Based on the weekly auctions monitored by Cattle Current last week, demand was strongest for lighter cattle suitable for summer grazing.
“The strengthening prices at the local level are being spurred by two factors at this point. The primary driver of lightweight calf prices is grass fever. Grass is slowly beginning to green; some marginal growth is evident in fescue pastures, while cool season annuals should really take off over the next couple of weeks,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “The strengthening price is not based on what grass is available but what is expected to be available. Thus, this is just the start of the price run as some producers are attempting to get a few cattle purchased before prices peak.”
Summer and fall Feeder Cattle futures are the other current price driver, according to Griffith.
“If the summer and fall contract months remain at current levels or push higher, then one can expect calf prices to continue to increase over the next six to eight weeks,” Griffith says. “There does appear to be some disconnect between Feeder Cattle futures and Corn futures, but there is no reason to try to outguess that disconnect. The key is to take advantage of what the market is offering and capitalize on prices in the near term.”
In the meantime, higher feed costs continue to challenge Feeder Cattle futures overall. They closed an average of $1.57 lower week to week on Friday, from 10¢ lower to $2.77 lower.
Week to week on Friday, Corn futures closed an average of 8¢ higher through the front six contracts.
Week to week on Friday, Soybean futures closed an average of 25¢ higher through the front six contracts.
“Tight global stocks and export demand for grain, oilseeds, and cotton continue to drive prices higher,” says Aaron Smith, Extension crop marketing specialist at the University of Tennessee, in his weekly Crop Comments. “China has been the major purchaser of U.S. agricultural products, however demand from other countries has also been robust…Brazil’s soybean harvest continues to be two to three weeks behind normal pace, limiting exports of soybeans to global purchasers. The cold weather across the Southern Plains last week has many concerned that winter kill could affect hard red winter wheat production.”
CattleFax analysts expect cattle prices to improve significantly after markets wade through currently plentiful fed cattle supplies.
Second-Half Optimism
Kevin Good, CattleFax vice president of industry relations and analysis sees this year shaping up as a tale of two halves, with prices continuing to struggle through the first two quarters and then finding plenty of lift in the second half of the year.
During its Market Outlook Wednesday, as part of the National Cattlemen’s Beef Association Winter Reboot, Good explained leverage will begin swinging back in producers’ favor as packing plant capacity utilization declines with smaller cattle harvest supplies.
CattleFax projects modest herd liquidation of 200,000 beef cows this year and 350,000 head next year, due in part to the likelihood of expanding La Niña drought this spring and summer.
In terms of price expectations, CattleFax projects:
- Annual average steer calf price (550 lbs.) at $170/cwt., with a range of $160-$180.
- Annual average feeder steer price (800 lbs.) at $145 with a range of $135-$160.
- Annual average fed steer price at $119 with a range of $108-$128.
- Annual average utility cow price at $64 with a range of $52 to $74.
- Annual average bred cow price at $1,600/hd with a range of $1,200 to $1,900.
At the same time, CattleFax expects consumer beef demand to continue strong.
According to Randy Blach, CattleFax CEO, domestic consumer beef demand last year was the strongest in more than 30 years, based on the U.S. Consumer Beef Demand Index. That was helped by consumer incomes being replaced almost entirely by government stimulus.
Internationally, CattleFax expects U.S. beef exports to increase at least 5% this year.
There are headwinds, of course.
Even before considering the drought, Mike Murphy, CattleFax vice president of research and risk management services, said both supply and demand mean feed costs will likely remain elevated into the next crop marketing year.
Fed Cattle Struggle for Steady
As it is, last week was a tooth-pulling contest for negotiated cash fed cattle prices to end up generally steady. Live trade was steady with the previous week in Nebraska and the Southern Plains at $114/cwt.; steady to $1 lower at $114 in the western Corn Belt. Dressed trade was steady to $2 higher at $182.
Week to week on Friday, Live Cattle futures an average of $1.65 lower, from 72¢ lower to $3.65 lower toward the front.
“It appears that some feeder cattle were carried over into 2021 and likely is reflected in the relatively large January placements,” explains Derrell Peel, Extension livestock marketing specialist, in his weekly market comments. “Feeder supplies are somewhat front-loaded early in 2021 but should tighten up in the second half of the year.”
Feedlot placements in January were 2.017 million head, according to the latest Cattle on Feed report. That was about 3% more year over year.
“This is a difficult environment to market finished cattle,” Griffith says. “Nothing seems to be in tune with normal tendencies. A negative basis of $2 to $3 is not unheard of in February, but it is also not that common. Cattle feeders will be hoping for cash and futures prices to converge moving into the April contract as convergence is advantageous to hedging strategies.”
Choice boxed beef cutout value was $1.30 higher week to week on Friday at $240.53/cwt. Select was $1.83 higher at $229.73.
Friday to Friday Change
Weekly Auction Receipts
| Feb. 27 | Auction | Direct |
Video/net |
Total |
|
216,800 (+139,200) |
46,100 (+27,800) |
37,300 (+35,400) |
300,200 (+202,400) |
CME Feeder Index
Thursday through Thursday…
| CME Feeder Index* | Feb. 25 | Change |
| $138.911 | + $0.80 |
*Wednesday-to Wednesday for CME Feeder Index
Cash Stocker and Feeder
North Central
| Steers-Cash | Feb. 27 | Change |
| 600-700 lbs. | $156.07 | + $0.92 |
| 700-800 lbs. | $144.73 | – $0.71 |
| 800-900 lbs. | $135.48 | – $1.94 |
South Central
| Steers-Cash | Feb. 27 | Change |
| 500-600 lbs. | $164.46 | + $10.75 |
| 600-700 lbs. | $147.19 | – $0.35 |
| 700-800 lbs. | $138.37 | + $1.42 |
Southeast
| Steers-Cash | Feb. 27 | Change |
| 400-500 lbs. | $161.34 | + $7.83 |
| 500-600 lbs. | $148.37 | + $3.89 |
| 600-700 lbs. | $135.87 | + $2.27 |
(AMS National Weekly Feeder & Stocker Cattle Summary)
Wholesale Beef Value
| Boxed Beef (p.m.) | Feb. 26 ($/cwt) | Change |
| Choice | $240.53 | + $1.30 |
| Select | $229.73 | + $1.83 |
| Ch-Se Spread | $10.80 | – $0.53 |
Futures
| Feeder Cattle | Feb. 26 | Change |
| Mar | $138.675 | – $0.450 |
| Apr | $142.575 | – $0.100 |
| May | $145.075 | – $0.650 |
| Aug | $151.950 | – $1.950 |
| Sep | $152.825 | – $2.175 |
| Oct | $153.200 | – $2.350 |
| Nov | $153.225 | – $2.775 |
| Jan ’22 | $151.650 | – $2.150 |
| Live Cattle | Feb. 26 | Change |
| Feb | $113.100 | – $2.825 |
| Apr | $120.000 | – $3.675 |
| Jun | $118.425 | – $2.100 |
| Aug | $117.050 | – $1.375 |
| Oct | $120.625 | – $0.725 |
| Dec | $123.325 | – $1.300 |
| Feb ’22 | $125.575 | – $1.000 |
| Apr | $126.800 | – $0.800 |
| Jun | $121.000 | – $1.100 |
| Corn | Feb. 26 | Change |
| Mar ’21 | $5.554 | + $0.128 |
| May | $5.474 | + $0.058 |
| Jly | $5.350 | + $0.020 |
| Sep | $4.894 | + $0.078 |
| Oct | $4.706 | + $0.106 |
| Mar ’22 | $4.784 | + $0.108 |
| Oil CME-WTI | Feb. 26 | Change |
| Apr | $61.50 | + $2.24 |
| May | $61.23 | + $2.17 |
| Jun | $60.74 | + $2.08 |
| Jly | $60.12 | + $2.00 |
| Aug | $59.46 | + $1.94 |
| Sep | $58.41 | + $1.89 |
Equities
| Equity Indexes | Feb. 26 | Change |
| Dow Industrial Average | 30932.37 | – 561.95 |
| NASDAQ | 13192.34 | – 681.12 |
| S&P 500 | 3811.15 | – 95.56 |
| Dollar (DXY) | 90.93 | + 0.57 |