Weakening grain futures prices helped fuel Feeder Cattle futures, sparking higher cash calf and feeder cattle prices toward the end of last week. Prices were significantly higher in some cases at the weekly auctions monitored by Cattle Current.
Overall, steers and heifers sold from $1 lower to $3 higher, according to the Agricultural Marketing Service.
Week to week on Friday, Feeder Cattle futures closed an average of $5.47 higher ($3.92 to $8.32 higher). Corn futures closed an average of 31¢ lower through the front six contracts and Soybean futures closed an average of 99¢ lower through the front six contracts.
Although welcome, the significant decline in grain futures likely represents a temporary reprieve, according to Aaron Smith, Extension crop marketing specialist at the University of Tennessee (UT).
“The underlying supply and demand numbers supported the August 2020-January 2021 rally (corn, soybeans and wheat), but you can only have so many weeks with double-digit gains before the market declines and seeks to establish a new trading range,” Smith explains, in his weekly Crop Comments. “Next week we are likely to see some volatility as markets seek a path forward. Nearby soybean futures should find support near $12.50, corn near $4.50, and wheat near $6.00.”
In the latest monthly Livestock, Dairy and Poultry Outlook (LDPO), analysts with USDA’s Economic Research Service (ERS) say the average feeder steer price last year was about 5% less than the previous year at $135.45/cwt. That’s basis a 750-800 lb. steer selling at Oklahoma National Stockyards.
“Prices in the first two weeks of January 2021 averaged $134.81, about 7% below the monthly average for January 2020,” ERS analysts say. “To the extent that prices at the beginning of 2021 were higher than expected, the first-quarter 2021 forecast was raised $1 to $134/cwt. However, higher expected feed costs lowered expectations for prices the rest of the year, and as a result the annual price forecast for feeder steers was lowered $1 to $137.”
Specifically, the average feeder steer price is projected at $134/cwt. in the first and second quarters, $139 in the third quarter and $140 in the fourth quarter for an annual average of $136.75.
“Demand for lightweight cattle will begin to pick up in the coming weeks as several buyers will be trying to buy some cattle before the grass cattle run reaches warp speed. This expected increase in demand will slowly begin to support calf prices, which should be beneficial to producers who are in a situation where they have to sell calves in the near term,” says Andrew P. Griffith, UT agricultural economist. “Feeder Cattle futures are also providing some price risk management opportunities for buyers. For example, the August Feeder Cattle contract price has shown a $5/cwt. increase this week and has exceeded the contract high…The stronger futures market may or may not hold, but it should support cash prices of calves and feeder cattle in the near term.”
Feedlot Placements More than Expected
Markets could view Friday’s Cattle on Feed report (feedlots with 1,000 head or more capacity) as a bit bearish with December placements 0.77% more than the previous year. Estimates ahead of the report expected a decrease of about 3%. The 1.84 million head placed were the second most for the month since the data series began in 1996, according to the National Agricultural Statistics Service.
Marketings in December of 1.85 million head were 1% more than the prior year, slightly more than expectations ahead of the report.
The on-feed inventory Jan. 1 of 11.96 million head was slightly more than the previous year, whereas average of expectations was for a decline of about 0.5%.
Fed Cattle Prices Unevenly Steady
Negotiated cash fed cattle sales last week, on a live basis, were mostly steady to $1 on either side of steady at $110-$111/cwt. in the Southern Plains, $109-$110 in the Northern Plains and $108-$110 in the western Corn Belt. Dressed trade was steady to $3 lower at $170-$173.
Week to week on Friday, Live Cattle futures closed an average of $2.51 higher though the front five contracts (50¢ to $4.32 higher) and then 10¢ to 82¢ lower at the back.
“February Live Cattle futures are trading over $116, which means the $7 gap between today’s cash price and the futures price has to be closed at some point. It can either happen by cash prices increasing, futures prices decreasing, or a mixture of both,” Griffith says. “The April Live Cattle contract is over $122 which provides a lot of optimism for cattle feeders moving forward. One would have to imagine cattle feeders are laying off some risk at this level.”
USDA projects the average five-area direct fed steer price at $113 in the first and second quarters, at $115 in the third quarter and at $120 in the fourth quarter.
Wholesale Beef Prices Continue Higher
Choice boxed beef cutout value was $9.90 higher week to week on Friday at $222.82/cwt. Select was $10.26 higher at $213.34. That’s $16.02 higher for Choice over the last two weeks and $16.62 higher for Select.
“The driver behind higher prices does not appear to be supply driven because beef production the first couple weeks of the year was greater than the same weeks one year ago,” Griffith says. “The thought then goes to demand driving the price. Looking at monthly beef trade data, beef and veal exports in November were 13.2% higher than the previous year and totaled 277 million pounds. Monthly data is not available for December, but the weekly beef muscle cut export data shows an increase of 23.3% for December; this has likely carried over to 2021. It appears the appetite for beef is strong and that same strength is likely found domestically. Additionally, there have been news reports that China may become a bigger player in U.S. markets now that the new presidential administration has taken office.”
As reported in Cattle Current earlier in the week, U.S. beef exports to China were record high from July through November of last year, suggesting progress and promise, but still representing less than 1% of the beef imported by that nation, according to USDA’s Economic Research Service.
Projected domestic beef availability also appears to be price supportive.
Even though total domestic red meat and poultry production if forecast higher this year, ERS analysts expect per capita meat disappearance to decline about 1%, due to increased exports and reduced beef imports.
Beef production for this year was projected lower than the previous month at 27.2 billion lbs. but still would be more than in 2020.
Friday to Friday Change
Weekly Auction Receipts
CME Feeder Index
Thursday through Thursday…
|CME Feeder Index*||Jan. 21||Change|
*Wednesday-to Wednesday for CME Feeder Index
Cash Stocker and Feeder
|600-700 lbs.||$149.43||+ $0.72|
|700-800 lbs.||$140.84||+ $3.63|
|800-900 lbs.||$133.83||+ $3.09|
|500-600 lbs.||$156.23||– $0.73|
|600-700 lbs.||$139.96||– $0.26|
|700-800 lbs.||$132.69||+ $0.80|
|400-500 lbs.||$153.85||– $1.03|
|500-600 lbs.||$139.38||– $0.09|
|600-700 lbs.||$128.87||– $0.87|
(AMS National Weekly Feeder & Stocker Cattle Summary)
Wholesale Beef Value
|Boxed Beef (p.m.)||Jan. 22 ($/cwt)||Change|
|Ch-Se Spread||$9.48||– $0.36|
|Feeder Cattle||Jan. 22||Change|
|Feb ’22||$124.650||– $0.100|
|Mar ’21||$5.004||– $0.310|
|Mar ’22||$4.374||– $0.280|
|Oil CME-WTI||Jan. 22||Change|
|Equity Indexes||Jan. 22||Change|
|Dow Industrial Average||30996.98||+ 187.72|
|S&P 500||3841.47||+ 73.22|
|Dollar (DXY)||90.21||– 0.56|