Calves and feeder cattle sold mixed last week, with stark regional variation. Steers and heifers sold $4-$9/cwt. higher in the North Central region, but $2 lower to $2 higher in the South Central and Southeast regions, according to the Agricultural Marketing Service (AMS).
“There have been some positive signs of the feeder cattle market recovering, which brings optimism to many,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “However, it is still going to be a long haul before the market is fully recovered.”
Feeder Cattle futures closed an average of $1.62 higher week to week on Friday, compared to the previous Thursday.
Fed Cattle Prices Steady to Higher
Negotiated cash fed cattle prices last week were generally steady to a touch stronger, leading some to wonder of the price bottom is established. Others suspect more pressure amid increasing beef production.
The weighted average five-area direct fed steer price through Thursday was $95.97/cwt. on a live basis and $157.67 in the beef. That was $1.06 and $3.84 higher, respectively.
In the latest monthly World Agricultural Supply and Demand Estimates (WASDE), analysts with USDA’s Economic Research Service (ERS) project the five-area direct weighted average steer price at $100/cwt. in the third quarter and at $103 in the fourth quarter for an annual average price of $106.80. That’s $1.80 less than the June projection. The projected annual price next year is $110, with prices estimated at $104 in the first quarter and $105 in the second.
Live Cattle futures closed an average of $1.47 higher week to week on Friday, compared to the previous Thursday (57¢ to $2.47 higher).
Griffith points out Aug Live Cattle ground its way back to $100, while Oct and Dec are trading above $100.
“The reason this is optimistic is because there is nothing in the cattle feeder’s favor right now,” Griffith says. “Coronavirus hit the market hard. Now, the seasonal tendencies of finished cattle prices are weighing on the market. On top of what is going on in the cattle market, corn futures prices have increased even though they are beginning to ease a little.”
WASDE estimated corn production for this year at 15.0 billion bu., which was 995 million bu. less (-6.22%) than the previous month’s estimate, given the 5 million fewer planted acres projected in June’s Acreage report.
Corn production, with projected yield of 178.5 bu./acre, would be 1.38 billion bu. more than last year (+10.16%). With 2020-2021 supply declining more than use, the forecast season-average corn price received by producers was raised 15¢ to $3.35/bu.
Wholesale Values Normalize
Wholesale beef values appear to about back into balance.
Choice boxed beef cutout value was 94¢ lower week to week on Friday (compared to the previous Thursday) at $204.50/cwt. Select was $4.47 lower at $194.29.
“The wholesale beef market is remaining surprisingly strong, given the cattle slaughter rate and total beef production. Weekly beef production has consistently exceeded year-ago levels for several weeks now. This is expected to continue until all of the backlogged cattle are harvested,” Griffith says. “Increased beef production is likely to continue even after the backlog is cleared with heavier cattle coming to market. The key to beef and cattle prices strengthening will be the demand side of the market, because the supply side is firm.”
USDA estimated total federally inspected cattle slaughter for the week ending July 11 at 664,000 head, which would be 6,000 head more than the same week last year. Estimated beef production for the week of 550.3 million lbs. would be 22.3 million lbs. more (+4.22%) than the prior year. Year-to-date beef production is estimated at 13.63 billion lbs., which would be 427 million lbs. less (-3.04%) than the same period last year.
AMS analysts point out 83.7% of carcasses graded Choice and Prime for the week ending June 27. That was 6.6% more than the same time a year earlier. “Most of this is due to cattle being fed for a longer period, with some being fed around 200 days,” they say.
Total red meat production under federal inspection is projected at 1.11 billion lbs., which would be 71.7 million lbs. more (+6.89%) than the same week a year earlier. Year-to-date total red meat production is estimated at 28.18 billion lbs., which would be 318.10 million lbs. less (-1.12%) than the same time last year.
Coronavirus Pressures Beef Demand
Beef demand faces continued challenge, both from economic damage already wrought by COVID-19, and with increasing domestic infections.
Internationally, consider U.S. beef exports in May, which were 33% less than a year earlier at 79,280 metric tons (mt)—the lowest monthly total in 10 years—according to data released by USDA and compiled by the U.S. Meat Export Federation (USMEF). Value was 34% less than the same time last year at $480.1 million.
“As protective measures related to COVID-19 were being implemented, plant disruptions peaked in early May with a corresponding temporary slowdown in exports,” explains USMEF President and CEO Dan Halstrom. “Unfortunately, the impact was quite severe, especially on the beef side. Exports also faced some significant economic headwinds, especially in our Western Hemisphere markets, as stay-at-home orders were implemented in key destinations and several trading partners dealt with slumping currencies.”
Domestically, Griffith explains, “Increased coronavirus cases in many states the past several weeks resulted in many states and local municipalities reverting back to more strict social distancing, as well as adding new precautions. This reversion is sure to negatively influence restaurants again as fewer customers can walk through the doors and because many consumers will revert back to more at-home meals.”
As mentioned in Cattle Current earlier in the week, U.S. restaurant customer transactions stalled for the second week in a row, amid increasing COVID-19 cases in some states, according to The NPD Group (NPD).
For the week ending June 28, total customer transactions at major U.S. restaurant chains were down 14% versus the same week a year ago. That’s a 1% decline from the previous week, based on NPD’s CREST®Performance Alerts.
Nationwide, full service restaurant customer transactions were 25% less than a year earlier, for the week ending June 28. That was a 1% weekly decline overall, while transactions fell 6-9% in states where coronavirus is increasing.
“It’s apparent that the road to recovery is going to be a challenging one for the U.S. restaurant industry,” says David Portalatin, NPD food industry advisor. “Consumer demand is there, as is the want for normalcy, but there is nothing normal about this situation.”
Friday to Friday Change
Weekly Auction Receipts
| July 10 | Auction | Direct |
Video/net |
Total |
|
134,500 (+50,800) |
73,000 (+39,400) |
n/a (n/a) |
207,500 (+58,300) |
CME Feeder Index
| CME Feeder Index* | July 9 | Change |
| $134.92 | + $6.04 |
*Thursday-to Thursday for CME Feeder Index
Cash Stocker and Feeder
North Central
| Steers-Cash | July 10 | Change |
| 600-700 lbs. | $159.84 | + $11.72 |
| 700-800 lbs. | $145.47 | + $9.05 |
| 800-900 lbs. | $139.32 | + $5.20 |
South Central
| Steers-Cash | July 10 | Change |
| 500-600 lbs. | $148.00 | – $3.47 |
| 600-700 lbs. | $142.61 | – $0.70 |
| 700-800 lbs. | $135.11 | + $1.05 |
Southeast
| Steers-Cash | July 10 | Change |
| 400-500 lbs. | $145.48 | – $0.26 |
| 500-600 lbs. | $137.42 | – $2.54 |
| 600-700 lbs. | $131.72 | – $0.43 |
(AMS National Weekly Feeder & Stocker Cattle Summary)
Wholesale Beef Value
| Boxed Beef (p.m.) | July 10 ($/cwt) | Change |
| Choice | $204.50 | – $0.94 |
| Select | $194.29 | – $4.47 |
| Ch-Se Spread | $6.682 | + $3.53 |
Futures
| Feeder Cattle | July 10 | Change |
| Aug | $135.750 | + $0.875 |
| Sep | $137.325 | + $1.475 |
| Oct | $138.500 | + $1.800 |
| Nov | $139.275 | + $1.925 |
| Jan ’21 | $138.975 | + $1.900 |
| Mar | $138.650 | + $1.825 |
| Apr | $139.175 | + $1.225 |
| Aug | $139.375 | + $1.925 |
| Live Cattle | July 10 | Change |
| Aug | $100.000 | + $0.600 |
| Oct | $104.575 | + $1.900 |
| Dec | $108.400 | + $2.475 |
| Feb ’21 | $111.725 | + $1.975 |
| Apr | $113.725 | + $1.650 |
| Jun | $107.765 | + $1.665 |
| Aug | $106.450 | + $1.300 |
| Oct | $108.075 | + 0.575 |
| Dec | $110.125 | + $1.125 |
| Corn | July 10 | Change |
| Jly | $3.404 | – $0.020 |
| Sep | $3.372 | – $0.062 |
| Dec | $3.446 | – $0.088 |
| Mar ’21 | $3.550 | – $0.100 |
| May | $3.612 | – $0.094 |
| Jly | $3.662 | – $0.084 |
| Oil CME-WTI | July 10 | Change |
| Aug | $40.55 | – $0.10 |
| Sep | $40.76 | -0- |
| Oct | $40.94 | + $0.03 |
| Nov | $41.10 | + $0.08 |
| Dec | $41.25 | + $0.14 |
| Jan ’21 | $41.40 | + $0.22 |
Equities
| Equity Indexes | July 10 | Change |
| Dow Industrial Average | 26075.30 | + 247.94 |
| NASDAQ | 10617.44 | + 409.81 |
| S&P 500 | 3185.04 | + 55.03 |
| Dollar (DXY) | 96.66 | – 0.57 |