Monday markets
Futures markets were all red today as traders attempt to rationalize this confusing market. Price discovery has been a great concern as fundamentals are not responding the way one might think. June live cattle were off $1.97 to $92.67 and August fell $3 to $97.20. Feeder cattle took most of the damage for the day with May falling $4.25 to $123.65, August down $4.27 to $132.67, and September was down $4.10 to $134.05.
Oklahoma National Stockyard in Oklahoma City reported a much stronger market today. They offered 11,200 head for sale, which compared to last week: Feeder steers under 850 lbs. were $5-10 higher; over 850 lbs. were $1-4 higher; feeder heifers were $1-5 higher; and steer and heifer calves were $1-6 higher. Demand was considered good for all classes despite cattle futures trading mostly in the red. Quality so far is mostly average; 750 lbs. steers were trading at $129.05 on the weighted average.
Monday negotiated cash trading was very limited on very light demand in the Texas Panhandle and Nebraska. A very few live trades moved at $100 in Texas and a very few live trades at $115 in Nebraska—not enough trades for a full market trend in either region. So far Monday in Kansas and the western Corn Belt, negotiated cash trading was at a standstill. Last week in the Southern Plains live trades ranged from $95 to $115. For the prior week in Nebraska live and dressed trades moved mostly at $95 and $150, respectively. For the previous week in the western Corn Belt live trades moved mostly at $103 and dressed trades ranged from $170 to $180. A total 2,599 head were priced on the formula grid market at $164.13.
Wholesale beef values continue to climb higher today. Choice traded at $468.58 and Select was trading at $452.97. The grinding markets are strong with 90 percent lean trading at $258.54 and the 50 percent lean trading at $290.19. This must be the first time that fat has outsold lean. The cow beef cutout was $214.48. Slaughter for the day is estimated to be 85,000 head.
Cassie Fish in her report, The Beef, said today, “Last week’s negotiated cash cattle trade volume was 69k head and the 5-area average was $104.50. With the $110 and $115 tossed around, and the huge futures market rally, it certainly seemed the industry sold fewer cattle and more cattle traded higher than it turned out to be.
“This week thus far it is dead quiet. No bids and no gossip, only lots of nervousness that boxed beef prices are topping and speculation packer support this week will be lacking.
More importantly, last week’s slaughter at 452k head was a disappointment, woefully short of what is needed. This week’s expectations are in the 480k-head area which will show slight improvement.
“In the meantime, the backlog of cattle is growing exponentially to a level never seen. There is a popular narrative that the big drop in placements will somehow allow the industry to muddle through. While cattle that ought to have been harvest a month ago still stand in their pens already. This issue will define 2020 and 2021 as the excruciatingly slow recovery of plant capacity utilization drags on into the summer. When price cannot clear inventory, then what mechanism does?” Fish poses.
“End users are already being forced to adjust to less beef to sell. And the slowness of the slaughter recovery coupled with the permanent loss of some capacity when things are ‘normal’ will likely lead to higher retail beef prices and less retail beef featuring. Restaurant dining is returning but again, at a slow pace. By midsummer, the end user piece of the supply chain may have well already adapted its beef usage and any urgency at procuring beef may well have dissipated.
“CME cattle futures are triple-digit red after a blistering late week rally and huge drop in open interest on Friday. By tomorrow, the open interest in Jun LC will be less than Aug LC as Goldman finishes up its bi-monthly roll. Jun LC is being supported relative to the other contract months by its discount to cash, $8 today. The remaining contracts are finding commercial selling pressure thanks to the worsening fundamental outlook. Even too-high-priced CME feeder cattle futures are losing to fats today, though fall feeders over $130 seem many, many dollars too high given the large number of cattle outside feedyards and the monstrous fed cattle backlog,” Fish said.
