Despite volatile outside markets and what appeared to be overall softer cash fed cattle prices, calves and feeders sold for mostly higher money last week.
Steers and heifers traded mainly steady to $3/cwt. higher, according to the Agricultural Marketing Service (AMS). The exception was $1-$3 lower in the Southeast.
“Demand was evident this week in the Dakotas on lighter-weight calves suitable for summer grazing (under 600 lbs.),” according to AMS analysts. “Heavier-weight cattle that will go directly to the feedyard are still in demand, just not at the handsome prices seen at the beginning of January.”
AMS analysts note that winter weather continues to impact the market with dicey travel conditions and impacts on feedlot performance.
The AMS reporter on hand for Thursday’s Superior Livestock video auction pointed out feedyards remain relatively full, while winter weather and muddy pen conditions are depressing gains.
“Cost of gains are increasing as the winter has taken its toll on pen conditions in several areas this winter,” say AMS analysts. “The extra mud takes energy away from weight gain; steer carcass weights declined to 901 lbs. for week ending Jan. 25, which was 6 lbs. lower than the previous week and 13 lbs. heavier than a year ago.”
Throw in volatile outside markets, tied to fears over how novel coronavirus could slow global economic growth and Cattle futures took a rollercoaster ride.
Week to week on Friday, Feeder Cattle futures closed from an average of 51¢lower to an average of 87¢higher.
AMS analysts note Feb-May Feeder Cattle contracts declined $11.63 to $12.55 since Jan. 13.
With all of that said, it appears the lowest prices of the cattle cycle are in the rearview mirror (see below).
Fed Cattle Prices Soften
Negotiated cash fed cattle trade was yet to fully develop through Friday afternoon but was shaping up lower. Live prices in the Southern Plains were $1 lower than the previous week at $121/cwt. Although too few to trend, early live sales in Nebraska were also $1 lower at $121, while early dressed sales were $1-$2 lower at $193-$195.
Except for 5¢to 30¢lower toward the front of the board, Live Cattle futures closed an average of 48¢higher week to week on Friday.
Since January 13, the front five Live Cattle contracts declined $6.10 to $8.50, according to AMS analysts.
“Despite a softer Live Cattle futures market than just a few weeks ago, the expectation remains for finished cattle to reach as high as $130 in the spring months,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “There is no good reason for the market to be experiencing weakness from a fundamental standpoint. There have not been any real surprises in market information as it relates to cattle supply and expected beef production, nor has there been any negative information on the demand side.”
Wholesale beef values declined with seasonal pressure and wonderments about global economic growth.
Choice boxed beef cutout value was $2.88 lower week to week on Friday at $212.12/cwt. Select was $6.77 lower at $203.89.
U.S. Beef Exports Should Regain Momentum
U.S. beef exports last year totaled 1.32 million metric tons (mt), 2.5% below the previous year’s record volume, according to data released by USDA and compiled by the U.S. Meat Export Federation (USMEF). Beef export value was 3% less at $8.1 billion. Beef export value per head of fed slaughter last year was $309.75, down 4%.
USMEF attributes part of the decline to decreased exports to Japan, borne by the tariff disadvantage of the U.S., compared to its competitors. U.S. beef exports to Japan were 6% less in both volume (311,146 mt) and value ($1.95 billion). Recent ratification of a new trade agreement by the Japanese Parliament should offer some relief. As of Jan. 1, the tariff rate declined from 38.5% to 26.6%, the same as other major competitors, according to USMEF. There will be another rate cut April 1.
At the same time, U.S. pork exports posted new volume and value records in 2019, 10% more than the previous year in volume (2.67 million mt) and 9% higher in value ($6.95 billion).
Cattle Prices Set to Strengthen
At the 2020 Industry Outlook in San Antonio last week, CattleFax analysts explained beef demand is strong and with U.S. cattle numbers plateauing, prices are likely to be stronger in the year ahead as consumers at home and abroad support industry profitability.
CattleFax forecasts steer calf prices (550 lbs.) this year $6 higher than last year at an average of $170/cwt., across a range of $155-$180.
CattleFax also projects feeder steer prices (750 lbs.), $6 higher, at an average of $150/cwt., across a range of $140-$160.
Kevin Good, CattleFax Vice President of Industry Relations and Analysis explained, “With strong demand for U.S. beef at home and rising demand overseas, the modest increases in supply will be more than offset by a growing consumer appetite for our product.”
CattleFax projects fed steer prices to average $120/cwt. during 2020, which would $3 more than last year. He notes there is downside risk at $108 and resistance at $130.
“There is strong demand for our product, but that’s the result of the fact that our business has paid attention to market signals and we’ve been producing a consistent, quality product that has gained a greater piece of that retail dollar. We need to protect that,” says Randy Blach, CattleFax CEO.
Friday to Friday Change
Weekly Auction Receipts
CME Feeder Index
|CME Feeder Index*||Feb. 6||Change|
*Thursday-to Thursday for CME Feeder Index
Cash Stocker and Feeder
|600-700 lbs.||$158.50||+ $0.85|
|700-800 lbs.||$146.69||+ $0.35|
|800-900 lbs.||$137.99||– $1.94|
|500-600 lbs.||$163.21||+ $2.40|
|600-700 lbs.||$149.70||+ $4.27|
|700-800 lbs.||$139.51||– $0.02|
|400-500 lbs.||$156.58||– $3.27|
|500-600 lbs.||$146.43||– $1.80|
|600-700 lbs.||$134.84||– $1.64|
(AMS National Weekly Feeder & Stocker Cattle Summary)
Wholesale Beef Value
|Boxed Beef (p.m.)||Feb. 7 ($/cwt)||Change|
|Ch-Se Spread||$6.23||+ $3.89|
|Feeder Cattle||Feb. 7||Change|
|Jan ’21||$147.300||– $1.025|
|Live Cattle||Feb. 7||Change|
|Feb ’20||$121.325||– $0.050|
|Feb ’21||$120.225||+ $0.675|
|Mar ’20||$3.834||+ $0.022|
|Mar ’21||$4.026||+ $0.022|
|Oil CME-WTI||Feb. 7||Change|
|Equity Indexes||Feb. 7||Change|
|Dow Industrial Average||29102.51||+ 576.48|
|S&P 500||3327.71||+ 102.19|
|Dollar (DXY)||98.72||+ 0.36|