open interest continued to dwindle.
Except for 15¢ and 22¢ higher in the front two contracts, Feeder Cattle futures closed an average of 29¢ lower.
Wholesale beef values were weak on Choice and higher on Select with moderate to good demand and heavy offerings, according to the Agricultural Marketing Service.
Choice boxed beef cutout value was 74¢ lower Tuesday afternoon at $212.85/cwt. Select was $1.66 higher at $212.16.
Corn futures closed mostly 2¢ to 5¢ higher through Jul ’21 and then mostly 1¢ higher.
Soybean futures closed mostly 2¢ lower.
Investors seemed to take a more measured view of the global spread of coronavirus, pushing major U.S. financial indices higher Tuesday, led by tech and financial stocks.
The Dow Jones Industrial Average closed 187 points higher. The S&P 500 closed 32 points higher. The NASDAQ was up 130 points.
Consumer appetite for Prime beef continues strong, based on year-over-year increases for Prime premiums, relative to the increased percentage of carcasses hitting the grade for the first few weeks of the year.
For the first four weeks of 2020, according to USDA reports, the Prime premium was $12.63 to $13.19/cwt., compared to $9.42-$9.44 a year earlier, or about 34-40% higher. At the same time, through the first three weeks, the percentage of fed cattle grading Prime was 9.39% to 9.85% compared to 9.16% to 9.31% at the same time last year.
“Heavier cattle weights could be a contributing factor, but within the last three years, there seems to be a clear push from cattle feeders to achieve the higher Prime grade,” say analysts with the Livestock Marketing Information Center (LMIC), in the latest Livestock Monitor. “Spreads between Prime and Choice have not been as low as they were in 2018 but have not been maintaining historical premiums either.”
For perspective, the premium for Prime was $20-$24 in September and October.
LMIC analysts note Prime supplies seemed to outpace the market as recently as 2018, when the Prime-Choice spread dropped as the percentage of carcasses grading Prime increased from 6.0% to 7.95% year over year. It averaged 8.60% last year.
The Prime market remains potentially fragile, though.
“Interest from retailers, such as Costco and Walmart to offer Prime cuts may be short-lived,” say LMIC analysts. “A U.S. recession and/or contraction in the cattle industry could put pressure on future demand for Prime-graded beef moving forward, if it no longer is price competitive or consumers are watching their wallets.”