Futures markets were again leading the way in price discovery last Thursday. All contracts were red after a short three-day rally. Nonetheless fed cattle values resumed their decline. April live cattle were down $2.55 to close at $105.90, June closed down $2.40 to $93.92 and the deferred months look worse.
The good news was that Tyson offered feeders a $5 premium on live cattle and an $8 premium on dressed cattle this week to help cattle feeders get through these uncertain times. Cash prices for the week were up sharply as of Thursday afternoon. A total 77,359 head traded with a weighted average price of $119.54 live and $190.04 dressed.
As of Thursday, estimated slaughter was 361,000 head—2,000 head more than last week but dead even for the same week last year. The boxed beef cutouts fell slightly with Choice trading at $253.57 and Select down to $242.17 on 149 loads of beef. It appears things may be slowing down after the mad rush to stock up over the past two weeks.
Cassie Fish at Consolidated Beef Producers had this to say about the week’s futures market activity: “The widespread commodity rally that began last week has been brought to full stop today. Red is everywhere except equities which are up sharply in response to the giant government stimulus package. There is obviously a great deal of air underneath commodities.
Cattle and hog futures have traded down the limit today, a move that would seem out of proportion in normal times. These are far from those. Cattle open interest falls by the thousands daily as more and more traders seek the sidelines away from the crazy swings and disconnect to the physical side. No doubt the “computers, machines, quants, algos” whatever name chosen to use, are having another field day today. Bears will hold on to the panic and anticipation of a recession to keep them short. Bulls are nowhere to be found.
“Sure, some people will try to rationalize this madness, but with Apr LC $15 below this week’s cash, it seems a lot of madness is priced. Cutout values, blown up by the consumer buying surge at retail are now correcting. It is worth reiterating that the Choice cutout reached an all-time high for March and packer margins sharply expanded. Those margins will stay wide as most beef is sold formula and on a three-week trailing moving average. The chuck and round which led the rally were unsustainably high and a correction is expected and normal. There is no disaster in the wholesale beef market, just another quick and dramatic adjustment during a time of unprecedented difficulty and challenge for U.S. citizens,” she surmised.
“Cattle feeders, who have aggressively sold inventory the past three weeks are just as nervous as ever and have already sold cattle $5 cheaper dressed today than yesterday. Emotions have rarely run higher than now.”
Feeder cattle markets are starting to attract more cattle as the grass is starting to green up, and prices improve. The West Coast cattle are starting to come off grass so volume will be getting stronger in that market. The latest CME feeder cattle index was at $128.50 last Thursday.
Feeder cattle futures dipped lower Thursday following Wednesday’s softer close. April feeders are down $2.32 at $126.35, May feeders are down $3.05 at $126.05 and August feeders are down $3.17 at $131.92.
The Roswell Livestock Auction in New Mexico reported 1,440 head offered and compared to their last sale, steer calves under 600 lbs. were $10-12 higher except 300-400-lb. steers, which were $18 higher. Feeders over 600 lbs. were steady. Heifer calves under 600 lbs. were $4-10 higher. Feeders over 600 lbs. were $1 higher with slaughter cows and bulls considered steady.
The OKC West Livestock Market, El Reno, OK, reported 2,881 head sold and, compared to the prior week, feeder steers and heifers were $10-20 higher with instances of $25 higher on feeder heifers. Steer and heifer calves were not well-tested but a higher undertone was noted. Demand was very good for all classes with active trade despite most months of the cattle futures trading lower. — Pete Crow, WLJ publisher
