Cattle Current Weekly Highlights—Week ending Feb. 5, 2021

Cattle Current Weekly Highlights—Week ending Feb. 5, 2021

Based on weekly auctions monitored by Cattle Current, calves and feeder cattle sold mixed last week, with overall demand strongest for lighter weights that can be steered to summer grass programs.

More specifically, calves and feeder cattle sold from $2/cwt. lower to $2 higher at auctions in the North Central and South Central regions last week, according to the Agricultural Marketing Service (AMS). Prices were $1 to $4 higher in the Southeast.

“Lightweight calf prices are beginning to catch fire, even before there are any signs of spring greening. This bodes well for the calf market moving through February and March,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “The higher calf prices would indicate that stocker producers believe feeder cattle prices will be much stronger moving through the summer months, which is exactly what futures traders are banking on right now. With two months of grass cattle buying ahead of the market, there is ample time for 500 lb. steer values to push higher than the $800 per head mark. Heifers of similar weight will likely push toward $700 per head at the same time. Thus, many operations will view this as a profitable price level as it relates to variable cash expenses. There is potential for the value of these animals to move higher than what is stated, but that is more of a timing issue than anything else.”

Week to week on Friday, Feeder Cattle futures closed an average of $2.41 higher from 55¢ higher in spot Mar to $4.70 higher toward the back, recovering about half of the previous week’s losses. Support included a pause to the run higher by grain futures.

Week to week on Friday, Corn futures closed narrowly mixed from fractionally lower to 8¢ higher through the front six contracts.

USDA releases monthly World Agricultural Supply and Demand Estimates on Tuesday, which could add price volatility.

Higher outside markets, tied to increasing COVID-19 vaccinations and hopes of reopening the economy provided overall market support, as did more positive supply fundamentals from the second quarter onward.

“The number of steers and heifers going through our packing plants over the course of the next several years is going to shrink. As it declines, so will our beef production, and prices are going to get higher. We’ll see a transition to a higher trending, more profitable cow-calf operator, feedstock operator and cattle feeder,” said Randy Blach, CattleFax CEO, at last week’s annual International Livestock Forum hosted by Colorado State University and the National Western Stock Show

At the same time, Blach expects consumer beef demand to continue near last year’s extraordinary pace. It was the most in 30 years, according to Blach, based on the Annual U.S. Consumer Beef Demand Index, which was near 180 in 2020, compared to just over 160 the previous year. That was with record beef, pork and poultry production.

“That speaks to the quality of the product that we’re producing in this country,” Blach says. He explained Prime and Choice beef production increased from approximately 11 to 12 billion lbs. in the early 2000s to around 18 billion lbs. last year.

Along the way, the Choice-Select spread maintained its strong pace, while the spread between Choice and the upper two-thirds of Choice grew. The Prime-Choice spread sagged this year due to the dearth of restaurant business.

Fed Cattle Prices Edge Higher

Negotiated cash fed cattle prices last week were mainly $1-$2 higher on a live basis at $114/cwt. in the Southern Plains, mostly $114 in Nebraska and at $112-$114 in the western Corn Belt, according to the AMS. Dressed trade was steady to $2 higher at $178-$180.

Week to week on Friday, Live Cattle futures closed an average of $1.80 higher, erasing the previous week’s decline.

“The futures market is pricing in a strong spring rally for finished cattle with April Live Cattle futures a full $10 higher than current cash prices,” Griffith says. “Essentially, the April futures contract is pricing in a 9% price increase over the next 12 weeks. This may be the information cattle feeders are using to bid for feeder cattle, but there remains the expectation of higher feed costs persisting. The market has a long way to go to reach projections.”

Beef Prices Begin to Stall

Recently resurgent wholesale beef prices showed signs of hitting the seasonal wall last week. Choice boxed beef cutout value was 63¢ higher week to week on Friday at $234.58/cwt. Select was $1.91 lower at $220.79.

“Most purveyors of the beef market likely expect beef prices to soften in February, and possibly into March, as these two months tend to experience soft demand,” Griffith says. “Such a decline would lead into another escalation of prices as grilling season hits. It is difficult to know how consumers will respond, with many restaurants remaining closed or at reduced capacity. If restaurants move toward full capacity at any point, one could expect consumers to be hesitant at first but also eager to dine in such restaurants. Another unknown will be summer sports such as baseball, where a considerable quantity of beef is consumed. Given the information for how the market responded in 2020, beef prices are likely to remain strong in 2021. As demand goes so will prices.”

Friday to Friday Change

Weekly Auction Receipts

Feb. 8 Auction Direct

Video/net

Total
 

225,100

(+31,000)

34,200

(-25,800)

10,900

(-27,400)

270,200

(-22,000)

 

CME Feeder Index

Thursday through Thursday…

CME Feeder Index* Feb. 4 Change
  $135.65 –  $0.37

*Wednesday-to Wednesday for CME Feeder Index

 

Cash Stocker and Feeder

North Central

Steers-Cash Feb. 8 Change
600-700 lbs. $151.04 –   $2.59
700-800 lbs. $141.14 –   $1.20
800-900 lbs. $133.63 –   $1.50

South Central

Steers-Cash Feb. 8 Change
500-600 lbs. $159.60 +  $0.95
600-700 lbs. $144.67 +  $2.29
700-800 lbs. $135.18 +  $0.65

Southeast

Steers-Cash Feb. 8 Change
400-500 lbs. $160.41 + $4.12
500-600 lbs. $144.71 + $2.65
600-700 lbs. $132.13 –  $1.63

(AMS National Weekly Feeder & Stocker Cattle Summary)

 

Wholesale Beef Value

Boxed Beef  (p.m.) Feb. 5 ($/cwt) Change
Choice $234.58 + $0.63
Select $220.79 –  $1.91
Ch-Se Spread $13.79 + $2.54

 

Futures

Feeder Cattle  Feb. 5 Change
Mar $138.275 + $0.550
Apr $142.200 + $1.450
May $144.775 + $2.100
Aug $152.350 + $2.400
Sep $153.475 + $2.725
Oct  $154.200 + $3.550
Nov $155.100 + $4.700
Jan ’22 $152.525 + $1.825

 

Live Cattle   Feb. 5 Change
Feb $116.725 + $1.675
Apr $123.775 + $1.925
Jun $119.975 + $2.375
Aug $118.500 + $2.000
Oct $121.150 + $1.625
Dec $123.550 + $1.625
Feb ’22 $125.100 + $2.000
Apr $126.000 + $1.750
Jun $121.100 + $1.200

 

Corn  Feb. 5 Change
Mar ’21 $5.484 + $0.014
May $5.474 -0-
Jly $5.362 –  $0.002
Sep $4.782 + $0.080
Oct $4.516 + $0.064
Mar ’22 $4.586 + $0.084

 

Oil CME-WTI Feb. 5 Change
Mar $56.85 + $4.65
Apr $56.70 + $4.62
May $56.40 + $4.52
Jun $56.01 + $4.38
Jly $55.56 + $4.22
Aug $55.07 + $4.07

 

Equities

Equity Indexes Feb. 5 Change
Dow Industrial Average  31148.24 +   1165.62
NASDAQ  13856.30 +     785.60
S&P 500    3886.83 +     172.59
Dollar (DXY)         91.00 +        0.02
2021-02-08T19:57:10-06:00

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