Doggedly higher grain prices, languishing cash fed cattle prices and increasing demand uncertainty added bearishness to cattle markets as last week progressed.
Calves and yearlings sold steady to $3/cwt. higher early in the week and steady to $4 lower later on, according to the Agricultural Marketing Service.
“With the higher grain prices and forage prices, we will see persistent pressure on feeder cattle and calf prices into 2021,” says Stephen Koontz, agricultural economist at Colorado State University, in the latest issue of In the Cattle Markets. “One dollar higher corn costs translate into about $6-$7/cwt. lower feeder cattle prices. This cattle price impact is being exacerbated by dry conditions in the western U.S. and hay prices that are creeping higher. The impact on calf prices will be greater.”
Koontz points out Corn futures (2020-21 crop) are about $1 higher than in August and Soybean futures are about $2 higher, including deferred contracts. He adds that prices for both appear to be at a premium to what underlying fundamentals suggest.
Feeder Cattle futures closed an average of $2.21 lower week to week on Friday, from $1.67 lower at the back to $3.27 lower in spot Jan.
USDA’s Economic Research Service (ERS) lowered the expected fourth-quarter feeder steer price by $6 from the previous month to $137/cwt., in the latest Livestock, Dairy and Poultry Outlook (LDPO). That’s basis Oklahoma City for Medium #1. The lower revision is based on seasonal price weakness and cash prices in October down more than $9 year over year at $137.55. ERS reduced expected feeder steer prices for next year by $1, based on higher projected feed prices.
Specifically, ERS forecasts feeder steer prices next year at $133 in the first quarter, $136 in the second, $141 in the third; annual average price of $138.
Feedlot Placements Down 11%
Heading into the new week, markets will likely view Friday’s monthly Cattle on Feed report as neutral, if not a touch friendly.
October placements of 2.19 million head in feedlots with 1,000 head or more capacity were 10.97% less than a year earlier. Estimates ahead of the report suggested placements to be about 1.5% more.
Marketings of 1.87 million head in October were just 2,000 fewer than a year earlier, about in line with pre-report estimates.
Cattle on feed Nov. 1 numbered 11.97 million head, which was 1.33% more than a year earlier. That was slightly less than expectations, but the most for the month since the data series began in 1996.
Fed Cattle Prices Steady
Negotiated cash fed cattle prices ended last week steady, according to data from the Agricultural Marketing Service (AMS). Live prices were at $110/cwt. in the Southern Plains and Nebraska and at $109-$110 in the western Corn Belt. Dressed prices are steady at $172.
Live Cattle futures closed an average of $1.50 lower week to week on Friday, from 95¢ to $2.00 lower.
“Heavy cattle continue to put pressure on some regional markets, but it is becoming less and less of a concern with each passing week. Prices may be a little softer next week with the shortened kill week,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments.
“Despite the rising number of cattle on feed, front-end supplies—the number of cattle on feed over 150 days—decreased for the third consecutive month as a percentage and in volume,” say ERS analysts, in the LDPO. “This is the result of an improving pace of fed cattle slaughter, which was faster than a year ago for the last three months and above the five-year average. The quickening slaughter pace, combined with an ample supply of fed cattle at heavier weights, led to higher expected beef production in fourth-quarter 2020 relative to 2019. Nevertheless, tighter front-end supplies will likely support continued seasonal movement in fed steer prices.”
ERS left the expected five-area direct fed steer price unchanged for the fourth quarter ($109) and for next year: $113 in the first quarter, $110 in the second quarter, $114 in the third quarter; annual average price of $114.
Boxed Beef Prices Continue Higher
Choice boxed beef cutout value was $12.37 higher week to week on Friday at $238.35/cwt. Select was $5.52 higher at $214.98. That’s $24.03 higher for Choice over the past two weeks and $16.49 higher for Select.
“Sharp upticks in Daily Boxed Beef prices this week caught many observers off-guard with Rib meats leading the charge,” say AMS analysts. “Wholesalers and retailers continued to buy beef out front to cover their customers’ needs moving towards the Christmas holiday season.”
By most measures, domestic consumer beef demand remains resilient in the face of multifold pandemic challenges, but those challenges will likely increase heading into winter.
“Loss of outdoor dining in cold weather will further aggravate restaurant challenges. Food service demand is likely to be additionally affected with worsening public health challenges. Macroeconomic concerns will grow as consumers go forward with less unemployment support,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “Ample supplies of beef, pork and poultry increase market price pressure, though disruptions in supply are a threat as well.”
Friday to Friday Change
Weekly Auction Receipts
| Nov. 20 | Auction | Direct |
Video/net |
Total |
|
321,900 (+16,600) |
45,400 (-29,700) |
9,800 (-600) |
377,100 (-13,700) |
CME Feeder Index
| CME Feeder Index* | Nov. 19 | Change |
| $136.75 | – $0.60 |
*Thursday-to Thursday for CME Feeder Index
Cash Stocker and Feeder
North Central
| Steers-Cash | Nov. 20 | Change |
| 600-700 lbs. | $146.51 | – $3.07 |
| 700-800 lbs. | $141.15 | – $0.38 |
| 800-900 lbs. | $142.71 | + $0.69 |
South Central
| Steers-Cash | Nov. 20 | Change |
| 500-600 lbs. | $151.65 | – $0.22 |
| 600-700 lbs. | $140.91 | + $0.06 |
| 700-800 lbs. | $136.94 | – $2.75 |
Southeast
| Steers-Cash | Nov. 20 | Change |
| 400-500 lbs. | $152.31 | + $0.64 |
| 500-600 lbs. | $140.91 | + $2.38 |
| 600-700 lbs. | $128.60 | – $0.58 |
(AMS National Weekly Feeder & Stocker Cattle Summary)
Wholesale Beef Value
| Boxed Beef (p.m.) | Nov. 20 ($/cwt) | Change |
| Choice | $238.35 | + $12.37 |
| Select | $214.98 | + $5.52 |
| Ch-Se Spread | $23.37 | + $6.85 |
Futures
| Feeder Cattle | Nov. 20 | Change |
| Jan ’21 | $134.600 | – $3.275 |
| Mar | $134.375 | – $2.775 |
| Apr | $136.175 | – $2.450 |
| May | $137.450 | – $2.150 |
| Aug | $143.425 | – $1.325 |
| Sep | $143.250 | – $1.850 |
| Oct ’21 | $143.200 | – $1.675 |
| Nov | $143.125 | n/a |
| Live Cattle | Nov. 20 | Change |
| Dec | $108.100 | – $1.825 |
| Feb ’21 | $110.650 | – $1.575 |
| Apr | $114.450 | – $1.750 |
| Jun | $109.250 | – $1.925 |
| Aug | $108.650 | – $2.000 |
| Oct | $112.650 | – $0.975 |
| Dec | $115.125 | – $1.075 |
| Feb ’22 | $117.050 | – $0.950 |
| Apr | $117.800 | – $1.425 |
| Corn | Nov. 20 | Change |
| Dec | $4.232 | + $0.128 |
| Mar ’21 | $4.282 | + $0.088 |
| May | $4.306 | + $0.066 |
| Jly | $4.306 | + $0.044 |
| Sep | $4.106 | + $0.050 |
| Oct | $4.082 | + $0.038 |
| Oil CME-WTI | Nov. 20 | Change |
| Dec | $42.15 | + $2.02 |
| Jan ’21 | $42.42 | + $2.02 |
| Feb | $42.64 | + $1.94 |
| Mar | $42.84 | + $1.83 |
| Apr | $43.02 | + $1.72 |
| May | $43.15 | + $1.60 |
Equities
| Equity Indexes | Nov. 20 | Change |
| Dow Industrial Average | 29263.48 | – 216.33 |
| NASDAQ | 11854.97 | + 25.68 |
| S&P 500 | 3557.54 | – 27.61 |
| Dollar (DXY) | 92.40 | – 0.32 |