Fears about the potential global economic impact of novel coronavirus continued to hammer equity and futures markets. Although Cattle futures firmed at the end of the week, steep losses early on helped pressure cash markets.
Nationwide, steers and heifers sold mostly $2-$5/cwt. lower, according to the Agricultural Marketing Service (AMS). There were instances of as much as $10 lower. The exception was portions of the Southeast.
Feeder Cattle futures closed an average of $3.89 lower week to week on Friday ($2.62 to $4.97 lower). That’s an average of $8.07 lower in the last two weeks.
Fed Cattle Trade Lower
Negotiated cash fed cattle trade ended the week generally $2-$3 lower on a live basis at $122/cwt. in the Southern Plains and Nebraska; $122-$123 in the western Corn Belt. Dressed sales were $3-$4 lower at $195.
“It should not be surprising for finished cattle prices to soften during January and February when beef supplies are plentiful and when beef demand is seasonally soft,” explains Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “However, the April Live Cattle contract is offering very little hope of a price resurgence heading into the summer grilling season. Thus, despite strong margins at the feedlot right now, many cattle feeders are already focused on the spring and summer marketing time frame. Many will have taken advantage of the previously strong futures contract price and hedged cattle, but those who did not will be looking to improve their situation.”
Live Cattle futures closed an average of $3.01 lower week to week on Friday ($1.30 to $4.62 lower). That’s an average of $5.40 lower over the last two weeks.
From Jan. 24 through Jan. 30, open interest declined by 34,260 contracts (-8.7%).
“Cattle slaughter is expected to decrease in 2020, including a slight year-over-year decline in steer and heifer slaughter and lower cow slaughter,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “However, large current feedlot inventories confirm that slaughter will be higher early in the year before decreasing in the second half of 2020. Total annual beef production is expected to be slightly higher year over year as heavier carcass weights offset lower slaughter. Beef production in the first half of the year will be higher on increased slaughter and larger carcass weights before lower slaughter pulls beef production down late in the year.”
Choice boxed beef cutout value was $1.49 lower week to week on Friday at $213.00/cwt. Select was 4¢ lower at $210.66.
“Given that red meat production is expected to remain elevated in 2020, it points to the importance of being able to export pork and beef,” Griffith says. “The relaxation of Chinese restrictions on U.S. beef and pork should improve the flow of meat to China, while the tremendous reduction in cattle numbers in Australia should also benefit U.S. beef exports. The market is not expected to move quickly, but this should support prices despite strong beef and pork production in 2020.”
President Trump also signed the U.S.-Mexico-Canada Agreement last week, which should remove some uncertainty from North American trade.
Herd Expansion Ends
Based on USDA’s Cattle report released Friday, as widely expected, national herd expansion is over.
USDA pegs the Jan. 1 inventory of all cattle and calves at 94.41 million head, which is 0.41% less (-391,400 head) than a year earlier.
Beef cows Jan. 1 were 31.31 million head, which was 1.18% less (-374,000 head) than the previous year.
Beef replacement heifers Jan 1 of 5.77 million head were 1.92% fewer (-113,000 head) than the previous year.
Milk cows Jan. 1 of 9.33 million head were 2.10% less (-113,000 head) than the same time a year earlier.
The 2019 calf crop was estimated at 36.06 million head, which was 0.70% less (-253,100 head) than in 2018
Cattle on feed Jan. 1—for all feedlots—of 14.68 million head was 2.16% more (309,800 head) than the previous year.
The estimated feeder cattle supply outside feedlots Jan. 1 of 26.45 million head is 0.40% less (-105,300 head) than a year earlier.
There were 1.61 million head grazing small grain pastures in Kansas, Oklahoma and Texas on Jan. 1. That was 15.26% less (-290,000 head) than a year earlier.
“With total cattle inventories at or just past a cyclical peak, feedlot inventories will likely peak in the next few months,” Peel says. “However, average feedlot inventories are currently record large. After peaking last August then declining for two months, the 12-month moving average of feedlot inventories moved higher the last three months and is currently at 11.639 million head, record large for the current data series back to 1996.”
Friday to Friday Change
Weekly Auction Receipts
CME Feeder Index
|CME Feeder Index*||Jan. 30||Change|
*Thursday-to Thursday for CME Feeder Index
Cash Stocker and Feeder
|600-700 lbs.||$157.55||– $2.59|
|700-800 lbs.||$146.34||– $3.08|
|800-900 lbs.||$139.93||– $3.66|
|500-600 lbs.||$160.81||– $3.58|
|600-700 lbs.||$145.43||– $3.18|
|700-800 lbs.||$139.53||– $3.06|
|400-500 lbs.||$159.85||– $1.64|
|500-600 lbs.||$148.23||– $0.91|
|600-700 lbs.||$136.48||– $0.80|
(AMS National Weekly Feeder & Stocker Cattle Summary)
Wholesale Beef Value
|Boxed Beef (p.m.)||Jan. 31 ($/cwt)||Change|
|Ch-Se Spread||$2.34||– $1.45|
|Feeder Cattle||Jan. 31||Change|
|Live Cattle||Jan. 31||Change|
|Feb ’20||$121.375||– $3.475|
|Feb ’21||$119.550||– $1.925|
|Mar ’20||$3.812||– $0.060|
|Mar ’21||$4.004||– $0.072|
|Oil CME-WTI||Jan. 31||Change|
|Equity Indexes||Jan. 31||Change|
|Dow Industrial Average||28256.03||– 733.70|
|S&P 500||3225.52||– 69.95|
|Dollar (DXY)||97.36||– 0.52|