Calf and feeder cattle prices diverged last week as wide temperature swings become the seasonal norm, adding cattle stress.
“Calves are split into two groups: the long-time weaned calves with vaccination programs selling mostly steady to firm with some sales up to $5/cwt. higher,” explain analysts with the Agricultural Marketing Service (AMS). “The other side of the coin are the un-weaned calves, fleshy bawlers in many cases, reported trading $3-$8 lower or with a sharply lower undertone. Discounts on these un-weaned calves will more than likely increase as we head into fall or until we get a good hard freeze.”
“Calf prices seasonally soften in the fall with the calf run, but the feeder cattle market has done very little to support calf prices,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “Based on Tennessee weekly auction price averages, a 525-lb. steer was worth $727 per head while the same weight heifer was worth $643 per head this week. These are not highly profitable prices that make a producer want to purchase bred heifers or keep back more heifers for breeding. Nor are these prices low enough to result in cow culling, because a 525-lb. steer this time last year was valued about $20 less than this week’s price and few producers culled very hard a year ago.”
Long yearlings coming off grass continued to command the most buyer attention, according to AMS, selling steady to $5 higher at mostly 850-1,000 lbs., with instances of $8 higher.
Feeder Cattle futures closed an average of $1.53 higher week to week on Friday (15¢ higher at the back to $2.25 higher).
Looking further ahead, USDA’s Economic Research Service (ERS) left projected feeder cattle prices unchanged from the previous month—Livestock, Dairy and Poultry Outlook (LDPO)–as higher feed costs and the slower expected pace of marketing outweigh declining supplies.
The average feeder steer price (basis Oklahoma City) is projected at $140/cwt. in the third and fourth quarters for an annual average of $135.70. The projected feeder steer price is $131 for the first quarter of next year, $134 for the second quarter and at $137 for the 2021 average.
“The result of greater placements in second-half 2020 without increased marketings in the second half will likely keep cattle in feedlots above year-ago levels through the remainder of 2020,” say ERS analysts. “Because of this, anticipated feeder cattle supplies will diminish in 2021. However, the increase in fed cattle prices will likely offset higher corn prices forecast for next year.”
Week to week on Friday, Corn futures closed an average of 7¢ higher through the front six contracts. That’s an average of 18¢ higher in the last two weeks.
Fed Cattle Prices Increase
Negotiated cash fed cattle trade ended the week $4-$5 higher on a dressed basis in Nebraska at $165/cwt. and $2-$3 higher in the western Corn Belt at $163. On a live basis, prices were $1.50-$2.00 higher in the Southern Plains at $103.00-$103.50, $2.50 higher in Nebraska at $103.50 and $2-$4 higher in the western Corn Belt at $104-$105.
Live Cattle futures closed an average of $1.47 higher week to week on Friday ($1.15 to $1.95 higher).
“Cattle feeders will be looking for the finished cattle market to slowly gain some steam heading toward the holiday marketing timeframe, but this will be a slow process, as prices are expected to be stagnant the next couple of weeks,” Griffith says.
For broader perspective, in the latest LDPO, ERS projects the average five-area direct Choice fed steer price at $101/cwt. for the third quarter, $104 for the fourth quarter and at $107.30 for the annual average, the same as the previous month.
“The reduction in slaughter capacity in the second quarter continues to show up in the year-over-year higher number of cattle on feed over 150 days (although diminishing since June) and in the carcass weights of steers and heifers,” say ERS analysts. “The improved pace of slaughter, combined with an ample supply of fed cattle at heavier weights, led to higher expected beef production in third-quarter 2020 relative to 2019, which is likely putting pressure on cattle prices.”
Heading into 2021, however, ERS forecast average Choice steer prices $2 higher than the previous month’s estimate at $107 in the first and second quarters with an annual average price of $112.
That’s based on expectations that a larger proportion of available feeder cattle supplies available July 1 were placed on feed, which will limit supplies available for placement in the first half of next year.
“This pulls feedlot marketings, and consequently steer and heifer slaughter, forward from the latter quarters of 2021,” say ERS analysts. “With fewer steers and heifers in the slaughter mix and higher forecast feed costs affecting the length of time on feed, carcass weight gains next year will be limited.”
In the meantime, wholesale beef values continued their seasonal decline.
Choice boxed beef cutout value was $4.25 lower week to week on Friday at $215.64/cwt. Select was $3.16 lower at $203.94.
“The main determinant of how fed cattle prices move will be associated with consumers’ willingness to pay for beef moving forward,” Griffith explains. “Has the pandemic changed consumption patterns? It is doubtful that it has, but discretionary spending may continue to be altered.”
Friday to Friday Change
Weekly Auction Receipts
| Sept. 18 | Auction | Direct |
Video/net |
Total |
|
201,200 (+81,400) |
46,700 (+22,700) |
39,800 (+28,400) |
287,700 (+75,700) |
CME Feeder Index
| CME Feeder Index* | Sept. 17 | Change |
| $142.19 | + $1.20 |
*Thursday-to Thursday for CME Feeder Index
Cash Stocker and Feeder
North Central
| Steers-Cash | Sept. 18 | Change |
| 600-700 lbs. | $152.96 | – $1.60 |
| 700-800 lbs. | $146.08 | – $1.59 |
| 800-900 lbs. | $143.06 | + $0.73 |
South Central
| Steers-Cash | Sept. 18 | Change |
| 500-600 lbs. | $149.68 | + $0.96 |
| 600-700 lbs. | $144.15 | + $1.77 |
| 700-800 lbs. | $141.35 | + $3.62 |
Southeast
| Steers-Cash | Sept. 18 | Change |
| 400-500 lbs. | $149.34 | + $0.61 |
| 500-600 lbs. | $139.73 | + $2.94 |
| 600-700 lbs. | $131.05 | – $2.53 |
(AMS National Weekly Feeder & Stocker Cattle Summary)
Wholesale Beef Value
| Boxed Beef (p.m.) | Sept. 18 ($/cwt) | Change |
| Choice | $215.64 | – $4.25 |
| Select | $203.94 | – $3.16 |
| Ch-Se Spread | $11.70 | – $1.09 |
Futures
| Feeder Cattle | Sept. 18 | Change |
| Sep | $140.875 | + $0.875 |
| Oct | $142.425 | + $1.850 |
| Nov | $142.525 | + $1.200 |
| Jan ’21 | $141.350 | + $2.225 |
| Mar | $140.950 | + $2.250 |
| Apr | $142.075 | + $1.975 |
| May | $142.400 | + $1.725 |
| Aug | $145.650 | + $0.150 |
| Live Cattle | Sept. 18 | Change |
| Oct | $107.350 | + $1.825 |
| Dec | $111.850 | + $1.950 |
| Feb ’21 | $116.675 | + $1.750 |
| Apr | $118.150 | + $1.200 |
| Jun | $111.600 | + $1.175 |
| Aug | $109.875 | + $1.250 |
| Oct | $111.850 | + $1.175 |
| Dec | $115.050 | + $1.150 |
| Oct | $117.375 | + $1.750 |
| Corn | Sept. 18 | Change |
| Dec | $3.784 | + $0.100 |
| Mar ’21 | $3.874 | + $0.092 |
| May | $3.926 | + $0.082 |
| Jly | $3.954 | + $0.074 |
| Sep | $3.882 | + $0.040 |
| Oct | $3.932 | + $0.036 |
| Oil CME-WTI | Sept. 18 | Change |
| Oct | $41.11 | + $3.78 |
| Nov | $41.32 | + $3.67 |
| Dec | $41.61 | + $3.53 |
| Jan ’21 | $41.93 | + $3.37 |
| Feb | $42.24 | + $3.22 |
| Mar | $42.54 | + $3.09 |
Equities
| Equity Indexes | Sept. 18 | Change |
| Dow Industrial Average | 27657.42 | – 8.22 |
| NASDAQ | 10793.28 | – 60.26 |
| S&P 500 | 3319.47 | – 21.50 |
| Dollar (DXY) | 93.00 | – 0.27 |