Cattle markets took a beating last week on news of the coronavirus and the potential effects on global trade and supply lines. Futures markets had no confidence and sold off in a big way. The long-managed money couldn’t get short fast enough. The February contract lost $6.00 for the week closing Thursday at $112.62; the deferred contracts on live cattle are even lower with August at $104.47. Feeder cattle contracts also took a beating with the February contract trading at $141 on Feb. 20 and falling below $130.00 Thursday, Feb. 28. The deferred contract on feeders are still respectable, trading above $145.
Cash markets were $5-6 lower for the week. Cattle feeders were aggressive sellers early in the week and by Thursday afternoon 59,617 head had traded hands at an average price of $115.20 live and $185.90 dressed.
Cassie Fish at Consolidated Beef Producers said, “The break in April live cattle is now $17.90 off the high or 14 percent. Today’s low was close enough to the post-fire low to be considered a double bottom—if, of course, the market doesn’t take out today’s low. Right now, Apr LC is speeding away from the low of the day leaving a long tail. Daily technical indicators are oversold and are flirting with turning up.
“Fear of the unknown is any market’s greatest motivator. It freezes up decision-making by businesspeople. It causes panic. It keeps people up at night and fills days with worry, the focus too much on the 24/7 news cycle of our 2020 world,” she surmised.
“How the current global coronavirus outbreak continues to spread and how long it will persist are unquantifiable. And that fact is unbearable for everyone. There is just no way to know the what/when/where of the next outbreak. This places everyone in a reactive mode. Unfortunately, the U.S. was a spectator to the paralysis that overtook much of China after cases increased and that nation struggled for containment. And even though what happened there is highly unlikely to occur in the U.S. it plays out in peoples’ minds regardless.”
Boxed beef prices were also softer with Choice trading at $205.54 and Select gaining some ground to close at $199.69 on active trade; 182 loads were sold. Packers picked up slaughter levels a bit. Estimates for the week were 630,000 head. The same week last year there were 609,000 head processed. Packers are expected to pick up slaughter rates going forward. Steer carcass weights are at a record high of 882 pounds, 18 pounds above last year.
Cash feeder cattle were significantly lower at market making auction barns, the feeder cattle index is around $140 and march feeder cattle futures at $130.92. The LSU Cattle Report chimed in saying, “It is fairly simple to see why the placements into feedyards is slowing. The decline in live cattle futures into summer and fall has discouraged placements, along with uncertainties regarding coronavirus and its implications for beef exports and Phase One of the trade agreement with China.
“January placements were under prior year and February is on track to follow up with smaller placements. Breakeven calculations forecast losers in the feedyard. Stocker operators are staring at negative margins with high priced calves for the summer grazing season. The industry is always living moment to moment of promises of better markets in the future only to find retailers and processors are holding all the cards and making all the profits,” the report continues.
“Moisture is always key to demand for lighter grazing cattle. The Southern Plains have received generous moisture and more cattle are diverted from feedyard placement to outside placement. Wheat fields will need more cattle for spring grazing but there is little incentive to purchase high priced calves.”
Oklahoma City: The National Stockyards reported feeder steers sold $6-10 lower compared to last week with feeder heifers trading mostly $7-9 lower. Steer calves were $6-16 lower, and heifer calves were $6-10 lower on light demand and plain to average quality. Both feeder and live cattle contracts on the CME traded sharply lower with limit down shown on many feeder cattle contract months. Last Friday’s Cattle on Feed reports was slightly positive but outside fears are pulling the markets lower.
Missouri: Joplin Regional Stockyards reported steers and heifers under 600 lbs. $2-6 lower, over 600 lbs. $5-7 lower, 900-weight steers $7-10 lower compared to the week prior. Demand was characterized as moderate with supply heavy. The uncertainty and unknown with the coronavirus has shaken commodity and financial markets.
Wyoming: TheTorrington Livestock Auction reported sales compared to last week; steer calves under 550 lbs. traded steady to $4 lower. Steer calves over 550 lbs. traded $3-7 lower with some instances of $10 lower on heavier weights. Heifer calves traded unevenly steady with a few instances of $4 lower on heifers under 500 lbs. They also reported a nice offering of feeder cattle with an active market considering the futures board being lower early in the week. — Pete Crow, WLJ publisher
