Cattle Current Weekly Highlights—Week ending Oct. 9, 2020

Cattle Current Weekly Highlights—Week ending Oct. 9, 2020

Increasing volume of spring-born calves and surging corn prices pressured cash calf and feeder cattle prices last week.

Steer and heifer calves traded $1-$3/cwt. lower, while yearling steers and heifers sold steady to $1 lower, according to the Agricultural Marketing Service (AMS).

“As cattle producers bring freshly weaned calves to market in large quantities, the price of calves has come under significant pressure,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “This price pressure will persist through November as producers continue to wean this year’s calf crop.”

Dry conditions and drought are adding price pressure in some areas.

For the week of Oct. 6, 62.9% of the continental United States was classified from abnormally dry to exceptional drought, according to the U.S. Drought Monitor. That was 26% more than the same time last year.

“With larger fall runs of calves expected in October and November, the lack of wheat pasture demand may add additional seasonal pressure to calf markets this fall,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments.

Moreover, he says the lack of wheat pasture and other forages may change the timing of calf and feeder cattle sales this fall.

Beyond forage availability to grow cattle, AMS analysts point out drought is pushing cows to town in some areas, such as Nebraska.

“Dry conditions in the state have over 98% of the state in some sort of drought designation; the highest percentage since July 2013,” says AMS analysts. “The question moving forward will be how many cows will leave the farm and go to harvest with a rancher exposed to paying more to keep cows around this winter than he has in the past. Some winter forage piles have started being used already and the calendar shows only the middle of October.”

Feed costs are increasing, too, with the surge in corn and soybean prices.

Week to week on Friday, Corn futures closed an average of 11¢ higher through the front six contracts. That’s an average of 24¢ higher for the same contracts over the past two weeks.

In the latest monthly World Agricultural Supply and Demand Estimates (WASDE), USDA projected the season average corn price received by producers by 10¢ to $3.60/bu.

Week to week on Friday, Soybean futures closed an average of 31¢ higher through the front six contracts. That’s an average of 49¢ higher for the same contracts over the past two weeks.

WASDE forecasts increased the U.S. season-average soybean price for 2020-21 by 55¢ to $9.80/bu.

In both cases, prices are buoyed by recent USDA data lowering projections for harvested area and yield.

Feeder Cattle futures closed an average of $3.37 lower week to week on Friday, from $1.65 lower in spot Oct to $4.35 lower.

Fed Cattle Prices Continue Rise

Negotiated cash fed cattle prices extended gains last week, supported by snugger front-end supplies and indications that cattle feeders continue to erase the backlog of fed cattle.

Regionally, cash prices last week were generally $2 higher in the Southern Plains at $109/cwt. on a live basis; $1-$2 higher in Nebraska and at $108-$109 and steady to $3 higher in the western Corn Belt at $107-$110. Dressed trade was $2-$3 higher at $170.

Through Thursday, the five-area direct negotiated weighted average fed steer price was $107.59/cwt. on a live basis, which was 48¢ higher than the previous week, but $1.49 less than the same time last year. The average price in the beef of $169.29 was $1.61 more than the prior week but 79¢ less than the previous year.

“Prices are about $13/cwt. higher than their summer lows and will likely continue to slowly increase into late fall as the holiday season approaches,” Griffith says. “The fourth-quarter peak price is still expected to exceed $115 with an upper range near $120. It will be tough to reach the $120 mark, but most cattle feeders will be profitable with prices over $115. One major factor that could temper prices in the fourth quarter is a glut of cattle coming off feed in the next 10 to 12 weeks.”

However, except for an average of $1.60 higher in the front two contracts, Live Cattle futures closed an average of $1.15 lower week to week on Friday (42¢ to $1.32 lower).

In the latest WASDE USDA’s Economic Research Service (ERS) increased projected fed cattle prices for this year and next. Specifically, ERS increased the 2020 annual average price (five-area direct) by $1.41 to $108.71/cwt., compared to the previous month, with a fourth-quarter price projection of $109. That’s based on current price strength and robust beef demand.

The forecast annual average fed steer price for 2021 increased by $2 to $114. Prices are projected to be $113 in the first quarter, $110 in the second quarter and $114 in the third quarter.

That’s with a projected increase in beef production both this year and next.

ERS projects beef production for this year at 27.14 billion lbs., which was 90 million lbs. more than the previous month’s estimate. That’s based on expectations for increased slaughter in the second half of the year. The total would be 17 million lbs. less than last year. Projections for beef production in 2021 increased 10 million lbs. to 27.37 billion lbs., which would be 227 million lbs. more than this year.

In the meantime, wholesale beef values continue their seasonal slumber.

Choice boxed beef cutout value was $4.82 lower week to week on Friday at $214.06/cwt. Select was $7.79 lower at $199.82.

“Wholesale beef prices will struggle to find much support the next four to six weeks as the market moves through a soft demand time period,” Griffith explains. “Following Thanksgiving, middle meats will provide the holiday support for the market as the rib will take front and center stage. Consumer demand will be the driving factor for prices, but competing meat prices will also play a role.”

Based on the latest data, demand for U.S. beef exports is beginning to rebound.

Beef muscle cut exports in August were the largest in more than a year at 89,148 metric tons (mt), up 3.5% year-over-year, led by record-large demand in South Korea and Taiwan, according to data compiled by the U.S. Meat Export Federation (USMEF). Export value increased slightly from a year ago to $611 million.

Variety meat exports were lower year over year, though, due in part to the lack of available labor required to harvest and export some items.

Combined beef/beef variety meat exports were 109,752 mt in August, down 4.5% from a year ago. Export value was $673.8 million, down 2% from a year ago but the highest since March.

For January through August, beef muscle cut exports were 6% below last year’s pace in volume (627,248 mt) and 9% lower in value ($4.38 billion). Beef/beef variety meat exports were down 8% to 808,659 mt, valued at $4.95 billion (down 9%).

“The upward trend in muscle cut exports is very encouraging and especially critical as beef and pork production continue to rebound from the interruptions earlier in the year,” says Dan Halstrom, USMEF president and CEO. “Maintaining variety meat volumes has been especially challenging this year but we continue to expand and develop destinations for these items, which are essential to maximizing carcass value.”

Beef export value per head of fed slaughter averaged $302.82 in August, up 1% from a year ago. The January-August average was down 4% to $297.96.

Friday to Friday Change

Weekly Auction Receipts

 

Oct. 9 Auction Direct

Video/net

Total
 

228,400

(+21,200)

21,000

(-18,700)

23,400

(+18,900)

272,800

(+21,400)

 

 

CME Feeder Index

CME Feeder Index* Oct. 8 Change
  $141.92 –   $1.04

*Thursday-to Thursday for CME Feeder Index

 

Cash Stocker and Feeder

North Central

Steers-Cash Oct. 9 Change
600-700 lbs. $152.56 –   $2.03
700-800 lbs. $148.32 –   $1.17
800-900 lbs. $144.70 –   $0.36

 

South Central

Steers-Cash Oct. 9 Change
500-600 lbs. $146.60 –  $1.21
600-700 lbs. $142.50 –  $0.68
700-800 lbs. $141.36 –  $0.88

 

Southeast

Steers-Cash Oct. 9 Change
400-500 lbs. $146.13 –  $2.77
500-600 lbs. $136.87 + $0.47
600-700 lbs. $130.21 + $0.73

(AMS National Weekly Feeder & Stocker Cattle Summary)

 

Wholesale Beef Value

Boxed Beef  (p.m.) Oct. 9 ($/cwt) Change
Choice $214.06 –  $4.82
Select $199.82 –  $7.79
Ch-Se Spread $14.24 + $2.97

 

Futures

Feeder Cattle  Oct. 9 Change
Oct $138.250 –  $1.650
Nov $135.525 –  $4.350
Jan ’21 $134.000 –  $4.000
Mar $133.350 –  $4.075
Apr $135.050 –  $3.850
May $135.725 –  $4.200
Aug $141.350 –  $3.000
Sep $142.475 –  $1.875

 

Live Cattle   Oct. 9 Change
Oct $109.875 + $1.700
Dec $112.600 + $1.500
Feb ’21 $114.300 – $0.425
Apr $115.850 – $1.300
Jun $109.525 – $1.200
Aug $107.875 – $1.325
Oct $110.100 – $1.300
Dec $113.075 – $1.325
Feb ’22 $115.500 – $1.200

 

Corn  Oct. 9 Change
Dec $3.950 + $0.154
Mar ’21 $4.022 + $0.130
May $4.064 + $0.118
Jly $4.094 + $0.110
Sep $3.954 + $0.072
Oct $3.966 + $0.056

 

Oil CME-WTI Oct. 9 Change
Nov $40.60 + $3.55
Dec $40.91 + $3.57
Jan ’21 $41.27 + $3.53
Feb $41.60 + $3.45
Mar $41.90 + $3.35
Apr $42.16 + $3.24

Equities

Equity Indexes Oct. 9 Change
Dow Industrial Average  28586.90 +  904.09
NASDAQ  11579.94 +  504.92
S&P 500   3477.13 +  128.69
Dollar (DXY)       93.03 –        0.78
2020-10-10T17:01:04-06:00

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