Negotiated cash fed cattle trade continued in Kansas on Thursday with live prices at $96-$102/cwt., but mostly $100-$102, which was $2-$6 lower than the last week.
Cattle futures softened Thursday, with continued light trade, lower cash prices and the ongoing decline in wholesale beef values.
Live Cattle futures closed an average of 59¢ lower.
Feeder Cattle futures closed an average 71¢ lower.
Beef exports continue to be a bright spot.
Net U.S. beef export sales of 20,100 metric tons for the week ending June 11 were 1% less than the previous week but 67% more than the previous four-week average, according to the U.S. Export Sales report from USDA’s Foreign Agricultural Service. Increased sales were mainly to South Korea, Japan, Hong Kong, Taiwan and Canada.
Choice boxed beef cutout value was $4.37 lower Thursday afternoon at $213.56/cwt. Select was $4.00 lower at $204.08.
The average dressed steer weight for the week ending June 6 was 892 lbs., which was 1 lb. heavier than the prior week and 46 lbs. heavier than the same week a year earlier, according to USDA’s Actual Slaughter Under Federal Inspection report. The average dressed heifer weight of 824 lbs. was 2 lbs. lighter than the previous week, but 42 lbs. heavier than the prior year.
Corn futures closed mostly fractionally higher.
Soybean futures closed mostly 1¢ to 2¢ higher.
Major U.S. financial indices closed narrowly mixed Thursday. Pressure included more initial weekly jobless claims than traders expected. Initial claims were 1.51 million according to the U.S. Department of Labor; that was 58,000 fewer than the previous week.
The Dow Jones Industrial Average closed 39 points lower. The S&P 500 closed 1 point higher. The NASDAQ closed 32 points higher.
“Given a potential months-long economic recession, overall beef demand will likely be down even as sit-down restaurants open across the USA,” says Brenda Boetel, Extension livestock economist at the University of Wisconsin-River Falls, in the latest issue of In the Cattle Markets. “Consumers will likely see a small decrease in beef consumption due to the expected decrease in 2020 beef production quantities, but the respective beef demand will likely be down more as consumers will be less willing to pay high prices for beef. The return to U.S. consumers spending large amounts on highly valued beef cuts will be slow and largely dependent on macroeconomic growth. Sit-down restaurants will find creative ways to entice patrons to return, including menu changes with lower price entrees. As such, overall beef demand will likely be down, while demand for higher-valued primals, typically consumed through foodservice, will be down more than the overall beef demand.”
Keep in mind that demand and consumption, though related, are quite different.
Boetel explains consumption is a function of production. As a perishable product, most all beef produced will be consumed. Calculated beef consumption is simply the sum of beef production and beef imports, minus exports and disappearance. She says beef consumption is projected to be 12.5% less in the second quarter of this this year, compared to the same time last year. That has to do with less beef production, spawned by disruptions to beef packing capacity.
Beef demand, on the other hand, reflects consumers’ perceptions of beef in the marketplace and is representative of consumers’ willingness to pay for beef, according to Boetel.
“Beef demand is impacted by several factors including beef prices, as well as prices of alternative proteins such as pork and chicken,” she explains. “Additionally, income is another determining factor in beef demand, as well as other factors such as tastes and preferences.
“Even though we eat (i.e., consume) the beef produced, it doesn’t mean that beef demand remains in a consistent relationship with production. Beef consumption can increase without an increase in beef demand because beef demand and beef consumption are not the same thing. For example, beef consumption might increase because more beef is produced, but beef demand decreases because consumers are willing to pay less for each pound of beef they do consume.”
Boetel points out the beef demand index calculated at Kansas State University decreased almost 18% for choice retail beef in April of this year, compared to the same time last year. Driving forces included the substantial loss of food service sales, as well as the economic downturn.
Looking ahead, Boetel says many analysts expect global economic growth this year to contract by nearly 3%, while the U.S. economy is expected to contract by nearly 5.7%.
All of that likely means continued overall pressure on cattle prices.
“Until sit-down restaurants are operating at levels prior to COVID, there will likely be differences in the spread between different primals, no matter the amount of cattle processed,” Boetel says. “It will take months for the U.S. processing sector to work through the backlog of cattle on feed, but as it does so, the spread between wholesale beef and live cattle prices will return to traditional levels, although at likely lower absolute price levels for both live cattle and beef due to the macroeconomic downturn.”