Wednesday markets
Packing plants are slowly adding to processing capacity. Today’s estimated slaughter was 91,000 head compared to 85,000 head on Tuesday. But the damage has already been done, and a million head of cattle have missed their processing window; it might take until the end of the year to get the pipeline cleared out. We have developed some great export markets but if we can’t serve them what good are they? It’s time for someone to add another beef packing plant to the infrastructure.
Futures markets were all red today with the June live cattle trading down $3.30 to $93.87 and August down $3.27 to close at $98.42. May feeders were down $2 to $125.30 and August feeders were down $2.67 to close at $133.09.
It looks like the beef cutout may have topped out for now. The Choice box lost $9.40 this afternoon to settle at $465.99; Select was off $13.73 to $437.24 on 132 loads. Trim markets were higher, however, with the 90 percent lean moving up to $302.77 and the 50 percent trim settling in at $293.60; both were higher by $3-5. There is a great deal of attention given to the ground beef markets with Memorial Day just around the corner. Grocery stores must have ground beef in the meat case.
On cash fed cattle markets for Wednesday, Kansas negotiated cash trading has been slow on light demand. Compared to Tuesday, live cash trades moved $5 higher to $115. In the Texas Panhandle, negotiated cash trading has been inactive on very light demand for Wednesday—not enough trades for a market trend. The last reported market was on Tuesday with live trades at $110. So far for Wednesday in Nebraska and the western Corn Belt, negotiated cash trading and demand has been moderate. In Nebraska, when compared to last week, live cash trades moved $15 higher to $110 on a light test, with a few up to $115. The bulk of dressed cash trades, when compared to last week, moved $20-30 higher from $170 to $180, with a few up to $185. In the western Corn Belt, when compared to the prior week, live cash trades moved mostly $12 higher at $115, and dressed cash trades moved steady to $5 higher from $170-185. The weighted average for live trade was $113.67 and dressed trade was $178.90. There were 8,000 head of formula grid cattle priced at $169.64, at an average weight of 888 pounds.
Cassi Fish wrote in The Beef today, “No doubt the politics of the moment continue to highlight this bizarre time in the cattle and beef market. Packers still are unable to resume a normal slaughter schedule due to the disruptions related to COVID-19 and the result has been sky-rocketing beef prices and shortages. At the same time cattle feeders are unable to sell market-ready cattle in a timely fashion because of the same production problems. Each week, producers get some cattle harvested and for the last three weeks including this one, prices have been higher only because packers have voluntarily paid more due to their expanding margins. So, supply and demand, the usual determinants of price, have been temporarily cast aside,” Fish said.
“CME cattle futures are whipsawing back and forth the last five days and today is another triple-digit red day, though no limit move as occurred yesterday when it was big green. Spot Jun LC continues to gain on the remaining contracts supported by its discount to cash. Open interest declined yesterday to a new low for 2020.”
The Cattle Report said, “There is currently a [government] plan on the table for those in the live sector of beef production to emerge from this disaster. Working out the details is difficult and many times views from participants, who all have their own individual perspectives, become diluted in the final plan. Most cattle operators are independent types and finding consensus in support of a plan is often difficult. Parsing the bill passed by the House and sent to the Senate will involve more negotiations and lobbying by the industry. Pressing for a solution is today’s news media reports of high food prices with beef often singled out as the culprit. Unfortunately, few consumers are aware of the fact there is no shortage of beef; only an insufficient processing capacity.” — Pete Crow, WLJ publisher
