Cattle futures closed sharply lower Monday with pressure likely including the significant decline in open interest at the end of last week and disappointment that week-to-week gains in estimated cattle slaughter were not more significant (see below).
Live Cattle futures closed an average of $2.31 lower (97¢ lower at the back to $3.00 lower).
Feeder Cattle futures closed an average of $3.61 lower ($2.45 to $4.27 lower)
Choice boxed beef cutout value was $7.70 higher Monday afternoon at $468.58/cwt. Select was $3.98 higher at $452.97.
Corn futures closed fractionally lower to 1¢ lower.
Soybean futures closed 2¢ to 3¢ higher.
Major U.S. financial indices closed mixed on Monday, with strength in tech stocks counterbalanced by jitters about how reopening the economy will impact the spread of COVID-19.
The Dow Jones Industrial Average closed 109 points lower. The S&P 500 closed fractionally higher. The NASDAQ closed 71 points higher.
“It will likely take many weeks for slaughter rates to catch up with the growing backlog of fed cattle and get the industry current once again,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his latest market comments. “Meantime, all sectors of the industry are responding to the need to slow cattle down and hold them longer in a variety of production settings before proceeding to finish in feedlots. Fed cattle weights are increasing and pushing carcass weights higher counter-seasonally.”
With that said, Peel sees a glimmer of hope in last week’s estimated cattle slaughter. Although still 32.2% less than the same week the previous year, estimated slaughter of 425,000 head was 6.4% more than the previous week.
“This hopefully indicates the beginning of recovery of packing capacity in the coming weeks,” Peel says. “Risks remain, however, and it is not clear how fast packing plant capacity will recover. New safety measures and work protocols likely mean that effective maximum capacity in beef packing plants will be reduced compared to pre-COVID-19 levels.”
In a webinar last week, Glynn Tonsor, agricultural economist at Kansas State University suggested that 85% of pre-COVID 19 packing capacity might be a reasonable ballpark for where it lands in a post-pandemic world.
“The timing during the year is drastically altered with second-quarter beef production forecast down 13.3% year over year. Beef production will be pushed into the third quarter, which is forecast to be up 5.4% compared to last year. Fourth-quarter beef production is currently forecast to be just slightly higher year over year,” Peel says.