Friday markets
The cash cattle market has had a strong week. Packers have stabilized slaughter at 91,000 head per day, and this week are expected to process 500,000 head. Beef markets are falling quickly with Choice boxes down, more than $50 for the week. Futures markets are irrelevant in the price discovery matrix. Cash trade had a wide range from $110 to $120 paid today. With the volume of cattle backing up every day, packers know they can buy cattle cheaper. JBS USA reported they lost $1 billion in the first quarter of 2020.
ShayLe Stewart at DTN commented on the futures markets, “With grand encouragement coming from the cash cattle market, live cattle contracts have stepped up their game and are trading somewhat higher. June live cattle are up $3 at $97.12, August live cattle are up $1.12 at $98.12 and October live cattle are up $0.70 at $100.65. The market has chopped higher and lower throughout the entirety of the week so some fundamental support from the cash market is greatly welcomed. Light trade has been reported throughout Friday morning in several areas. Southern live cattle sold for $120—$5-10 higher than the trade seen Wednesday, and $14 higher than last week’s weighted average. Cattle left on show lists are prices around $120-plus for live cattle and dressed cattle are at $185.”
So far for Friday, in Nebraska a few live and dressed trades moved from $119-120 and at $190, respectively. However, not enough for a full market trend. The last fully reported market was on Wednesday with the bulk of live and dressed trades at $110 and $180, respectively. Thus far for Friday in the western Corn Belt, there were not enough trades for a market trend. The last fully reported market was on Wednesday with the bulk of live and dressed trades moved at $115 and $180, respectively.
Cassie Fish said in her report, The Beef, “In late March, no one knew that only two weeks later the ability to harvest cattle would be brought to its knees where it has stayed ever since and has only just now begun to improve. It’s unfathomable that the ability to slaughter over 600k cattle per week is unreachable today and may not be achievable until mid-June.
“CME cattle futures seem unsure how to trade the growing backlog that will reach 1M head next month. Jun LC being dramatically discount to cash for now ought to continue to gain on the rest of the contract months as the backlog will certainly hurt summer and fall cattle prices much more than today,” Fish continued.
“Cattle weights are historically high and will climb to unprecedented levels by fall. For the week ended May 2 steer carcass weights were reported by the USDA at 893 pounds, 40 pounds over the five-year average and 41 pounds over a year ago. Seasonally, weights bottom in early May. Cattle feeders are unable to move cattle through the supply chain in a timely manner and carryover is building.
“The higher prices paid by packers increases the weekly average price which most formula cattle use for a base price before adding grid premiums. But due to this extreme disruption in the economics of the beef industry, prices no longer have any impact on the slaughter rate of cattle. Packers are working non-stop to restore production levels, but it has proven to be much more difficult than anyone ever expected.
“Boxed beef values have begun a correction that will only accelerate as the production level rises. Choice boxes have already dropped $40 this week and will ultimately drop much more. Unfortunately, beef will begin losing market share this summer to cheaper and more plentiful pork and chicken. Q3 beef production, thanks to huge weights and way bigger kills, will exceed Q2 dramatically. Q3 typically is a weaker demand period for beef.”
The Cattle Report also commented, “Food retailers have space and select products for sale to place, expecting quick turnover and profit on the sales. As meat products moved up in price and scarce in availability, many chose to expand offerings of alternative meats. Those alternative meats expanded their sales in April with 275 percent growth over the previous month. Every missed sale of beef was reflective of a lost sale and a backed-up animal in the nation’s feedyards.
“The positive signs were an improvement in the daily slaughter numbers. The four-day total this week is 358,000 head compared to 323,000 last week. Last week’s weekly total of 452,000 head—up from 425,000 the previous week but far short of the 667,000 of last year. It now appears the forecast to have volumes back by June 1 will fail and the backlog will continue to increase, leaving the market in a dismal position for the balance of the year.” —Pete Crow, WLJ publisher
