Cattle Current Weekly Highlights—Week ending July 24, 2020

Cattle Current Weekly Highlights—Week ending July 24, 2020

Recently increased feedlot turnover and the availability of grass yearlings helped lift calf and feeder cattle prices last week. Nationwide, steers and heifers sold steady to $4/cwt. higher, according to the Agricultural Marketing Service (AMS).

Feeder Cattle futures closed an average of 93¢ lower week to week on Friday (32¢ lower at the back to $1.42 lower).

“The strength that has been evident in the futures market the past couple of weeks is beginning to become evident in the cash feeder cattle and calf markets,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “The calf market price movement could be considered contra-seasonal because the calf market tends to soften during the heat of summer and moving into the fall. However, the coronavirus pandemic depressed the calf market through the spring months and the first part of summer. The calf market is now trying to realign based on fundamental supply and demand. It is going to be extremely difficult to predict where this market will go over the next several months, but there is a good possibility that fall prices will be better than the fall of 2019.”

As for feeder cattle, Griffith notes the seasonal tendency of increasing prices through the summer seems to be intact.

“The market is offering producers an opportunity to sell calves at higher prices, and there is more upside potential,” Griffith says. “However, the market is so fragile that any negative news within the beef industry, such as news of higher feed costs or something negatively associated with coronavirus, could turn the feeder cattle market on its head.”

Get through August and net feedlot returns grow significantly more positive, according to the most recent Historical and Projected Kansas Feedlot Net Returns (HPK) from Kansas State University.

Fed Cattle Prices Edge Higher

Through Thursday, the average five-area direct fed steer price was $97.23/cwt. on a live basis, which was 91¢ higher than the previous week, but $18.20 less than the same time last year.

Regionally, negotiated cash fed cattle trade for the week was generally $1-$2 higher on a live basis at $96/cwt. in the Southern Plains, $98 in the Northern Plains and $99-$100 in the western Corn Belt. Dressed trades were mostly $1 higher at $158.

Live Cattle futures closed an average of 95¢ lower week to week on Friday (12¢ lower at the back to $1.95 lower in spot Aug).

Total estimated cattle slaughter for the week ending July 25 of 646,000 head would be 4,000 head fewer than the prior week and 6,000 head fewer than the same week a year earlier, according to USDA’s Estimated Weekly Meat Production Under Federal Inspection report.  

Year to date, through June, fed cattle slaughter of 12.08 million was 772,600 head fewer (-6.01%) than the same time last year, according to the monthly USDA Livestock Slaughter report.

Boxed Beef Price Might be Established

“There is a very good chance boxed beef prices have hit their summer low,” Griffith says. “If they have hit their low, then there is a good chance they will be somewhat stagnant for a while before a slow grind higher leading up to holidays at the end of the year. How high boxed beef prices move through the end of the year may depend on how holidays are celebrated if coronavirus remains a concern.”

Choice boxed beef cutout value was $1.30 higher week to week on Friday at $201.77/cwt. Select was 32¢ higher at $190.63.

“The expectation of strong beef production through the end of the year will temper wholesale beef values to some degree, simply due to the quantity supplied to the market,” Griffith explains. “Despite this strong production, Choice boxes have the potential to move back to the $225 to $230/cwt. range as an apex before the end of the year.”

Year to date through June, beef production under federal inspection of 12.78 billion lbs. was 279.7 million lbs. less (-2.14%) than the same time last year, according to the Livestock Slaughter report.

Heavier carcass weights continue to close the gap between beef production and the number of cattle harvested.

Year to date through June, the average dressed steer weight of 897 lbs. is 33 lbs. heavier. The average dressed heifer weight of 829 lbs. is 25 lbs. heavier. Both are record high, according to AMS.

“Beef production will be higher year over year for the remainder of the year,” explained Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his early-week market comments. “This may combine with limited demand to keep wholesale beef prices under pressure going forward.

“Longer term, beef demand may be affected by the economic recession. Impacts have not been obvious thus far but unemployment is still high and some unemployment benefits will end this month. With COVID-19 far from controlled, considerable uncertainty remains regarding how school schedules, sporting activities and business travel could affect beef demand this fall.”

USDA Reports on Price Investigation

USDA released its investigation into cattle and beef price reactions to last summer’s fire at the Tyson plant in Holcombe, KS and to disruptions wrought by COVID-19.

The report—Boxed Beef & Fed Cattle Price Spread Investigation Report—details market conditions and prices before, during and after those events, although the pandemic continues.

Keep in mind this USDA investigation does not examine potential violations of the Packers and Stockyards Act. USDA continues to cooperate with the Department of Justice Antitrust Division in that agency’s current investigation.

Instead, the report provides the logic and details behind the price reactions of the two black swan events: higher wholesale beef prices and lower fed cattle prices spawned by disruption to packing capacity and by altered demand flow, in the case of the pandemic.

“Frankly speaking, the report released by USDA did not reveal anything that was not already known,” Griffith says. “It appeared to be less of an investigation and more of a simple analysis and report of the data. Something further could come of this report, but it is highly unlikely any type of investigation is going to result in findings of the packers doing something illegal. Packers were taking advantage of what the market was offering.”

Friday to Friday Change

 

Weekly Auction Receipts

 

July 24 Auction Direct

Video/net

Total
 

128,100

(-21,000)

79,500

(-16,000)

96,600

(-228,800)

304,200

(-266,400)

 

 

CME Feeder Index

CME Feeder Index* July 23 Change
  $139.43 +  $2.82

*Thursday-to Thursday for CME Feeder Index

 

Cash Stocker and Feeder

North Central

Steers-Cash July 24 Change
600-700 lbs. $162.72 +  $11.41
700-800 lbs. $149.02 +  $6.24
800-900 lbs. $141.41 +  $3.90

 

South Central

Steers-Cash July 24 Change
500-600 lbs. $152.81 + $0.55
600-700 lbs. $145.10 –  $0.11
700-800 lbs. $140.48 + $1.35

 

Southeast

Steers-Cash July 24 Change
400-500 lbs. $146.84 + $2.03
500-600 lbs. $138.94 + $1.77
600-700 lbs. $132.08 + $2.27

(AMS National Weekly Feeder & Stocker Cattle Summary)

 

Wholesale Beef Value

Boxed Beef  (p.m.) July 24 ($/cwt) Change
Choice $201.77 + $1.30
Select $190.63 + $0.32
Ch-Se Spread $11.14 + $0.98

 

Futures

Feeder Cattle  July 247 Change
Aug $142.050 –  $0.650
Sep $142.750 –  $0.575
Oct $142.800 –  $0.800
Nov $142.675 –  $1.175
Jan ’21 $141.025 –  $1.375
Mar $140.175 –  $1.425
Apr $141.325 –  $1.125
May $142.425 –  $0.325

 

Live Cattle   July 24 Change
Aug $101.325 –  $1.950
Oct $105.100 –  $1.775
Dec $109.325 –  $1.375
Feb ’21 $112.450 –  $1.325
Apr $113.975 –  $1.000
Jun $108.450 –  $0.275
Aug $107.300 –  $0.475
Oct $109.525 –  $0.275
Dec $111.750 –  $0.125

 

Corn  July 24 Change
Sep $3.262 – $0.068
Dec $3.350 – $0.046
Mar ’21 $3.460 – $0.036
May $3.530 – $0.030
Jly $3.584 – $0.022
Sep $3.596 – $0.008

 

Oil CME-WTI July 24 Change
Sep $42.18 + $1.43
Oct $42.00 + $1.06
Nov $41.82 + $0.71
Dec $41.64 + $0.37
Jan ’21 $41.45 + $0.03
Feb $41.29 –  $0.29

 

Equities

Equity Indexes July 24 Change
Dow Industrial Average  26469.89 –  202.06
NASDAQ  10363.18 –  140.01
S&P 500   3215.63 –       9.10
Dollar (DXY)       94.35 –       1.66
2020-07-27T16:29:35-05:00

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