Although trade was light, Cattle futures closed limit up Monday, higher for the third consecutive session— higher in four of the last five sessions. Support included sky-rocketing wholesale beef values, Tyson’s announcement last week of a one-time support payment for cattle it harvests this week—$5/cwt. on a live basis and $7.94/cwt. in the beef—as well as the friendly Cattle on Feed report. China buying U.S. grain last week also helped.
Live Cattle futures closed limit-up $3.00. At $101.60, spot Live Cattle remains hugely discounted to cash.
Feeder Cattle futures closed limit-up $4.50.
Choice boxed beef cutout values were sharply higher on good demand and heavy offerings.
Choice boxed beef cutout value was $3.57 higher Monday afternoon at $257.32/cwt. Select was $4.97 higher at $245.14.
Corn futures closed mostly fractionally higher to 1¢ higher.
Soybean futures closed 10¢ to 21¢ higher through Jan ‘21, and then 1¢ higher to mostly 2¢ lower.
Major U.S. financial indices closed lower Monday as the U.S. Senate failed for a second time to agree to legislation for massive economic stimulus, in the wake of COVID-19.
The Dow Jones Industrial Average closed 582 points lower. The S&P 500 closed 67 points lower. The NASDAQ was down 18 points.
Glynn Tonsor, agricultural economist at Kansas State University estimates economic losses in the cattle industry, due to COVID-19, at $7.98 billion to $9.44 billion, representing two broad approaches for approximating damages for the U.S. cattle sector.
Up front, Tonsor emphasizes the estimates are not to be taken as final, precision estimates, but as a timely broad approximation to offer the industry context.
Tonsor arrived at the $7.98 billion estimate by considering recent price estimates and cattle inventory.
For prices, Tonsor utilized estimates updated last week by the Livestock Marketing Information Center (LMIC).
Compared to January:
LMIC reduced the first-quarter price estimate for fed cattle (1,400 lbs.) by $7 to $117/cwt.; $18 less in the second quarter to $103.50.
LMIC reduced the first-quarter price estimate for feeder cattle (750 lbs.) by $5 to $140.50/cwt.; $23.50 less in the second quarter to $124.50.
LMIC increased the first-quarter price estimate for calves (550 lbs.) by $4 to $170/cwt., but reduced second-quarter expectations by $20 to $149.50.
You can find price estimates for the other quarters in Tonsor’s factsheet.
Bottom line, Tonsor estimates per-head damage for the year at $126 for fed cattle, $98 for feeder cattle, and $58 for calves.
“Moving from damages per head to an economic impact estimate requires an inventory-impacted number,” Tonsor explains. “USDA NASS estimated the total beef cow inventory to be 31.32 million head in their January Cattle report. If we approximate that for every 100 cows we ultimately have 92 offspring sold, this would suggest, for a full calendar year, 28.81 million calves will be sold by the cow-calf sector. Proceeding forward, presuming 2% death loss rates for subsequent sectors, results in 28.24 million feeder cattle and 27.67 million fed cattle being sold, subsequently.”
The other approach Tonsor took, which arrives at $9.44 billion in losses, considers declining Feeder Cattle and Live Cattle futures prices. Again, you can see Tonsor’s path to the calculation in the factsheet.