Renewed optimism continued in cattle markets last week, bolstered by strong week-to-week gains in Cattle futures prices. Traders are apparently looking beyond the current backlog of fed cattle.
Calves and feeder cattle sold mixed. Steers and heifers in the South Central region traded $3-$4/cwt. higher, according to the Agricultural Marketing Service (AMS). In the North Central and Southeast regions, though, they sold from $3 lower to $1 higher.
AMS analysts note, “There was a big increase in North Central prices last week, due to some annual specials that bring high-quality, reputation, one-iron brand strings of cattle to town.”
Feeder Cattle futures closed an average of $4.44 higher week to week on Friday ($2.95 higher to $6.95 higher in spot Aug).
“The market for heavier feeder cattle is beginning to gain some steam, which is a typical seasonal pattern,” explains Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “The August Feeder cattle contract traded to its highest level since March 4 and has gained more than $6 since the Independence Day holiday. The August Feeder Cattle contract is still $14 lower than its contract high set in early January, but it is also $26 higher than its contract low set in early April. It is probably not feasible for the market to move back above the $150 mark for the August contract, but it could still have some upside potential given its slow and steady ascent back to its current level.”
On the other hand, Griffith notes summer heat and seasonality are weighing on calf prices. “The prices will continue to be pushed lower in the fall as the run of spring born calves make their way to market,” he says.
In the latest monthly Livestock, Dairy and Poultry Outlook (LDPO), analysts with USDA’s Economic Research Service (ERS) say expected higher fed cattle slaughter and increased feedlot marketings should improve demand for feeder cattle heading into the third quarter.
ERS projects the average feeder steer price (basis Oklahoma City) at $133/cwt. in the third quarter and $131 in the fourth quarter for an annual average of $131.70. Prices are projected at $129 in the first quarter of next year and at $132 in the second.
Of course, dry conditions could have plenty to say about late-summer markets.
“For the first time this year, over 50% of the country is in some sort of drought designation,” say AMS analysts. “The last time that occurred was the week ending Sept. 18, 2018, when the country was coming off a historical drought.”
Specifically, 51.4% of the continental U.S. was designated from abnormally dry to Extreme Drought, according to the U.S. Drought Monitor for July 14. At the same time last year, it was 9.79%.
For the week ending July 12, 36% of the nation’s pasture and range was rated in Good or Excellent condition, which was 32% less than last year, according to USDA’s Crop Progress report. Conversely, 30% was rated in Poor or Very Poor condition, compared to 8% at the same time last year.
Fed Cattle Prices Firm
Negotiated cash fed cattle prices were mainly steady last week.
The weighted average five-area direct fed steer price through Thursday was $96.32/cwt. on a live basis, which was 35¢higher than the previous week, but $16.70 less than the same week last year. The average steer price in the beef was $157.58, which was 9¢less than the previous week and $25.39 less than a year earlier.
Live Cattle futures closed an average of $1.89 higher week to week on Friday ($1.05 higher to $3.27 higher in spot Aug).
“The October Live Cattle futures contract gained $6 since the beginning of July, while the December Live Cattle contract gained about $5.50 over that same timeframe,” Griffith says. “These prices still do not put finished cattle where cattle feeders want them, but there is a lot of time between now and the fall marketing time period for cattle to keep creeping higher. Another point of optimism is the fact that current cash prices have found a steady state instead of continuing to decline. The steep decline through the spring did not bode well for summer market prices, but they are holding their ground well given seasonal pressure.”
However, ERS lowered forecast fed steer prices by $4 to $100/cwt. in the third quarter and by $3 in the fourth quarter to $103.
“Despite slaughter rates having stabilized near year-ago levels, there continues to be a large volume of market-ready cattle supplies available for slaughter,” say ERS analysts, in the LDPO. “Based on the USDA Cattle on Feed report for June, the number of cattle that have been on feed over 150 days grew to 971,000 head, or 42% more than last year. Further, wholesale beef prices declined rapidly from recent peaks to below year-ago levels, marking a sharp turnaround.”
Retail Beef Prices Still Elevated
Choice boxed beef values last week sank to the lowest levels since December of 2017, according to AMS.
Choice boxed beef cutout value was $4.03 lower week to week on Friday at $200.47/cwt. Select was $3.98 lower at $190.31.
Renewed packing capacity and cattle slaughter is behind normalizing wholesale values, while heavier carcasses are adding extra pressure.
ERS increased forecast beef production for this year by 260 million pounds, compared to the prior month, to 26.9 billion lbs., just about 1% less than last year.
At the same time, retail beef prices remain high, relative to current production, following the price surge in the wake of coronavirus disruptions.
Retail Choice beef value in June was nearly $7.56/lb.. That was a tick lower than in May but $1.05 higher than in January, according to Griffith. The all fresh retail beef price was around $7.38/lb., up 34¢ from May and $1.46 more compared to January.
“Retailers were forced to push prices higher rather rapidly in April and May due to reduced supply of beef from lower cattle slaughter,” Griffith explains. “Though prices escalated quickly at the retail level, it is doubtful they will decline as quickly. Retailers are looking to make up for the losses they likely incurred during late March and April. Therefore, it will be a long slow march through the rest of the year as retail beef prices soften. There is no guarantee the prices will be back to pre-COVID-19 levels by the end of the year.”
Friday to Friday Change
Weekly Auction Receipts
CME Feeder Index
|CME Feeder Index*||July 16||Change|
*Thursday-to Thursday for CME Feeder Index
Cash Stocker and Feeder
|600-700 lbs.||$151.31||– $8.53|
|700-800 lbs.||$142.78||– $2.69|
|800-900 lbs.||$137.51||– $1.81|
|500-600 lbs.||$152.26||+ $4.26|
|600-700 lbs.||$145.21||+ $2.60|
|700-800 lbs.||$139.13||+ $4.02|
|400-500 lbs.||$144.81||– $0.67|
|500-600 lbs.||$137.17||– $0.25|
|600-700 lbs.||$129.81||– $1.91|
(AMS National Weekly Feeder & Stocker Cattle Summary)
Wholesale Beef Value
|Boxed Beef (p.m.)||July 17 ($/cwt)||Change|
|Ch-Se Spread||$10.16||– $0.05|
|Feeder Cattle||July 17||Change|
|Jan ’21||$142.400||+ $3.425|
|Live Cattle||July 17||Change|
|Feb ’21||$113.775||+ $2.050|
|Mar ’21||$3.496||– $0.054|
|Oil CME-WTI||July 17||Change|
|Jan ’21||$41.42||+ $0.02|
|Equity Indexes||July 17||Change|
|Dow Industrial Average||26671.95||+ 596.65|
|S&P 500||3224.73||+ 39.69|
|Dollar (DXY)||96.01||– 0.65|