Demand increased for calves and feeder cattle–especially after mid-week–helped along by stronger cash fed cattle prices and increasing confidence that the previous week’s Executive Order–mandating meat and processing facilities remain open–will help normalize the supply chain, eventually.
Steers and heifers sold steady to $5/cwt. higher, according to the Agricultural Marketing Service (AMS).
Feeder Cattle futures closed an average of $8.83 higher week to week on Friday.
“From a fundamental standpoint, the futures market started the year overvaluing feeder cattle. However, coronavirus resulted in a huge selloff, which then sent the market into undervaluing feeder cattle which has persisted for nearly two months,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “It would seem the market is adjusting to the current environment and trying to bring feeder cattle values back in line with a more fundamental expectation for the year. The futures market likely still has feeder cattle undervalued to a slight degree, looking into the summer and fall contracts, but the market is much more in line with expectations.”
Griffith adds that both cash and futures prices will likely remain volatile as the market seeks equilibrium.
Cash Fed Cattle Prices Gain
Negotiated cash fed cattle trade ended the week on a decidedly higher. Live sales in the Southern Plains were at $115/cwt., which was $5 more than earlier in the week and $10-$20 higher than the previous week. Live sales in Nebraska were $19-$20 higher than the previous week at $114-$115. Live sales in the western Corn Belt were mainly $3-$10 higher than the previous week at mostly $103; dressed sales there were $20-$30 higher at mostly $180.
“This strength is most likely due to the slight increase in estimated cattle slaughter and continued strong demand for beef,” Griffith says.
According to AMS, estimated cattle slaughter under federal inspection for the week was reported at 452,000 head, still well below where it needs to be, but 27,000 head more than the previous week.
Live Cattle futures closed an average of $6.02 higher week to week on Friday ($3.50 higher at the back to $7.65 higher toward the front.
Although day-to-day gains moderated as the week wore on, the bottleneck in beef packing and processing continued to boost wholesale beef values.
Choice boxed beef cutout value was $83.43 higher week to week on Friday at $460.88/cwt. Select was $91.86 higher at $448.99.
Cattle slaughter and beef production continue vastly lower year over year, while the backlog of fed cattle continues to build.
Estimated cattle slaughter for the week ending May 2 was 425,000 head, which was 38% less year over year, according to Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. For the past four weeks (through May 2), he says total cattle slaughter averaged 26.4% less than the same weeks last year–down 689,000 head, or a little more than a week’s worth of cattle slaughter.
Similarly, Peel explains beef production was down 35% the previous week, compared to a year earlier; an average of 25% less for the past four weeks. Relative to the first 14 weeks of the year, before current COVID-19 production declines began, he says the combined 520 million lbs. of reduced beef production over the last four weeks equates to losing a week’s worth of production.
“Given when packing plant workers began to be impacted and the additional attention now focused on protecting worker health, it is likely that we are currently at or very near the worst point of packing plant disruptions,” Peel says. “However, it is unclear how fast plants will resume production levels in the coming weeks. It is likely that the effective capacity will be reduced permanently or certainly for the foreseeable future because of the safety changes needed at packing plants. The impacts on cattle markets will linger for many weeks before backlogs are cleaned up and markets are current again.”
For consumers, Peel emphasizes there is no shortage of beef in the country. Any lack of availability encountered will be temporary.
Even so, there will likely continue to be plenty of angst from the ranch gate to the retail meat case.
“Soon, U.S. consumers will begin to see in their local meat case the effects of the beef and pork plant shut downs in April, with potentially 30% less meat on shelves and prices up to 20% above last year,” according to a new report from CoBank’s Knowledge Exchange Division: Closed Meat Cases Today Mean Empty Meat Cases this Summer. “For cattle and hog producers, the bottlenecks created by the plant slowdowns and shut downs have meant they will lose billions of dollars this year and be forced to euthanize millions of pigs. In spite of President Trump’s executive order to re-open the plants, per capita COVID-19 cases around U.S. meat plants have continued to climb, raising the risk of further plant capacity disruptions.”
U.S. Beef Exports and Imports Continue to Add Value
As scarcer beef supplies spawn more retail and food service outlets to limit customer purchases, some consumers wonder why the U.S. continues to export beef. Similarly, as cattle prices sag and run opposite of wholesale beef values, some producers question why the U.S. continues to import beef.
“Closing off or limiting beef exports does not necessarily mean greater amounts of beef in U.S. retail grocery stores, nor does limiting imports mean greater cattle prices,” says Brenda Boetel, livestock economist at the University of Wisconsin-River Falls. “The reason is because beef exported is not the same as beef imported. Even with beef production down, the importance of keeping export markets (and import markets) open is vital to the long-term health of the cattle industry.”
More specifically, in the latest issue of In the Cattle Markets, Boetel explains the mix of U.S. beef exports add value to domestic cattle prices as international customers place a higher value on some beef products than U.S. consumers.
Likewise, importing beef–mostly lean trim–helps bolster U.S. ground beef demand and keep it more price competitive than using higher value parts of the domestic carcasses.
U.S. beef exports were record high for the first quarter, according to the latest data released by USDA and compiled by the U.S. Meat Export Federation (USMEF).
U.S. beef exports in March totaled 115,308 metric tons (mt), up 7% from a year earlier. Value was 4% more at $702.2 million. Japan, South Korea, Mexico, Canada and Taiwan drove export growth for the month.
First-quarter beef exports climbed 9% from a year earlier to 334,703 mt; valued at $2.06 billion, which was 8% higher.
Beef export value per head of fed slaughter was $308.21 in March, down 8% from the very high March 2019 average. For the first quarter, per-head export value increased 2% to $317.06.
Friday to Friday Change
Weekly Auction Receipts
CME Feeder Index
|CME Feeder Index*||May 7||Change|
*Thursday-to Thursday for CME Feeder Index
Cash Stocker and Feeder
|600-700 lbs.||$145.21||– $1.71|
|700-800 lbs.||$135.44||+ $1.35|
|800-900 lbs.||$121.90||– $0.63|
|500-600 lbs.||$150.62||+ $1.27|
|600-700 lbs.||$137.82||+ $1.80|
|700-800 lbs.||$126.72||+ $4.55|
|400-500 lbs.||$147.85||+ $2.60|
|500-600 lbs.||$137.60||+ $0.19|
|600-700 lbs.||$127.19||+ $1.53|
(AMS National Weekly Feeder & Stocker Cattle Summary)
Wholesale Beef Value
|Boxed Beef (p.m.)||May 8 ($/cwt)||Change|
|Ch-Se Spread||$11.89||– $8.24|
|Feeder Cattle||May 8||Change|
|Jan ’21||$137.875||+ $8.800|
|Live Cattle||May 8||Change|
|Feb ’21||$111.650||+ $6.275|
|Mar ’21||$3.490||– $0.012|
|Oil CME-WTI||May 8||Change|
|Equity Indexes||May 8||Change|
|Dow Industrial Average||24331.32||+ 607.63|
|S&P 500||2929.80||+ 99.09|
|Dollar (DXY)||99.10||+ 0.31|