Demand for calves and feeder cattle continued to increase last week, amid plenty of ongoing uncertainty stemming from the growing backlog of fed cattle and worries about what the economic recession will ultimately mean to beef demand.
Nationwide, steers and heifers sold steady to $5/cwt. higher, according to the Agricultural Marketing Service (AMS).
Recent fed cattle price strength and the previous week’s friendly Cattle on Feed report helped bolster Cattle futures.
Feeder Cattle futures closed an average of $3.95 higher week to week on Friday ($2.60 higher at the back to $6.55 higher in spot Aug).
“Given that prices (calf and feeder) were depressed during their seasonal peak, it would make logical sense that calf prices will not decline as much moving forward. Thus, the market may be fairly stable the next several weeks until summer heat begins to take over,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments.
Feedlot placements for March and April were down a combined 867,000 head from the previous year, suggesting a significant decline in fed marketing, mostly in September and into October, says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his latest market comments.
“The delayed placements from March and April will show up starting in May, and will be heavier, but the delay will help feedlots have a chance to get current,” Peel says. “The feedlot industry will spend much of the summer working through the backlog of fed cattle but the hole from March and April feedlot placements should provide a marketing window to catch up by this fall if not before.”
Fed Cattle Prices Soften Some
Negotiated cash fed cattle prices continued across a broad range last week. On a live basis, prices were steady to $5 lower in the Texas Panhandle at $115-$120/cwt., $5 less in Kansas at $115, steady to $7 less in Nebraska at $112-$120 and steady to $1 higher in the western Corn Belt at $115. Dressed prices were steady to $12 lower in Nebraska at $178-$190 and $5-$15 lower in the western Corn Belt at $175-$185.
Through Thursday, the five-area direct weighted steer price was $115.65/cwt. on a live basis and $183.30 in the beef. That was $1.64 less and 45¢less, respectively.
Live Cattle futures closed an average of $1.62 higher week to week on Friday (95¢ higher to $2.27 higher).
“Cattle slaughter has rebounded in recent weeks and this week averaged over 110,000 head Tuesday through Friday. Normal daily cattle slaughter in January was around 120,000,” say AMS analysts.
USDA estimated cattle slaughter for the week at 524,000 head, which was 31,000 head fewer (-5.58%) than the previous week, keeping in mind it was a holiday week. Compared to the same week last year, estimated slaughter was 64,000 less (-10.88%).
Barring a resurgence of COVID-19, or some other unforeseen circumstance, recent slaughter data suggest the worst of COVID-19 packing disruptions may be over.
“For beef and pork, the plants are mainly back online, but are running at reduced capacity due to social distancing of workers, etc. Beef and pork are currently running at about 10% to 15% below last year,” says Jayson Lusk, agricultural economist at Purdue University, in his latest comments. “The worst of the disruptions occurred in late April and early May when we were running about 40% below last year, but significant improvements have been made since then.”
For perspective, the week ending May 2 might be the ebb in packing capacity, when USDA estimated cattle slaughter at 425,000 head, which was 36.8% less (-248,000 head) year over year. Actual cattle slaughter under federal inspection that week ended up 438,614 head, which was 34.8% less (-233,836 head).
Wholesale Beef Prices Adjust Lower
“Along with the increased slaughter rates, meat production has gone up as well. Year-to-date beef production is still behind year ago but will be making inroads to making up the difference in the coming weeks and months,” AMS analysts explain. “With an accumulation of fed cattle, seasonal weights have increased ahead of schedule. Typically, this time of year, calf-feds comprise a substantial component of the fed cattle slaughter and drops the average weights.”
The average dressed steer weight for the week ending May 16 (latest available) was 901 lbs., which was 5 lbs. heavier than the previous week and 52 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 831 lbs. was 2 lbs. heavier than the previous week and 43 lbs. heavier than last year.
Choice boxed beef cutout value was $33.40 lower week to week on Friday at $363.34/cwt. Select was $34.11 lower at $340.07.
Griffith points out Choice boxed beef prices began the year at just less than $210/cwt. They charged to $459 as COVID-19 reduced packing capacity. Until then, he says the record high price was $263 in May of 2015, when cattle supplies were cyclically snug.
“One would think the higher price of beef at the wholesale level would be passed on to consumers. In some instances that was and will continue to be the case, but not all of the beef price increase has been passed on to consumers, as can be seen in most local grocery stores,” Griffith says. “Regardless of what retail beef prices are now, grocery stores will have to recoup some of those losses, which means retail beef prices are likely to continue creeping higher even as wholesale prices decline. The wholesale price of beef will decline as product is restored to grocery shelves.”
Friday to Friday Change
Weekly Auction Receipts
| May 29 | Auction | Direct |
Video/net |
Total |
|
138,200 (-66,600) |
42,000 (-9,200) |
57,600 (+55,800) |
237,800 (-20,000) |
CME Feeder Index
| CME Feeder Index* | May 28 | Change |
| $129.36 | + $3.12 |
*Thursday-to Thursday for CME Feeder Index
Cash Stocker and Feeder
North Central
| Steers-Cash | May 29 | Change |
| 600-700 lbs. | $151.94 | + $1.39 |
| 700-800 lbs. | $142.06 | + $2.82 |
| 800-900 lbs. | $132.26 | + $1.27 |
South Central
| Steers-Cash | May 29 | Change |
| 500-600 lbs. | $155.80 | + $0.34 |
| 600-700 lbs. | $140.24 | – $0.89 |
| 700-800 lbs. | $131.34 | – $0.25 |
Southeast
| Steers-Cash | May 29 | Change |
| 400-500 lbs. | $149.99 | – $0.64 |
| 500-600 lbs. | $141.69 | + $1.30 |
| 600-700 lbs. | $132.25 | + $1.39 |
(AMS National Weekly Feeder & Stocker Cattle Summary)
Wholesale Beef Value
| Boxed Beef (p.m.) | May 29 ($/cwt) | Change |
| Choice | $363.34 | – $33.40 |
| Select | $340.07 | – $34.11 |
| Ch-Se Spread | $23.27 | + $0.71 |
Futures
| Feeder Cattle | May 29 | Change |
| Aug | $135.350 | + $6.550 |
| Sep | $135.750 | + $5.600 |
| Oct | $136.025 | + $4.775 |
| Nov | $136.050 | + $3.975 |
| Jan ’21 | $134.225 | + $3.050 |
| Mar | $133.400 | + $2.475 |
| Apr | $133.950 | + $2.600 |
| Aug | $134.275 | + $2.600 |
| Live Cattle | May 29 | Change |
| Jun | $99.725 | + $2.025 |
| Aug | $99.600 | + $2.275 |
| Oct | $101.425 | + $2.025 |
| Dec | $104.700 | + $1.950 |
| Feb ’21 | $108.425 | + $1.725 |
| Apr | $110.550 | + $0.975 |
| Jun | $103.525 | + $0.950 |
| Aug | $103.075 | + $1.250 |
| Oct | $106.250 | + $1.450 |
| Corn | May 29 | Change |
| Jly | $3.256 | +$0.076 |
| Sep | $3.300 | +$0.074 |
| Dec | $3.386 | +$0.060 |
| Mar ’21 | $3.502 | +$0.050 |
| May | $3.572 | +$0.046 |
| Jly | $3.624 | +$0.044 |
| Oil CME-WTI | May 29 | Change |
| Jly | $35.49 | + $2.24 |
| Aug | $35.84 | + $2.19 |
| Sep | $36.20 | + $2.06 |
| Oct | $36.43 | + $1.94 |
| Nov | $36.67 | + $1.83 |
| Dec | $36.92 | + $1.74 |
Equities
| Equity Indexes | May 29 | Change |
| Dow Industrial Average | 25383.11 | + 917.95 |
| NASDAQ | 9489.77 | + 165.28 |
| S&P 500 | 3044.31 | + 88.86 |
| Dollar (DXY) | 98.30 | – 1.50 |