Cash calf and feeder cattle prices were mixed last week, amid plenty of volatility in equity markets, declining wholesale beef prices and pressure on cash fed cattle.
Steers and heifers sold steady to $2/cwt. higher in the North Central region, but steady to $4 lower in the South Central and Southeast regions, according to the Agricultural Marketing Service (AMS).
“With the slaughter pace inching closer to normal and beef cutout values dropping, the focus may soon turn to the surplus of market ready cattle that history says will have to be whittled away at by getting to a price low enough to stimulate surplus demand (see below),” noted the AMS reporter on hand for Wednesday’s weekly sale at South Central Regional Stockyards in Vienna, MO.
Feeder Cattle futures closed an average of $2.94 lower to week on Friday.
“The fact that fresh-weaned calf prices are not declining speaks to strength in the market,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “Prices for lightweight calves typically reach their apex in March and then seasonally decline through the summer and fall months…The market did not experience its seasonal peak because coronavirus shut everything down.”
Griffith explains feeder cattle weighing less than 800 lbs. are garnering the most feedlot demand because lighter cattle offer more opportunity to work through the backlog of market-ready fed cattle.
Cow Culling Likely to Increase
Dry conditions and drought continue to expand, according to the latest U.S. Drought Monitor (June 11), with 38.6% of the continental U.S. rated as abnormally dry (D0) to Extreme Drought (D3), versus 10.6% a year earlier.
Much of the affected area ranges from Colorado west and up through the Northwest, as well as northern New Mexico, western Kansas and the Panhandles of Oklahoma and Texas.
A couple of year’s worth of anemic economic cow-calf returns, and now those dry conditions, continue to boost beef cow slaughter, helped along by stronger cull cow values.
According to AMS, year-to-date beef cow slaughter through May 31 (preliminary) is 1.5% more than a year ago and about 15% more than the previous five-year average. Keep in mind that cow slaughter the past couple of months was likely muted by disruptions in packing capacity.
Rather than the short and shallow liquidation phase many expected at the beginning of the year, it now appears a more conventional cyclical liquidation phase is in the cards.
Fed Cattle Prices Turn Sharply Lower
Through Thursday, the average five-area direct fed steer price (AMS) was $104.84 on a live basis, compared to $112.68 the previous week. The dressed steer price was $166.65, versus $179.17 the prior week.
Regionally, live prices were $3-$4 lower in the Southern Plains at $104/cwt. in the Texas Panhandle and at $103-$107 in Kansas. Live trade was $5-$10 lower in Nebraska at $105-$108; $5-$9 less in the western Corn Belt at $103-$105. Dressed trade was $10-$20 lower in Nebraska at $165; $13-$15 lower in the western Corn Belt at $160-$172.
“The available supply of market-ready cattle is high and the demand for cattle cannot physically exceed slaughter capacity. Thus, prices for finished cattle are softening and will remain soft until packers can work through the glut of market-ready cattle,” Griffith says. “This comes at a time when finished cattle prices are seasonally softening as the market moves toward the dog days of summer. How long the backup of cattle can hang over the market is not exactly known. It will depend on how well beef prices are doing and how many Saturdays are utilized. It may take until the fourth quarter of the year before cattle marketings are current.”
Other than $2.17 higher in spot Jun, Live Cattle futures closed an average of $2.04 lower week to week on Friday (85¢ to $2.87 lower at the back).
The average five-area direct live steer price (FOB) in May was $111.53/cwt., which was $9.51 more than the previous month, according to USDA. The average dressed steer price in the beef was $179.02 (delivered), which was $19.75 more than the previous month.
As mentioned in Cattle Current earlier this week, USDA’s Economic Research Service (ERS) increased price projections for this year’s average fed steer price by $4.50 to $108.60/cwt. In the latest monthly World Agricultural Supply and Demand Estimates (WASDE), ERS forecasts fed steer prices to average $106 in the second quarter, $104 in the third quarter and $106 in the fourth quarter. The first-quarter price was $118.32.
Retail Beef Prices Record High
Wholesale beef values continue to decline and normalize as packing capacity recovers.
Estimated cattle slaughter for the week was 658,000 head, according to USDA, which was 22,000 head more (+3.5%) than the previous week; 11,000 head fewer (-1.6%) than the same week last year. Estimated year-to-date cattle slaughter of 13.97 million head is 957,000 head fewer (-6.4%) than the same time a year ago. However, heavier carcass weights contributed to the fact that beef production for the week was 2.1% more than the same week last year at 542.2 million lbs.
Choice boxed beef cutout value was $30.84 lower week to week on Friday at $230.64/cwt. Select was $27.15 lower at $219.27.
Sky-high wholesale prices, especially from the second half of April and throughout May mean consumers will likely be paying higher prices for a while.
“Those high wholesale prices led to major changes in retail prices. Since the price series has been recorded, dating back more than 30 years, the all fresh retail price for beef hit a record high in May, coming in just under $7.05/lb.,” Griffith says. “This is $1.08 higher than the all fresh retail price of beef reported in March. Thus, retail beef prices increased 18% the past two months and that may not be the end. There is no doubt wholesale beef prices have moderated the past several weeks and will continue to do so. However, this does not mean retail prices will decline quickly. Retailers will be looking to recapture some of their losses from April and May, which means retail beef prices will remain elevated.”
Friday to Friday Change
Weekly Auction Receipts
| June 12 | Auction | Direct |
Video/net |
Total |
|
160,300 (-46,800) |
33,800 (-53,600) |
46,300 (+35,600) |
240,400 (-64,800) |
CME Feeder Index
| CME Feeder Index* | June 11 | Change |
| $129.58 | + $1.65 |
*Thursday-to Thursday for CME Feeder Index
Cash Stocker and Feeder
North Central
| Steers-Cash | June 12 | Change |
| 600-700 lbs. | $153.21 | + $1.18 |
| 700-800 lbs. | $141.43 | – $0.03 |
| 800-900 lbs. | $132.83 | + $2.41 |
South Central
| Steers-Cash | June 12 | Change |
| 500-600 lbs. | $150.74 | – $3.49 |
| 600-700 lbs. | $141.23 | – $1.92 |
| 700-800 lbs. | $131.92 | – $0.80 |
Southeast
| Steers-Cash | June 12 | Change |
| 400-500 lbs. | $149.18 | – $1.45 |
| 500-600 lbs. | $142.15 | – $0.03 |
| 600-700 lbs. | $132.36 | – $0.30 |
(AMS National Weekly Feeder & Stocker Cattle Summary)
Wholesale Beef Value
| Boxed Beef (p.m.) | June 12 ($/cwt) | Change |
| Choice | $230.64 | – $30.84 |
| Select | $219.27 | – $27.15 |
| Ch-Se Spread | $11.37 | – $3.69 |
Futures
| Feeder Cattle | June 12 | Change |
| Aug | $131.000 | – $3.175 |
| Sep | $132.475 | – $3.000 |
| Oct | $133.150 | – $2.925 |
| Nov | $133.475 | – $3.075 |
| Jan ’21 | $132.450 | – $2.800 |
| Mar | $131.350 | – $3.150 |
| Apr | $132.375 | – $2.800 |
| Aug | $132.975 | – $2.625 |
| Live Cattle | June 12 | Change |
| Jun | $96.075 | + $2.175 |
| Aug | $95.325 | – $0.850 |
| Oct | $98.000 | – $1.300 |
| Dec | $102.050 | – $1.775 |
| Feb ’21 | $106.000 | – $2.050 |
| Apr | $108.450 | – $2.300 |
| Jun | $102.000 | – $2.475 |
| Aug | $101.550 | – $2.750 |
| Oct | $104.425 | – $2.875 |
| Corn | June 12 | Change |
| Jly | $3.300 | – $0.012 |
| Sep | $3.344 | – $0.010 |
| Dec | $3.430 | – $0.022 |
| Mar ’21 | $3.546 | – $0.024 |
| May | $3.612 | – $0.020 |
| Jly | $3.662 | – $0.020 |
| Oil CME-WTI | June 12 | Change |
| Jly | $36.26 | – $3.29 |
| Aug | $36.51 | – $3.29 |
| Sep | $36.78 | – $3.25 |
| Oct | $37.00 | – $3.15 |
| Nov | $37.21 | – $3.07 |
| Dec | $37.42 | – $3.00 |
Equities
| Equity Indexes | June 12 | Change |
| Dow Industrial Average | 25605.54 | – 1505.54 |
| NASDAQ | 9588.81 | – 225.27 |
| S&P 500 | 3041.31 | – 152.62 |
| Dollar (DXY) | 97.09 | + 0.14 |