Market carnage and uncertainty spawned by the COVID-19 panic prompted lots of calf and feeder cattle sellers last to hold cattle or offer fewer than they would otherwise. In fact, auction receipts were the least for a non-holiday week since the current report format was established in 2002, according to the Agricultural Marketing Service (AMS).
There were some week-to-week price gains for some classes at some auctions, but according to AMS, overall, steers and heifers sold $5-$10/cwt. lower, with instances of $12-$15 lower.
“It is likely feeder cattle receipts will continue to be light next week as cattle producers attempt to wait out the market suppression,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “The risk in this is that there is no way to know how short or how long market prices will remain under pressure…The best advice today is for producers to keep one eye on the market and the other eye on national and world efforts to mitigate the length of this pandemic.”
Thanks to a late-week rally, supported by the extraordinary increase in wholesale beef values, Cattle futures closed higher week to week for the first time in five weeks.
Feeder Cattle futures closed an average of $4.47 higher week to week on Friday (2.60 higher to $7.72 higher in spot Mar).
Except for 22¢ and 50¢ lower in two contracts, Live Cattle futures closed an average of $1.06 higher week to week on Friday 42¢ higher to $3.07 higher in spot Apr).
The monthly Cattle on Feed report published Friday should be supportive, mirroring pre-report expectations. February placements for feedlots with 1,000 head or more capacity were 1.71 million head, which was 7.91% less (-147,000 head) than the previous year. Marketings in February of 1.77 million head were 5.47% more (+92,000 head) than the previous year. The on-feed inventory Mar. 1 of 11.81 million head was 0.18% more (+21,000 head), compared to a year earlier.
Fed Cattle Prices Firm
When all was said and done, negotiated cash fed cattle trade last week was steady to $2 higher on a live basis at $110-$112/cwt. and fully steady in the beef at $175.
According to the Texas Cattle Feeders Association on Friday, “Tyson announced this afternoon that for all fed cattle harvested next week, they will make a one-time assistance payment to cattle feeders of $5/cwt. live and $7.94/cwt. dressed.”
Choice boxed beef cutout value was $45.61 higher week to week on Friday at $253.75/cwt. Select was $38.19 higher at $240.17.
That’s the fastest rally on record, according to AMS analysts.
“As businesses and schools continue to close, along with restaurants, consumers swarmed the meat cases to stockpile protein items. Reports of empty meat cases started last week, all over the country,” AMS analysts explain. “The magnitude of the buying caught retailers by surprise, and as this consumer-driven market rages on, it appears that the cutout will be volatile in the short term.”
“There will be a variety of impacts on markets for specific beef products,” explained Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “For example, increased demand for ground beef has resulted in local shortages of product at grocery stores, while reduced restaurant demand may result in weaker middle meat sales. We can expect significant disruptions and stress on beef supply chains given the consumption changes associated with requirements to control COVID-19.”
Should the labor forces of beef packing, processing, or shipping be directly impacted by COVID-19, Peel says supply chain disruptions could be more significant.
“The dynamics of the beef market have changed the past couple of weeks, which is what is driving market prices,” Griffith explains. “Restaurants and food retailers demand different cuts; packers have had to adjust to meet these needs because of the change in consumption patterns across the nation. Thus, packers are taking advantage of what the market is offering them at this time. The market is offering lower cattle prices and strong prices for beef cuts that go to grocery stores. The market is not offering as much value for beef cuts that would typically enter the restaurant business. The market will adjust as more and more unknowns are resolved.”
Equity Markets Continue Lower
Despite fiscal stimulus announced so far, U.S. financial markets continue to plunge lower.
Week to week on Friday, the Dow Jones Industrial Average closed 4,012 points lower. The broader S&P 500 closed 406 points lower.
Keep in mind, the collapse in crude oil prices adds to the overall economic weakness. Although already under pressure from softer demand and plentiful supplies, OPEC added undue and unexpected price pressure when it decided to increase production in retaliation against Russia.
Week to week on Friday, West Texas Intermediate Crude Oil futures on the CME were an average of $7.87 lower through the front six contracts.
“The uncertainty in the cattle market and most other markets persist as market participants try to determine the true impact from coronavirus. As more and more information becomes available, the market will continue to try to find an equilibrium point,” Griffith says. “The market will eventually find that equilibrium. However, it may take longer than some expect because market participants are treading through unfamiliar and murky water.”
Friday to Friday Change
Weekly Auction Receipts
| Mar. 20 | Auction | Direct |
Video/net |
Total |
|
59,000 (-139,200) |
10,200 (-11,800) |
16,500 (+14,600) |
85,700 (-135,400) |
CME Feeder Index
| CME Feeder Index* | Mar. 19 | Change |
| $121.38 | – $6.53 |
*Thursday-to Thursday for CME Feeder Index
Cash Stocker and Feeder
North Central
| Steers-Cash | Mar. 20 | Change |
| 600-700 lbs. | $146.61 | – $4.89 |
| 700-800 lbs. | $133.13 | – $2.75 |
| 800-900 lbs. | $125.64 | – $0.21 |
South Central
| Steers-Cash | Mar. 20 | Change |
| 500-600 lbs. | $146.26 | – $11.93 |
| 600-700 lbs. | $134.54 | – $9.31 |
| 700-800 lbs. | $120.73 | – $5.46 |
Southeast
| Steers-Cash | Mar. 20 | Change |
| 400-500 lbs. | $144.14 | – $11.31 |
| 500-600 lbs. | $133.50 | – $9.63 |
| 600-700 lbs. | $122.23 | – $10.11 |
(AMS National Weekly Feeder & Stocker Cattle Summary)
Wholesale Beef Value
| Boxed Beef (p.m.) | Mar. 20 ($/cwt) | Change |
| Choice | $253.75 | + $45.61 |
| Select | $240.17 | + $38.19 |
| Ch-Se Spread | $13.58 | + $7.42 |
Futures
| Feeder Cattle | Mar. 20 | Change |
| Mar | $120.725 | + $7.725 |
| Apr | $118.825 | + $6.225 |
| May | $118.250 | + $3.775 |
| Aug | $123.800 | + $2.625 |
| Sep | $124.875 | + $2.600 |
| Oct | $126.075 | + $3.150 |
| Nov | $127.500 | + $4.250 |
| Jan ’21 | $127.600 | + $5.450 |
| Live Cattle | Mar. 20 | Change |
| Apr | $98.650 | + $3.075 |
| Jun | $89.525 | – $0.225 |
| Aug | $90.750 | + $1.575 |
| Oct | $94.000 | + $0.200 |
| Dec | $98.200 | – $0.500 |
| Feb ’21 | $102.400 | + $0.425 |
| Apr | $104.375 | + $0.575 |
| Jun | $98.125 | + $0.575 |
| Aug | $96.650 | + $1.000 |
| Corn | Mar. 20 | Change |
| May | $3.436 | – $0.220 |
| Jul | $3.494 | – $0.190 |
| Sep | $3.546 | – $0.130 |
| Dec | $3.632 | – $0.098 |
| Mar ’21 | $3.732 | – $0.094 |
| May | $3.774 | – $0.100 |
| Oil CME-WTI | Mar. 20 | Change |
| Apr | $22.43 | – $9.30 |
| May | $22.63 | – $9.48 |
| Jun | $24.36 | – $8.23 |
| Jly | $25.93 | – $7.22 |
| Aug | $27.10 | – $6.64 |
| Sep | $28.02 | – $6.34 |
Equities
| Equity Indexes | Mar. 20 | Change |
| Dow Industrial Average | 19173.18 | – 4012.44 |
| NASDAQ | 6879.52 | – 995.36 |
| S&P 500 | 2304.92 | – 406.10 |
| Dollar (DXY) | 102.00 | + 3.31 |