Cash fed cattle prices underpinned more optimism last week, with buyers mostly paying more for calves and feeder cattle amid increased auction volume.
Nationwide, steers and heifers sold steady to $4/cwt. higher, according to the Agricultural Marketing Service (AMS).
Feeder Cattle futures closed an average of $2.23 lower week to week on Friday.
“There are two aspects of the market worth noting and they are that prices for most classes of cattle are holding their ground or showing slight improvements and the number of cattle being marketed is increasing,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “Even though the economy is not completely business as usual, it does seem the workforce and consumers are trying to achieve some sort of normalcy… Many of the animals that are hitting the feeder calf and feeder cattle market at this time were probably delayed to some degree as producers attempted to manage through the coronavirus pandemic. At the same time, there are producers who are looking to purchase cattle and those producers are likely behind on making purchases because cattle did not come to market from the middle of March through early May. Thus, these producers may have to purchase a little heavier animal than typical to meet their needs.
Feedlot Placements Down 22%
Markets will likely view Friday’s monthly USDA Cattle on Feed report as neutral, with numbers about mirroring pre-report estimates.
For feedlots with 1,000 head or more capacity, April placements of 1.43 million head were 22.26% less than the prior year. April marketings of 1.46 million head were 24.32% less than a year earlier. On-feed inventory May 1 was 5.14% less at 11.20 million head.
In the latest monthly Livestock, Dairy and Poultry Outlook (LDPO), analysts with USDA’s Economic Research Service (ERS) estimated there were 20.54 million head of cattle outside feedlots Apr. 1. That was 657,000 head more (+3.30%) than the same time a year earlier.
As the backlog of market-ready fed cattle continues to grow and feedlot margins are squeezed, ERS expects feeder cattle prices to remain under pressure.
“Based on recent price data, the second-quarter 2020 feeder steer price was lowered by $2 to $121/cwt. The third-quarter 2020 price forecast was lowered $5 to $123 and the fourth-quarter 2020 price was lowered $17 to $118,” say ERS analysts. “As a result, this month’s annual price forecast for 2020 was $124.50/cwt., close to last month’s forecast. The price forecast for first-quarter 2021 is expected to remain relatively low at $125. Feeder steer prices are expected to improve in the second half of 2021 on increased demand. The 2021 annual feeder steer price is forecast at $131.50, more than 5% higher than 2020.”
Fed Cattle Prices Bounce Higher
Negotiated cash fed cattle traded ended up mainly $5-$10 higher on a live basis last week at mostly $120/cwt. in the Southern Plains and at $119-$120 in Nebraska. Dressed trade was mostly $10 higher at mainly $190.
Other than 70¢ and 87¢ higher on either end of the board, Live Cattle futures closed an average of 41¢ lower week to week on Friday.
“This is the first week since the beginning of January when finished cattle prices exceeded year-ago prices from the same week. Additionally, this is only the third week this year when finished cattle prices have been higher than year-ago prices,” Griffith says. “There is a good possibility that finished cattle prices will see year- over-year gains, given that current prices are improving and year-ago prices were declining. The environment today is much different than a year ago, which provides optimism for year-over-year price gains, but that does not mean finished cattle prices will continue to surge higher. Increasing fed cattle slaughter will do the most to improve prices, but the rest will be left up to a consumer base that is struggling with cash flow.”
USDA estimated total cattle slaughter for the week at 555,000 head, which would be 56,000 head more (+11.2%) than the previous week, but 92,000 head fewer (-14.2%) than the same week a year earlier. Year to date, cattle slaughter of 12.11 million head is 893,000 head fewer (-6.9%) than the same period least year.
“The buildup in fed cattle supplies that are market ready is expected to have a substantial and lasting effect on fed cattle prices,” say ERS analysts. “Prices will remain low as the supply of market-ready cattle remains above the sector’s ability to process them, and the supply issue is expected to linger through 2021.”
Consequently, ERS lowered this year’s average price forecast for fed steers (five-area direct) to $104.08/cwt.: $118.32 in the first quarter; $99 in the second and third quarters; $100 in the fourth quarter. The projected annual average price for next year is $109.
Keep in mind the forecast runs counter to current cash prices, which appear to be supported by packers’ willingness to give back some of their margins.
Wholesale Beef Value Decline Continues
As packing capacity recovers and beef production increases, wholesale beef values continue heading south.
Choice boxed beef cutout value was $37.58 lower week to week on Friday at $396.74/cwt. Select was $44.88 lower at $374.18.
“The increase in slaughter and the increase in beef production is slowly lowering boxed beef prices at a time when consumers are preparing for the unofficial start of summer,” Griffith notes. “Generally, this is a weekend when consumers head to the grocery store and spend a little extra at the meat counter to get good quality middle meats to throw on the grill. This typical action will likely be muted this year as unemployment rates have spiked and retail beef prices are extremely high. In some instances, ground beef may even be too expensive for many consumers to consider as the main course when celebrating Memorial Day. It is difficult to imagine consumers trading a steak for a pork chop or a chicken breast but that may be the case if consumers are already running low on cash.”
Friday to Friday Change
Weekly Auction Receipts
CME Feeder Index
|CME Feeder Index*||May 21||Change|
*Thursday-to Thursday for CME Feeder Index
Cash Stocker and Feeder
|600-700 lbs.||$150.55||+ $0.10|
|700-800 lbs.||$139.24||– $0.44|
|800-900 lbs.||$130.99||+ $4.23|
|500-600 lbs.||$154.23||+ $0.34|
|600-700 lbs.||$141.13||+ $0.28|
|700-800 lbs.||$131.59||+ $1.71|
|400-500 lbs.||$150.63||+ $2.67|
|500-600 lbs.||$140.39||+ $0.99|
|600-700 lbs.||$130.86||+ $2.08|
(AMS National Weekly Feeder & Stocker Cattle Summary)
Wholesale Beef Value
|Boxed Beef (p.m.)||May 22 ($/cwt)||Change|
|Ch-Se Spread||$22.56||+ $7.30|
|Feeder Cattle||May 22||Change|
|Jan ’21||$131.175||– $2.050|
|Live Cattle||May 22||Change|
|Feb ’21||$106.700||– $0.125|
|Oil CME-WTI||May 22||Change|
|Equity Indexes||May 22||Change|
|Dow Industrial Average||24465.14||+ 779.72|
|S&P 500||2955.45||+ 91.75|
|Dollar (DXY)||99.80||– 0.56|