Higher grain prices continued to batter calf and feeder cattle markets last week. At least, that’s the fundamental explanation, along with stout cattle supplies and lower year-over-year exports.
Steers and heifers sold from $3/cwt. lower to $2 higher, according to the Agricultural Marketing Service (AMS).
“Severe thunderstorms and extreme flooding remain across the Northern and Southern Plains. This is limiting movement for feeders and delaying wheat harvest,” explained the AMS reporter on hand for Thursday’s Superior Livestock Video auction.
“The feeder cattle index ($131.43 on Thursday) is at its lowest price level since March 2017, and there does not appear to be any relief in sight as the fundamental supply and demand factors appear as if they will continue to pressure prices,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments.
Feeder Cattle futures closed an average of $1.46 lower week to week on Friday, across the front half of the board and then an average of 40¢ lower.
“The questions producers have to ask is if they can be profitable with steer calves valued between $700 and $750 per head and heifer calves valued closer to $600 to $650 per head at weaning,” Griffith says. “One factor that is pushing feeder cattle prices lower is higher corn prices. Higher corn prices provide more incentive to put more weight on cattle outside the feedlot and this will likely remain true heading into the fall marketing time period. This brings forth a management decision that producers should already be considering in the form of backgrounding calves instead of selling off the cow.”
Fed Cattle Prices Drop
Negotiated cash fed cattle prices were $2-$4 lower on a live basis at $108-$110/cwt. in the Southern Plains, mostly $110 in Nebraska and at $113-$114 in the western Corn Belt. Dressed trade was $3-$4 lower in Nebraska at $180-$183 and $6 lower in the western Corn Belt at $178-$180.
Live Cattle futures an average of $1.19 lower week to week on Friday (72¢ to $2.25 lower in spot Jun).
“Live Cattle futures continue to find a way to scrape the bottom of the barrel, which keeps forcing cash prices lower,” Griffith explains. “A couple of months ago, it would have been absurd to fathom Live Cattle futures trading below $100. However, trading below $100 does not seem out of the question with the August contract closing the week just above $102/cwt. It will take serious work for finished cattle prices to drop another $10/cwt. this summer, but that does not mean the futures market cannot find a way to get there. Lower finished cattle prices and higher corn prices will put a pinch on cattle feeders, which means they will be forced to bid down feeder cattle. It is the only place to make margin in the current market.”
“Cattle feeders have approached the dog days of summer cautiously this year, with cost of gains expected to creep up with the lack of corn acres being planted nationwide this year,” say AMS analysts. “Flesh condition of cattle has really been attractive after the cold, wet, muddy conditions cattle have had to endure to this point. Backgrounders have historically sold cattle this time of year and probably wouldn’t hold on this long if the crystal ball would’ve predicted a much lower market for short and long yearlings.”
Wholesale beef prices are offering no extra support as they wallow between seasonal weakness and the still-delayed grilling season across wide swaths of the nation.
Choice boxed beef cutout value was $2.41 lower week to week on Friday afternoon at $219.82/cwt. Select was $3.21 lower at $199.55, the lowest since December.
Feedlot Placements Lower
Markets will likely view Friday’s monthly Cattle on Feed report—feedlots with 1,000 head or more capacity—as neutral to slightly bearish.
Placements in May of 2.06 million head were 2.82% less (-60,000 head) than the previous year, whereas expectations ahead of the report were for a decline of about 4%.
Marketings in May of 2.07 million head were 0.68% more (+14,000 head) than the previous year. Expectations ahead of the report were for an increase of 0.80%.
Cattle on feed June 1 of 11.74 million head were 1.62% more (+187,000 head) more than last year, the most for the month since the data series began in 1996. Heading into the report, expectations were for an increase of 1.30%.
Friday to Friday Change*
Weekly Auction Receipts
CME Feeder Index
|CME Feeder Index*||June 20||Change|
*Thursday-to Thursday for CME Feeder Index
Cash Stocker and Feeder
|600-700 lbs.||$153.50||– $10.27|
|700-800 lbs.||$141.21||– $6.85|
|800-900 lbs.||$136.95||+ $1.09|
|500-600 lbs.||$158.28||+ $1.61|
|600-700 lbs.||$147.93||+ $1.14|
|700-800 lbs.||$135.28||– $1.26|
|400-500 lbs.||$147.56||– $6.21|
|500-600 lbs.||$139.19||– $4.32|
|600-700 lbs.||$130.57||– $2.26|
(AMS National Weekly Feeder & Stocker Cattle Summary)
Wholesale Beef Value
|Boxed Beef (p.m.)||June 21 ($/cwt)||Change|
|Ch-Se Spread||$20.27||+ $0.80|
|Feeder Cattle||June 21||Change|
|Jan ’20||$133.475||– $0.375|
|Live Cattle||June 21||Change|
|Feb ’20||$113.375||– $0.725|
|Corn futures||June 21||Change|
|Mar ’20||$4.592||– $0.082|
|Oil CME-WTI||June 21||Change|
|Equity Indexes||June 21||Change|
|Dow Industrial Average||26719.13||+ 629.52|
|S&P 500||2950.46||+ 63.48|
|Dollar (DXY)||96.09||– 1.48|