Negotiated cash fed cattle prices ended the week across a wide range but generally steady with the previous week with live prices at $95-$100/cwt. in the Texas Panhandle, $95-$105 in Kansas and Nebraska and at $93-$100 in the western Corn Belt. Dressed sales were at $150-$160.
Through Thursday, the negotiated five-area daily weighted average direct live steer price was $1.03 less than the previous week at $95.92/cwt. It was 23¢ more in the beef at $154.50.
Cattle futures firmed further, supported by the week’s Executive Order to keep packing and processing plants open, sky-high boxed beef prices and some states beginning to ease stay-at-home orders. Resurgent Lean Hog futures also provided support.
Live Cattle futures closed an average of 80¢ higher, (45¢ to $1.50 higher).
Except for $1.30 lower in Mar, Feeder Cattle futures closed an average of 70¢ higher, (5¢ higher at the back to $1.15 higher toward the front).
Demand continues to run well ahead of wholesale beef supplies.
Choice boxed beef cutout value was $9.89 higher Friday afternoon at a $377.45/cwt. Select was $6.97 higher at $357.13.
Corn futures closed from 1¢ lower to 2¢ higher.
Soybean futures closed 2¢ to 5¢ lower through Nov ’20 and then mostly 1¢ to 2¢ higher.
Major U.S. financial indices closed sharply lower Friday, extending losses from the previous session. Pressure included renewed political sabre rattling between the U.S. and China.
The Dow Jones Industrial Average closed 622 points lower. The S&P 500 closed 81 points lower. The NASDAQ closed 284 points lower.
“With boxed beef prices running wildly to records every day and live cattle prices moving lower, there is a lot of talk about packers colluding to take advantage of the market situation,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “It is nearly impossible for any outsider to know if collusion is occurring or not. However, it is easy for an outsider to see the current situation and know he or she would be trying to slaughter as many cattle as possible and market beef at record prices to fulfill the objective of being profitable. Slaughter facilities have a number of reasons to stay open and operate at as full of a capacity as possible; making money is not the least of these. Slaughter facilities are paying double time and giving bonuses to entice employees to work and produce meat while also attempting to address health concerns of employees. This is a delicate balancing act on the part of slaughter facilities, but this gets overlooked because boxed beef prices are 75% higher than where they were at the end of January. Is the packer in the wrong? Maybe or maybe not, but there must be at least two entities willing to bid the price this high.”
In the meantime, various groups are lobbying for all kinds of changes, everything from the trite and WTO-illegal mandatory Country of Origin Labeling, to calls for legislation mandating some level of weekly cash fed cattle trade to improve market transparency and price discovery. That’s while USDA investigations continue into market reactions following last summer’s beef packing plant fire in Kansas, and current market reaction in the wake of beef packing capacity reduced by COVID-19.
“Never before has the industry faced so many challenges that threaten the operation of multiple processing facilities simultaneously, along with massive disruptions to the food service supply chain severely limiting nearly half of the total beef market,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments.
Peel points out current industry structure and business practices evolved in response to economic forces driving the beef industry to be ever more competitive.
“The cost efficiencies of large-scale cattle feeding and meatpacking operations are undeniable. Some current proposals will add cost and risk to the industry and will further increase the differences between cattle and wholesale beef prices,” Peel explains. “A less efficient, higher cost beef industry will ultimately result in higher beef prices for consumers and make beef a less competitive protein industry. Simultaneously, cattle producers will face lower cattle prices and, as the industry downsizes, more will be forced out of the industry.”
Peel isn’t advocating for or against any particular change or policy prescription.
“My job is to make sure that the industry understands the implications and consequences of alternatives that are being considered,” Peel says. “Some of the proposals being promoted today will have unintended consequences that are negative for the entire industry. This industry consists of many diverse sectors and perspectives. In the end, the entire cattle and beef industry will thrive or not as a single industry. Be careful what you ask for.”