Markets remain firmly entrenched in the COVID-19 panic that is forcing widespread disruptions to how people go about their business, while slowing economic wheels.
Live Cattle futures showed signs of life Monday, with surging wholesale beef values, but sank hard again, as did Feeder Cattle.
Live Cattle futures closed an average of $3.73 lower.
Feeder Cattle futures closed an average of $4.47 lower, limit-down in all but one contract.
Wholesale beef values rocketed higher Monday, with heavy offerings, as retailers replenished supplies windrowed by consumers stocking up. There was also likely some defensive buying against potential challenges in the supply chain.
Choice boxed beef cutout value was $16.22 higher Monday afternoon at $224.36/cwt. Select was $14.73 higher at $216.71.
Corn futures closed 11¢ and 10¢ lower in the front two contracts and then mostly 4¢ to 6¢ lower.
Soybean futures closed 18¢ to 27¢ lower through Jly ’21 and then mostly 14¢ to 16¢ lower.
Major U.S. financial indices on Monday gave back everything recovered in the previous session, despite aggressive action by the Fed over the weekend and the economic support previously announced by the White House.
West Texas Intermediate Crude Oil futures on the CME closed $2.76 to $3.03 lower through the front six contracts, down to $28.70 in spot Apr.
The Dow Jones Industrial Average closed 2,997 points lower. The S&P 500 closed 324 points lower. The NASDAQ was down 970 points.
“The cattle and beef industry, along with the rest of the U.S. and global economy is in uncharted waters with the coronavirus pandemic. There are many unknowns about the timing, severity and aftermath of the disease,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “For the beef industry, there are longer term questions about overall impact on domestic and international beef demand, with questions about a U.S. and global recession looming large. In the short run, the actions needed to manage the epidemiology of COVID-19 is having significant impacts on beef supply chains.”
Peel explains beef products flow through three primary market channels: retail (grocery), food service and exports; each using separate supply chains. Domestically, based on USDA data, he says food at home, which approximately matches retail grocery, represents about 46% of total food expenditures in the U.S. Food away from home represents about 54% of total food expenditures.
“The immediate response to COVID-19 is to limit travel, gatherings and public activities. Reduced travel, fewer restaurant visits and school closures all impact the HRI sector (hotels, restaurants, institutions),” Peel explains. “This implies a dramatic shift of food from the food service (HRI) sector into retail grocery sales. This represents huge demands on grocery store sales and the logistics of supplying retail stores. For beef, there is immediate demand for more processing, packaging and shipping of beef for retail sale and less processing and shipping of meat through food service distribution channels.”
Moreover, Peel notes each marketing channel utilizes a different mix of beef products.
“There will be a variety of impacts on markets for specific beef products,” Peel explains. “For example, increased demand for ground beef has resulted in local shortages of product at grocery stores, while reduced restaurant demand may result in weaker middle meat sales. We can expect significant disruptions and stress on beef supply chains given the consumption changes associated with requirements to control COVID-19.”
Should the labor forces of beef packing, processing, or shipping be directly impacted by COVID-19, Peel says supply chain disruptions could be more significant.