Let’s hope the futures markets have all the bad news figures in. Futures were not friendly to live cattle last week. Shedding more than $9 on the April live cattle contract, which was $85.95 at close last Thursday, June will be the contract to turn to and it isn’t encouraging either, closing at $82.92. There is talk of a lot of cattle being delivered to central market points. Deferred contracts are all higher than June with the August contract at $88.45, which may reflect some bullish news coming out of last Friday’s Cattle on Feed report. The report is expected to show 5 percent fewer cattle on feed, marketings up 6 percent for March, with one extra day of trade, and placements will be down roughly 20 percent from a year ago.
The boxed beef market was where all the fun was last week, with the Choice cutout skyrocketing to a new all-time high at $184.39, up over $30 for the week. Select was close behind at $272.89 on 121 loads. Packers just can’t get enough fed cattle killed to bring wholesale beef prices down. Thursday’s slaughter was expected to be 84,000 head, which would put the industry 138,000 head behind the same week last year. Ground beef markets are much higher with the 90 percent lean at $248.29 and 50-50 trim trading for $147.23; three weeks ago the 50s were around $30 cwt.
Cash trade was slow last week. Through Thursday, negotiated cash trade was light on moderate demand in Kansas, Nebraska and the western Corn Belt. Compared to the bulk of last week in Kansas, live purchases traded $5 lower at $100. The weighted average on live sales was $99.70. Compared to the bulk of trade last Wednesday in Nebraska and the western Corn Belt, dressed purchases traded $10 higher, ranging from $148-$160, with the bulk at $160. The weighted average was $157.23. Trade was very limited on light demand in the Texas Panhandle last Thursday, however there were not enough for an adequate market test. The latest established market in the Texas Panhandle was on Tuesday with live purchases at $100.
Cassie Fish, analyst with Consolidated Beef Producers, points out the obvious: “The unprecedented cattle slaughter reduction, due to COVID-19 hitting packing plants for three consecutive weeks, has sent the wholesale beef market above the 2015 high, the prior highest level which occurred when fed cattle supplies were historically low. Since April 6 and including this week, cattle slaughter will be down about 420k or 22 percent in total those three weeks from a year ago, what would be considered normal. About 300k of those cattle are fed cattle. The USDA reported the Choice cutout this morning at $282.68, about $18 higher than the prior all-time high.
“CME live cattle futures are selling off because the slaughter loss means the industry is unable to market cattle on time, losing currentness. However, Apr LC is taking the brunt of the selling as rumors that some cattle feeders, unable to get cattle marketed, will deliver the cattle against the CME contract as a last resort.
“The remainder of the CME cattle contracts were lower but seem to be shifting some of the perspective to a less bearish outlook—perhaps considering all the bad news has been priced? For one, Friday’s USDA Cattle on Feed report will show a big drop in placements, perhaps 300k head fewer than a year ago. And it’s a foregone conclusion April placement, which will be reported in May, will see that many fewer cattle placed as well. Couple that with the ‘country will be reopening this summer’ optimism reflected by equities and a premium structure is building in the futures market.
“Some packers are just focusing on buying the fattest cattle that are offered and leaving the rest. Other packers are extremely short bought but of course, can easily cover whatever needed as no cattle feeder is able to come close to cleaning up available supply,” Fish said.
Feeder cattle markets showed a bit more life, steady to higher for most of the week. Volume picked up a bit, so buyers had something to buy. There were just not many feeder cattle and calves offered during the past few weeks.
DTN reported that feeder cattle contracts were trading steadily lower with little excitement interesting traders to invest within the marketplace. April was up $0.95 to $119.42, May feeders are up $0.60 at $117.25, August feeders are down $0.82 at $126. Thankfully, sale barns have had some interest this week in cattle that are ready to go to grass, which has kept prices strong for that market. Feeder cattle auctions reported stronger cash sales Thursday with more cattle offered compared to the week before. National Stock Yards in Oklahoma City offered 6,450 head Thursday. They reported feeder steers under 850 lbs. $4-8 higher; over 850 lbs. steady to $2 higher; and feeder heifers $6-10 higher. Steer calves under 500 lbs. were not well tested; over 500 lbs. were $5-10 higher. Heifer calves, 500-600 lbs., were $6-8 higher; other weights were not fully established. Demand was considered moderate to good on average quality. Temperatures remain unseasonably cool. CME Feeder and Live Cattle contracts leveled out towards the end of last week.
Joplin Regional Stockyards in Carthage, MO, offered 5,097 head last Thursday and reported steers under 550 lbs. and over 700 lbs. steady to $3 higher, 550- to 700-lb. steers steady, and heifer calves and yearling heifers steady, except a two-load lot of replacement quality 800-lb. heifers were sharply higher. Demand was moderate to good, and supply was reported as moderate. Live cattle and feeder cattle futures closed lower. — Pete Crow, WLJ publisher
