Cash cattle prices mainly increased last week, in the face of volatile futures trade, clouded by how soon and how much packing capacity will return, the growing backlog of market-ready fed cattle, as well as demand uncertainty tied to the reopening of the U.S. economy and consumer economic wherewithal.
Nationwide, calves and feeder cattle traded $1-$5/cwt. higher, according to the Agricultural Marketing Service (AMS).
“The best demand, by far, remains on light calves suitable for backgrounding,” say AMS analysts. “Seller interest improved somewhat, while some ranchers continue to resist the current market.” Even so, they point out that auction volume continued heavy as cattle came to town from winter wheat and ryegrass pastures in the Southern Plains.
Feeder Cattle futures closed an average of $3.89 lower week to week on Friday, giving back about half of what was gained the previous week.
“It is extremely risky, from a market analyst standpoint, to make a statement about the direction of cattle prices, but the past couple of weeks give the appearance that the market may be finding some stability,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “The key to a stronger feeder cattle market is feedlots being able to move the current cattle out and opening up pen space. This can only be done if slaughter rates begin to accelerate. The thought is that cattle prices will recover as slaughter capacity recovers. However, there will still be seasonal tendencies that influence the market. There will be some changes to seasonal tendencies as fewer cattle have been placed in feedlots the past couple of months, but those seasonal changes may not be as drastic as some people may think. The cattle that are still in the country are going to be heavier placements, which means fewer days on feed.”
Fed Cattle Prices Continue Higher
Packing capacity continues to recover from COVID-19 slowdowns, albeit slowly.
Estimated slaughter under federal inspection last week was 499,000 head, which was 47,000 head more than the previous week and 74,000 head more than two weeks earlier, but still 163,000 head fewer than same week last year, according to the Agricultural Marketing Service (AMS).
That helped boost fed cattle prices, although it remains difficult to get a firm handle on value as prices continue across a wide range and as packers appear to be paying more than current fundamentals dictate.
The five-area direct weighted average steer price through Thursday was $11.36 higher than the previous week at $111.40/cwt. The average price in the beef was $19.90 higher at $179.30.
Regionally, negotiated cash fed cattle prices were $10-$15 higher on a live basis at $115/cwt. in Kansas, $119-$120 in Nebraska and $115 in the western Corn Belt. AMS reported live prices at the Texas Panhandle at mostly $110, while the Texas Cattle Feeders Association reported its members trading steers at a weighted average price of $112.53 and heifers at $113.29. Dressed prices in the North were $10-$30 higher at $180.
“It will likely take many weeks for slaughter rates to catch up with the growing backlog of fed cattle and get the industry current once again,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “Meantime, all sectors of the industry are responding to the need to slow cattle down and hold them longer in a variety of production settings before proceeding to finish in feedlots. Fed cattle weights are increasing and pushing carcass weights higher counter-seasonally.”
The average five-area direct fed steer price (FOB) in April was $10.46/cwt. less than the previous month at $102.02, according to the most recent monthly report from USDA. In the beef (delivered), the average steer price of $159.27 was $19.30 less.
Other than $2.35 higher in spot Jun, Live Cattle futures closed an average of $3.55 lower week to week on Friday, giving back a little more than half of what was gained the previous week.
“It is understandable for there to be a gap in cash prices and the futures market since it is not June, but the basis is just too large right now,” Griffith says. “There are still a lot of skeptics that think finished cattle prices will continue to falter, but the market is demanding meat protein. There is no way to guess what will happen to finished cattle prices, but feedlots will continue to market as many cattle as possible with the strong basis and backed up cattle.”
Wholesale Beef Values Appear to Top
Wholesale beef values declined sharply Wednesday–the first day-to-day decline since Apr. 8–likely signaling the Covid-skewed top was established.
Choice boxed beef cutout value was $26.56 lower week to week on Friday at $434.32/cwt. Select was $29.93 lower at $419.06.
“The main story from a meat perspective is the daily and weekly slaughter levels. Cattle slaughter the first quarter of the year exceeded 621,000 head every week except the first week of the year. There was even a week when cattle slaughter nearly reached 685,000 head just prior to April,” Griffith explains. “Slaughter levels then declined rapidly as facilities closed or reduced harvest levels in the middle of April. Slaughter levels on a weekly basis fell to about 425,000 head the last week of April and starting into May.”
USDA projects beef production at 25.76 billion lbs. this year, according to the latest monthly World Agricultural Supply and Demand Estimates (WASDE). That’s 1.68 billion lbs. less (-6.12%) than the April forecast and would be 1.39 billion lbs. less (-5.12%) than last year.
Friday to Friday Change
Weekly Auction Receipts
CME Feeder Index
|CME Feeder Index*||May 14||Change|
*Thursday-to Thursday for CME Feeder Index
Cash Stocker and Feeder
|600-700 lbs.||$150.45||+ $5.24|
|700-800 lbs.||$139.68||+ $4.24|
|800-900 lbs.||$126.76||+ $4.86|
|500-600 lbs.||$153.89||+ $3.27|
|600-700 lbs.||$140.85||+ $3.03|
|700-800 lbs.||$129.88||+ $3.16|
|400-500 lbs.||$147.96||+ $0.11|
|500-600 lbs.||$139.40||+ $1.80|
|600-700 lbs.||$128.78||+ $1.59|
(AMS National Weekly Feeder & Stocker Cattle Summary)
Wholesale Beef Value
|Boxed Beef (p.m.)||May 15 ($/cwt)||Change|
|Ch-Se Spread||$15.26||+ $3.37|
|Feeder Cattle||May 15||Change|
|Jan ’21||$133.225||– $4.650|
|Live Cattle||May 15||Change|
|Feb ’21||$106.825||– $4.825|
|Mar ’21||$3.446||– $0.044|
|Oil CME-WTI||May 15||Change|
|Equity Indexes||May 15||Change|
|Dow Industrial Average||23685.42||– 645.90|
|S&P 500||2863.70||– 66.10|
|Dollar (DXY)||100.36||+ 1.26|