Cattle markets continue their decline as the COVID-19 virus expands fears. Futures markets were down or near down the trading limit on all contracts last Thursday. April Live cattle were at $93.87 and June was down to $84.92. Cash trade was near nonexistent. Only 20,000 head were traded on the cash market at $112 live and $180 dressed, a decrease of $8 from last week’s packer supported trade.
The packing side of the business is starting to show its vulnerability as employees are being tested for coronavirus. JBS had to shut down its Souderton, PA plant mid-week and some employees were positive at the Greely, CO plant. Two packing plants in Canada have shut down. Packers are working to provide employees with more safety options. Lower packing capacity means fewer cattle will be slaughtered, which is forcing futures markets lower.
DTN reported, “Sharp losses continue in all livestock markets as growing concerns of further demand erosion despite strong retail demand for meat products. June live cattle futures have moved off session lows, able to hold long-term support levels and move above contract lows. Limited cash cattle activity is seen early Thursday, but the widespread market weakness could add to the pressure in cash prices. Crude oil prices have surged following an announcement by President Trump about expected production cuts from Saudi Arabia and Russia.”
Boxed beef markets were starting their anticipated decline with Choice moving down to $232.64 and Select down to $222.12 on 135 loads. Slaughter for the week was at 467,000 head which would be 17,000 fewer cattle than were processed last week. Plant disruptions are starting to have some impact.
Cassie Fish at Consolidated Beef Producers commented on the current situation. “At a time when fear is dominate and rumors are rampant, it is important to take a moment for perspective and context regarding how far the live cattle futures market has fallen. The unknown nature of the pandemic continues to fuel selling. And though there have been some issues at packing plants (some overblown in press reports) the packing industry and entire supply chain is functioning well.
“There have been raises, bonuses and extra precautions taken by companies—again some not publicized,” Fish added. “There is a tendency during times like these to focus on the negative as it’s human nature. But the proof is in the production numbers.
“In Q1 2020 based on daily kill numbers (actual kill data for March not available yet), the industry has slaughtered 439k more total cattle and 374k more fed cattle than 2019. That is astonishing and way more than any analyst forecast. It means the industry has less cattle to slaughter in Q2 than originally expected. The north has 175k fewer cattle on feed than a year ago as of March 1 and the north typically hits its peak numbers in May-July. This year’s supply will not be as large as a year ago, though granted out-weights will be higher. Certainly, Q3 numbers will be down from 2019, especially considering March placements will be very small.
“This week’s cattle slaughter is now estimated to be 645k head, down from earlier week guesses and still the sixth largest for that week since 1980. This compares to 627k a year ago. Next week packers have taken out a few Saturday shifts and one major company has a long-scheduled maintenance project. That will drop the weekly slaughter to 620k compared to 638k a year ago.
“The concentration of more market-ready fed cattle supplies than a year ago has always been the first half of 2020 with much of that increase in Q1. The industry has handily worked through the supply and then some and has begun Q2 in great shape. This fact is not calming cattle feeder fears. Nor has the fact that packing companies are maneuvering these historically challenging times successfully.
“Most in the industry are focused on what seems like bottomless futures prices along with the rising number of COVID-19 cases and see little hope.”
Feeder cattle receipts were erratic across the country as some auctions received more cattle. Country bids that were sharply lower sent some cattle owners to auctions where they found prices $5-10 lower than last week. Some owners of replacement cattle were deciding to feed their cattle rather than sell. Breakeven projections for many owners were discouraging with the balance of this year’s futures prices at such low levels. Current feeding margins are deep in the red even at the lower feeder cattle prices.
Weather conditions are allowing many outside cattle to stay in place. Rains across much of the nation have fostered growth of forage and whether wheat fields or winter grass, green growth is providing a way station for those wanting to delay marketing plans.
Superior Livestock Auction held their normal Thursday sale, which was larger than most. They saw cattle over 750 lbs. sell sharply lower $95-110 while 550-lb. calves traded between $155-165. There were quite a few cattle withdrawn from the sale. The major auction markets around the country attracted more cattle this week because the week before there were very light offerings, which pushed the market higher. Thinking the market recovered, cattlemen brought more cattle to town and found a much softer market. —Pete Crow, WLJ publisher
