Seemingly bottomless Cattle futures prices cast a pall over cash markets last week, amid continued COVID-19 uncertainty.
Feeder steers sold $5-$17/cwt. lower in the North Central and South Central areas, according to the Agricultural Marketing Service (AMS). Feeder heifers in the same regions traded $7-$15 lower. Calves in the Southeast sold from steady to $5 higher early in the week to steady to $5 lower later in the week.
“Prices are tracking $10-$20 lower than a year ago,” say AMS analysts. “Demand was reported as moderate to good in auctions this week as buyers did want to procure cattle, just at lower price levels. Some backgrounders who sold yearlings did not recoup the first cost of those calves.”
Feeder Cattle futures closed an average of $11.36 lower week to week on Friday, ($7.45 lower at the back to $12.82 lower toward the front).
“Maybe even worse than the fact that prices (cash) are struggling is the extreme volatility in the futures market,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “In the past six weeks, the April Feeder Cattle futures contract traded from $142/cwt. down to $108. It then traded back over $130 before going back under $110. Such volatility makes it difficult for anyone to physically want to trade cattle.”
The AMS reporter on hand for this week’s sale at Green City Livestock Auction in Missouri aptly summed up the current market situation: “Volatile doesn’t seem a strong enough word to describe the situation anymore, as daily limit up and down moves at the CME are almost expected…Those big moves take all the confidence out of a cash market and make it difficult for producers to decide when to turn loose as well as for buyers to figure what one is worth.”
Fed Cattle Prices Sink
Negotiated cash fed cattle trade remained largely undeveloped through Friday afternoon. However, according to the Agricultural Marketing Service (AMS), there was a light test of live sales in all regions Wednesday at mostly $112/cwt. and at $175-$180 in the beef. That was $6-$8 less than last week on a live basis and $10-$15 less dressed.
“Last week’s prices were wildly higher and this week’s prices were wildly lower,” Griffith says. “The unknowns of the coronavirus are enough to result in huge price swings in the market but those movements would still imply market efficiency. Where the inefficiency comes in is when government officials begin telling people what to do and how to act…Technically, the market is still acting as efficiently as it can, but there are cattle producers being caught in the whiplash.”
Live Cattle futures closed an average of $6.47 lower week to week on Friday, from $4.00 lower at the back to $12.62 lower in spot Apr.
“A lot more market volatility is likely to come as the effects of COVID-19 ripple through our economy,” says David Anderson, Extension livestock economist at Texas A&M University, in the latest issue of In the Cattle Markets. “While we come to grips with all the demand implications it’s worth recognizing that it is occurring in the time of cyclically peak beef supplies.”
With two days left in the first quarter, Anderson explained, year over year: fed steer and heifer slaughter was up 5.4%; cow and bull slaughter was 4.5% higher; average steer dressed weights were 22.5 lbs. heavier; average heifer dressed weights were 13.7 lbs. heavier; cow weights were up 2.6 lbs.
Wholesale beef values sank lower as it appeared the initial onslaught of increased retail demand was coming to an end.
Choice boxed beef cutout value was $22.40 lower week to week on Friday at $230.44/cwt. Select was $26.54 lower at $215.84.
“More and more states are ordering residents to stay at home, which means more meals are being prepared and consumed at home instead of away from home. One would think this change would influence meat consumption and meat disappearance,” Griffith says. “Boxed beef prices are still extremely strong, but they are likely to decline further and the extent of the price decline will likely depend on how long the current situation persists. Things are likely to get worse before they get better.”
Feed Prices Appear Friendly
Corn planted area for all purposes in 2020 is estimated at 97.0 million acres, which would be 8% more or 7.29 million acres more than last year. That’s according to USDA’s Prospective Plantings report. If realized, this will be the highest planted acreage since 2012, according to the National Agricultural Statistics Service. Acreage increases from last year of 800,000 or more are expected in Indiana, Illinois, Ohio, and South Dakota.
“Weather delays may change that number to the downside; reduced demand from ethanol will also be a contributing factor,” say AMS analysts. “As expected, U.S. ethanol production dramatically declined last week and reported the largest week-to-week decline ever recorded. Ethanol blender demand decreased again this week and is the lowest blender demand on record since they started collecting the data in 2010.”
As demand for oil declines and as oil prices declined further with the price war between the U.S. and Russia, ethanol demand follows suit, pressuring corn prices.
Friday to Friday Change
Weekly Auction Receipts
| Apr. 3 | Auction | Direct |
Video/net |
Total |
|
179,100 (+91,900) |
21,500 (-500) |
500 (-3,700) |
201,100 (+87,700) |
CME Feeder Index
| CME Feeder Index* | Apr. 2 | Change |
| $121.07 | – $9.37 |
*Thursday-to Thursday for CME Feeder Index
Cash Stocker and Feeder
North Central
| Steers-Cash | Apr. 3 | Change |
| 600-700 lbs. | $148.60 | – $7.06 |
| 700-800 lbs. | $132.56 | – $10.62 |
| 800-900 lbs. | $120.70 | – $12.35 |
South Central
| Steers-Cash | Apr. 3 | Change |
| 500-600 lbs. | $156.29 | – $5.01 |
| 600-700 lbs. | $142.17 | – $3.63 |
| 700-800 lbs. | $122.73 | – $14.31 |
Southeast
| Steers-Cash | Apr. 3 | Change |
| 400-500 lbs. | $156.01 | – $2.21 |
| 500-600 lbs. | $144.64 | + $0.41 |
| 600-700 lbs. | $131.40 | – $0.97 |
(AMS National Weekly Feeder & Stocker Cattle Summary)
Wholesale Beef Value
| Boxed Beef (p.m.) | Apr. 3 ($/cwt) | Change |
| Choice | $230.44 | – $22.40 |
| Select | $215.84 | – $26.54 |
| Ch-Se Spread | $14.60 | + $4.14 |
Futures
| Feeder Cattle | Apr. 3 | Change |
| Apr | $108.250 | – $12.350 |
| May | $108.100 | – $12.825 |
| Aug | $114.425 | – $12.675 |
| Sep | $115.800 | – $11.775 |
| Oct | $116.900 | – $11.625 |
| Nov | $117.550 | – $11.250 |
| Jan ’21 | $117.350 | – $10.900 |
| Mar | $120.250 | – $7.450 |
| Live Cattle | Apr. 3 | Change |
| Apr | $88.325 | – $12.625 |
| Jun | $80.850 | – $8.575 |
| Aug | $84.300 | – $6.150 |
| Oct | $88.500 | – $5.825 |
| Dec | $92.350 | – $5.975 |
| Feb ’21 | $97.025 | – $5.600 |
| Apr | $99.950 | – $4.550 |
| Jun | $93.450 | – $4.975 |
| Aug | $93.000 | – $4.000 |
| Corn | Apr. 3 | Change |
| May | $3.306 | – $0.154 |
| Jul | $3.366 | – $0.150 |
| Sep | $3.422 | – $0.138 |
| Dec | $3.506 | – $0.136 |
| Mar ’21 | $3.620 | – $0.120 |
| May | $3.682 | – $0.102 |
| Oil CME-WTI | Apr. 3 | Change |
| May | $28.34 | + $6.83 |
| Jun | $30.90 | + $5.75 |
| Jly | $32.33 | + $4.20 |
| Aug | $33.00 | + $2.95 |
| Sep | $33.37 | + $2.07 |
| Oct | $33.62 | + $1.48 |
Equities
| Equity Indexes | Apr. 3 | Change |
| Dow Industrial Average | 21052.53 | – 584.25 |
| NASDAQ | 7373.08 | – 129.30 |
| S&P 500 | 2488.65 | – 52.82 |
| Dollar (DXY) | 100.68 | + 2.375 |