Cattle Current Daily—May 1, 2020

Cattle Current Daily—May 1, 2020

Although too few to trend, negotiated cash fed cattle trade continued Thursday across a broad range, according to the Agricultural Marketing Service (AMS). Live sales were reported in the Southern Plains at $95-$96/cwt., $95-$100 in the western Corn Belt and $93.75-$95.00 in Nebraska. Dressed prices ranged from $147 to $160.

Live Cattle futures continued to firm, though, perhaps with hopes that capacity returns to beef packing sooner rather than later (see below), given the previous day’s Executive Order mandating that meat packing and processing facilities remain open.

Other than $4.40 higher in expiring spot Apr, Live Cattle futures closed an average of 70¢ higher, (15¢ higher at the back to $1.67 higher in new spot Jun), except for 2¢ lower in away Apr.

Feeder Cattle futures closed an average of $1.56 lower, (37¢ lower in expiring spot Apr to $1.95 lower). 

Wholesale beef values climbed by double digits again.

Choice boxed beef cutout value was $10.18 higher Thursday afternoon at a $367.56/cwt. Select was $10.25 higher at $350.16.

The average dressed steer weight for the week ending Apr. 18 was 889 lbs., which was 3 lbs. heavier than the previous week and 32 lbs. heavier than the previous year, according to USDA’s Actual Slaughter Under Federal Inspection report. The average dressed heifer weight was 823 lbs., which was 3 lbs. less than the prior week but 24 lbs. heavier than the same week a year earlier.

Beef production for the week was 395.6 million lbs., which was 36 million lbs. fewer than the prior week (-8.34%) and 118 million lbs. less (-22.98%) than the same week last year.

Weekly export sales added support to grain markets Thursday. Net corn export sales were 87% more than the previous week, led by Mexico, and 19% more than the prior four-week average, according to the U.S. Weekly Export Salesreport from UADA’s Foreign Agricultural Service. Net soybean export sales were noticeably higher than the previous week, led by China, and noticeably higher than the prior four-week average.

Corn futures closed 4¢ to 7¢ higher in the front three contracts and then 2¢ to 3¢ higher.

Soybean futures closed 12¢ to 18¢ higher through Jan ’21 and then mostly 5¢ to 8¢ higher.

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Major U.S. financial indices closed lower Thursday, with another round of massive initial jobless claims of 3.84 million, according to the U.S. Labor Department.

“Looking ahead, as workplaces reopen, we must ensure that individuals transition from unemployment back into the workforce,” says Secretary of Labor Eugene Scalia. “Key to this process will be workplace safety.”

Although still mired at the bottom, crude oil prices continued recent nascent recovery Thursday. The front six contracts for West Texas Intermediate futures on the CME were up $1.71 to $3.78. Spot Jun closed at $18.84, which was $6.50 higher than on Wednesday.

The Dow Jones Industrial Average closed 288 points lower. The S&P 500 closed 27 points lower. The NASDAQ closed 25 points lower.

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Depending on how fast packing plant production normalizes, there could be in excess of 1 million head of long-fed cattle come June 1, according to recent calculations by agricultural economists Glynn Tonsor at Kansas State University and Lee Shulz at Iowa State University.

For purposes here, long-fed refers to cattle on feed for more than 120 days and more than 150 days–the carryover of market-ready fed cattle.

“Cattle on feed for over 120 days and over 150 days is useful when evaluating the currentness of cattle supplies in feedlots,” Tonsor and Shulz explain. “Currentness refers to whether cattle are being marketed on a timely basis, or kept on feed longer. Keeping marketings current is generally positive to market prices. Currentness has implications, some short-run and some longer lasting, for price rebounds. Too many producers being forced to delay feedlot marketings can quickly cause an oversupply of both market-ready cattle and over-fed, over-finished cattle and lead to an eventual market purge of heavy cattle at some point, which can drive prices down. It is important to remember that overall feedlot numbers are not burdensome; it is the supply of market-ready or near market-ready cattle that is burdensome relative to current slaughter capacity.”

In, Fed Cattle Flows: Demonstrative Scenario Examples, Tonsor and Shulz estimate the number of cattle on feed for more than 120 days and more than 150 days, as of Apr. 1, utilizing monthly Cattle on Feed reports, which account for feedlots with 1,000 head or more capacity.

Next they present four possible scenarios, which consider various levels of reduced estimated weekly fed cattle slaughter through May 30, relative to last year, due to current disruptions wrought by COVID-19. Then they calculate accompanying fed cattle overflow for May 1 and June 1, relative to each scenario.

For recent slaughter perspective, they say cattle slaughter for the week of Apr. 25 was estimated at 469,000 head. That was down 33,000 head fewer (6.6% less) than the previous week and 173,000 head fewer (26.9% less) than the same week a year earlier. The USDA chart below offers a similar perspective in terms of weekly beef production.

Keeping the outline described above in mind, Tonsor and Shulz estimate fed cattle carryover May 1 ranges from 485,000 to 510,000 head. For June 1, it’s 1.07 million to 1.34 million head.

Rather than necessarily projecting specific numbers, this work from Tonsor and Schulz provides valuable context and insight to how quickly and far behind marketing currentness can become.

“We have no concrete ability to project fed cattle marketings given challenges presented by COVID-19,” say Tonsor and Shulz. “It should immediately be appreciated that any positive developments that lead to increased and persistent operation of packing plants will reduce cattle carryover, backup, and related impacts―which is a scenario the entire industry would welcome!”

2020-04-30T19:54:19-05:00

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