Depending on weight and location, some classes of calves and feeder cattle came under pressure last week as dry conditions spread and the cash fed cattle market succumbed to the backlog of market-ready cattle, declining wholesale beef values and iffy near-term domestic demand.
Nationwide, steers and heifers traded steady to $4/cwt. lower, according to the Agricultural Marketing Service (AMS).
Still, Feeder Cattle futures closed an average of $2.00 higher to week on Friday.
“The expectation is the market will remain under pressure through the end of fall as the industry works through large supplies of cattle and meat,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “Cattle prices will start to gain a little momentum in the first quarter of 2021 before really accelerating in the second and third quarter of 2021…This is the expectation because it is likely more cows will be culled this year, as well as fewer heifers retained for breeding, due to lower cattle prices and the need for cash flow. Thus, the increased marketings in the short run will place added pressure on prices while at the same time providing support for prices moving into the longer run.”
Based on recent price data, USDA’s Economic Research Service (ERS) increased the projected annual average feeder steer price (basis Oklahoma City) by almost $7, compared to the previous month, to $131.40/cwt.
“With higher anticipated fed cattle slaughter in 2020, feedlot marketings will increase. A faster pace of marketings and higher forecast fed cattle prices than last month will likely improve feedlot demand for feeder cattle,” say ERS analysts, in the latest monthly Livestock, Dairy and Poultry Outlook.
Heading into this week, the market could see added pressure from the monthly Cattle on Feed report, which will likely be viewed as at least somewhat bearish.
Compared to average expectations ahead of the report, more cattle were placed, fewer were marketed and slightly more were on feed at the beginning of the month. That’s for feedlots with 1,000 head or more capacity.
Placements in May of 2.04 million head were 26,000 head fewer (-1.26%) than the previous year.
Marketings in May of 1.5 million head were 570,000 head fewer (-27.54%) than a year earlier and the least marketings for the month since the data series began in 1996.
There were 11.67 million head on feed June 1, which was 57,000 head fewer (-0.49%) than a year earlier. That’s the second highest June inventory since the data series began in 1996.
Moreover, expanding dryness could hamper intentions and prices as the summer unfolds.
According USDA’s weekly Crop Progress report (week ending June 14), 45% of nation’s pasture and range was rated in Good (39%) or Excellent (6%) condition. That’s 26% less than last year. 22% was rated in Poor (14%) or Very Poor (8%) condition, compared to 6% at the same time last year.
Fed Cattle Prices Lower
Through Thursday, the five-area direct weighted average price for steers was $100.82/cwt., which was $4.02 less than the previous week. The average dressed steer price was $160.74, which was $5.91 less. Prices at the same time last year were at $110.43 and $180.56, respectively. Keep in mind that carcass weights are contra-seasonal and significantly heavier than last year.
The average dressed steer weight for the week ending June 6 was 892 lbs., which was 1 lb. heavier than the prior week and 46 lbs. heavier than the same week a year earlier, according to USDA’s Actual Slaughter Under Federal Inspection report. The average dressed heifer weight of 824 lbs. was 2 lbs. lighter than the previous week, but 42 lbs. heavier than the prior year.
“The expectation was for finished cattle prices to decline but not $15/cwt. in three weeks,” Griffith says. “The lower prices speak volumes concerning the supply of market-ready cattle and the fact packers have plenty of cattle available to them. One would have thought there was price support at current prices and one can continue to think that based on this week’s prices, but there will continue to be pressure on finished cattle prices moving through the next couple of months. This is not a good sign for cattle feeders or those looking to market feeder cattle in the near term. It may take a while before optimism comes back to the finished cattle market.”
Other than $1.37 lower in spot Jun, Live Cattle futures closed an average of $1.13 higher week to week on Friday (7¢ to $1.65 higher).
Estimated total cattle slaughter for the week of 656,000 head was just 12,000 head fewer (-1.8%) than the same time last year, according to USDA.
The average five-area direct fed steer price in May was $111.53/cwt. on a live basis, which was more than 9% higher than in April, according to ERS. With that in mind, USDA increased its price forecast for fed steers in the second quarter by $3 to $104. Forecast prices for the third and fourth quarters increased by $6 to $105 and $106, respectively.
Wholesale Values Normalizing
Wholesale beef values continue lower with increased beef production.
Choice boxed beef cutout value was $16.92 lower week to week on Friday at $213.72/cwt. Select was $15.36 lower at $203.91.
“The red meat market has traversed some unfamiliar territory the past several months and probably still has a few new trails to cut before some form of normalcy is evident,” Griffith says. “The two broad markets the beef industry navigates are the domestic market and the international market. The international market is a major player in determining the full value of cattle produced domestically, which points to the importance of beef and cattle product exports. Through the first four months of 2020, beef and veal exports on a quantity basis were 7.0% greater than the same four months in 2019. However, beef and veal export value only increased 3.2% for January through April of 2020 compared to 2019. There is a good chance May 2020 beef and veal exports will have struggled compared to year-ago levels, given that May beef production was 19.2% lower than the same month one year ago.”
Friday to Friday Change
Weekly Auction Receipts
| June 19 | Auction | Direct |
Video/net |
Total |
|
160,400 (+100) |
46,500 (+12,700) |
9,700 (-36,300) |
216,600 (+23,800) |
CME Feeder Index
| CME Feeder Index* | June 18 | Change |
| $128.01 | – $1.57 |
*Thursday-to Thursday for CME Feeder Index
Cash Stocker and Feeder
North Central
| Steers-Cash | June 19 | Change |
| 600-700 lbs. | $152.86 | – $0.38 |
| 700-800 lbs. | $137.25 | – $4.18 |
| 800-900 lbs. | $128.38 | – $4.45 |
South Central
| Steers-Cash | June 19 | Change |
| 500-600 lbs. | $148.22 | – $2.52 |
| 600-700 lbs. | $140.60 | – $0.63 |
| 700-800 lbs. | $131.80 | – $0.12 |
Southeast
| Steers-Cash | June 19 | Change |
| 400-500 lbs. | $147.75 | – $1.43 |
| 500-600 lbs. | $139.58 | – $2.57 |
| 600-700 lbs. | $130.56 | – $1.80 |
(AMS National Weekly Feeder & Stocker Cattle Summary)
Wholesale Beef Value
| Boxed Beef (p.m.) | June 19 ($/cwt) | Change |
| Choice | $213.72 | – $16.92 |
| Select | $203.91 | – $15.36 |
| Ch-Se Spread | $9.81 | – $1.56 |
Futures
| Feeder Cattle | June 19 | Change |
| Aug | $132.550 | + $1.450 |
| Sep | $133.875 | + $1.400 |
| Oct | $134.850 | + $1.700 |
| Nov | $135.575 | + $2.100 |
| Jan ’21 | $134.850 | + $2.400 |
| Mar | $134.000 | + $2.650 |
| Apr | $134.675 | + $2.300 |
| Aug | $135.000 | + $2.025 |
| Live Cattle | June 19 | Change |
| Jun | $94.700 | – $1.375 |
| Aug | $95.400 | + $0.075 |
| Oct | $98.850 | + $0.850 |
| Dec | $102.850 | + $0.800 |
| Feb ’21 | $107.275 | + $1.275 |
| Apr | $109.875 | + $1.425 |
| Jun | $103.650 | + $1.650 |
| Aug | $103.050 | + $1.500 |
| Oct | $105.900 | + $1.475 |
| Corn | June 19 | Change |
| Jly | $3.324 | +$0.024 |
| Sep | $3.372 | +$0.028 |
| Dec | $3.452 | +$0.022 |
| Mar ’21 | $3.566 | +$0.020 |
| May | $3.630 | +$0.018 |
| Jly | $3.676 | +$0.014 |
| Oil CME-WTI | June 19 | Change |
| Jly | $39.75 | + $3.49 |
| Aug | $39.83 | + $3.32 |
| Sep | $39.93 | + $3.15 |
| Oct | $40.02 | + $3.02 |
| Nov | $40.10 | + $2.89 |
| Dec | $40.19 | + $2.77 |
Equities
| Equity Indexes | June 19 | Change |
| Dow Industrial Average | 25871.46 | + 265.92 |
| NASDAQ | 9946.12 | + 357.31 |
| S&P 500 | 3097.74 | + 56.43 |
| Dollar (DXY) | 97.66 | + 0.57 |