Calves and feeder cattle traded steady to higher last week as a sense of stability returned to Cattle futures and as hopes grew for the U.S. economy opening sooner rather than later as COVID-19 appeared to plateau.
Steers and heifers traded $5-$10/cwt. higher in the South Central region, according to the Agricultural Marketing Service (AMS). Prices were steady to $4 higher in the North Central and Southeast regions.
Auction receipts continued lighter than normal as some producers hold cattle, hoping markets will improve. Auction volume was less than 100,000 head for the third time in five weeks, according to AMS–about 18.5% less than in 2019 so far this year.
Except for unchanged in spot Apr and 47¢ lower in Aug, Feeder Cattle futures closed an average of $1.14 higher on Friday, compared to the previous Thursday (57¢ to $2.10 higher).
“The recommendation for most producers has been to hold on to cattle and try to lengthen the potential marketing window, and that recommendation holds today,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “Unfortunately, there are producers that can no longer hold on to cattle, which limits their flexibility. One alternative some producers could consider is shipping cattle to the feedlot. This is a potential solution for producers who can afford to hold on to cattle and do not need the cash flow to sustain business operations. Several producers will need the cash flow, given they have been purchasing feed all winter, and fertilizer bills will be due sooner rather than later. These are the producers who are in the toughest position because there are very few alternatives. Many producers will simply have to make the best decision for today, given the available information. There is no reason to look back a month from now and wish the decision was different.”
Packing Constraints Pressure Fed Cattle Prices
Slowing beef packing and processing, due to COVID-19, pressured negotiated cash fed cattle prices amid a light test.
Live trades were mostly steady in the Southern Plains at mainly $105/cwt. They were steady to $11 lower in the north at $94-$105 in Nebraska and at $95-$105 in the western Corn Belt. Dressed sales were steady to $18 lower at $155-$165 in Nebraska and at $150-$168 in the western Corn Belt.
“The reduction in production means there is not as much need for cash cattle purchases to fill in production holes throughout the week, as many of these facilities are trying to make sure they get all of their contracted cattle processed with a limited labor resource in many instances,” Griffith explains. “What few cattle trade in the cash market will mean lower prices week-over-week, which will play into lower formula prices as well.”
“This predicament could result in a situation not previously seen in the beef industry,” explained Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his Monday market comments. At the time, JBS had closed its Greeley, CO plant for two weeks, according to the Colorado governor’s office.
“It may simply not be possible to slaughter animals in a timely manner,” Peel explained. “Last summer, the loss of a single packing plant in Kansas resulted in relatively little decrease in overall cattle slaughter as production was shifted to other plants; increased Saturday slaughter largely offset the loss of the fire-damaged plant. In the current situation, closure or reduced chain speeds across multiple plants may make it impossible to keep up with slaughter.”
Negotiated cash trade for the week was slightly less than 10,000 head (noon Friday), according to AMS. Those analysts say that would be the sparsest volume since mandatory livestock reporting began in 2001.
Except for 52¢ and 42¢ lower in Oct and Dec, Live Cattle futures closed an average of 90¢ higher from the previous Thursday through Friday (22¢ to $1.92 higher).
Between slower production and anemic returns, feedlot placements are likely to be lower year over year for the next several months, perhaps significantly lower. David Anderson, Extension livestock economist with Texas A&M University provided his outlook for the next Cattle on Feed report, in a webinar hosted by the Texas and Southwestern Cattle Raisers Association Friday afternoon. He sees March placements 20% less than the previous year, March marketings up near 13% and the Apr. 1 cattle on feed inventory being 5% less.
“One of the key factors moving forward will be pasture and range conditions,” say analysts with the Livestock Marketing Information Center, in the latest Livestock Monitor. “Good forage conditions will allow cattle to gain weight outside the feedlot and buy time, which at this point looks like a pivotal hedge/risk management option. If drought becomes an issue, it will force placements into feedlots even if economic conditions for feeding animals is weak. Cattle feeding returns are expected to be negative until fall 2020. Producers selling feeder animals in a drought market will likely face prices sharply below a year ago.”
On the other side of the equation, reduced production from supply chain disruptions continues to lift wholesale beef values.
Choice boxed beef cutout value was $15.06 higher week to week on Friday at $238.99/cwt. Select was $18.87 higher at $227.20.
“From a consumer perspective, there is concern about meat availability at the local grocery store, while slaughter facilities are trying to manage around employee health and the agricultural producers who are supplying live animals to the facility. When slaughter levels are reduced then animals will start backing up in the feedlot or finishing barn,” says Griffith. “This means cattle feeders and hog finishers have to decide what to do with these animals. Most cattle feeders will feed cattle to heavier weights until they can physically move them to the slaughter facility. This means pen space is not opening up, which backs up feeder cattle and calves.”
Friday to Friday Change
Weekly Auction Receipts
CME Feeder Index
|CME Feeder Index*||Apr. 16||Change|
*Thursday-to Thursday for CME Feeder Index
Cash Stocker and Feeder
|600-700 lbs.||$153.42||+ $10.24|
|700-800 lbs.||$134.01||+ $7.78|
|800-900 lbs.||$123.64||+ $6.47|
|500-600 lbs.||$153.14||+ $3.49|
|600-700 lbs.||$136.91||– $1.11|
|700-800 lbs.||$121.26||+ $1.03|
|400-500 lbs.||$150.37||– $0.57|
|500-600 lbs.||$140.93||+ $1.77|
|600-700 lbs.||$127.55||– $0.46|
(AMS National Weekly Feeder & Stocker Cattle Summary)
Wholesale Beef Value
|Boxed Beef (p.m.)||Apr.17 ($/cwt)||Change|
|Ch-Se Spread||$11.79||– $3.81|
|Feeder Cattle||Apr. 17||Change|
|Jan ’21||$129.300||+ $2.100|
|Live Cattle||Apr. 17||Change|
|Feb ’21||$104.500||+ $0.225|
|Mar ’21||$3.552||– $0.070|
|Oil CME-WTI||Apr. 17||Change|
|Equity Indexes||Apr. 17||Change|
|Dow Industrial Average||24242.29||+ 523.12|
|S&P 500||2874.56||+ 84.74|
|Dollar (DXY)||99.72||+ 0.16|