Cattle markets were mixed this week. Futures markets showed some strength with April live cattle moving higher Thursday to close at $92.37, up $0.45 in the day while June LC was off $2.57 to settle at $84.10. Feeder cattle futures were up every day last week until Thursday when April fell $2.60 to close at $117.27 and June fell $2.20 to close at $117.17. All other FC contracts were green.
Live cash trade was very slow with only 17,821 head traded by Thursday afternoon. Live cash trade was between $103.50 to mostly $105; dressed trade was at $168.00. Packers have been warning cattle feeders about the use of beta antagonists going forward, and that processing timelines may be extended to the point that their use may not be beneficial.
Slaughter was the big question mark for the week—How many cattle would packers be able to process? Packing plants were all being touched by the coronavirus and packers were busy retrofitting workstations, testing employees and doling out personal protective gear. Employees are going thorough temperature checks, foot baths and spray booths to mitigate viral damage. Teams of healthcare people are monitoring employees. Line speeds have suffered.
Boxed beef markets remained under pressure. Choice lost 22 cents to $222.67 while Select lost $4.20 to close at $207.57 on 145 loads. Slaughter through Thursday was running 50,000 head behind the prior week’s pace of 467,000 head.
Cassie Fish in The Beef report voiced concern about the pending market situation: “The beef and pork industries are facing their most difficult challenge in modern history. Multiple difficulties at the packing plant level due to COVID-19 have cut weekly production for this week and likely for the following three to four weeks as much as 10 percent or more. Never in history has an instant red meat shortfall been created almost out of thin air, giving end users no time to prepare.
“This week’s weaker cutout has mostly been the result of cleaning up aged products ahead of the holiday. Next week, offerings for pork and beef will be down sharply and at higher money. Expect cutouts to rise until production can resume something close to normal. May is a major meat demand month, synonymous with grilling.
“The forced reduction in slaughter is large and occurring when slaughter would be seasonally advancing and will back up fed cattle marketings. This would normally be bearish, but the USDA Ag Secretary Sonny Perdue tweeted April 8 that the Packers and Stockyards division is extending oversight to determine the causes of divergence between live beef prices and boxed beef prices, now with COVID-19.
“[Last] week’s $105 cash trade may well be followed soon with a higher cash cattle price as cutout values rise and this pattern may be repeated until slaughter can begin to return to normal—thus topping the cutout.
“Carcass weights dropped 7 pounds last week too with steer carcasses weighing in at 891 pounds—still record high but the lowest since last September. Weights bottom seasonally in mid-May, though this year weights will likely bottom at the heaviest level in history.
CME cattle futures may be mostly lower but look to close higher on the week after making a new low for the entire move last Monday. Technical divergence hints that perhaps the market priced the worst-case scenario last week, with slowed slaughter due to COVID-19.
“What’s next is to see the impact of these cuts on wholesale values, end users and ultimately consumers. Food insecurity across the U.S. has escalated because of the loss of jobs. No one in leadership at this difficult time wants the U.S. consumer to become agitated due to limited red meat availability in stores. This is going to be a serious challenge for all concerned.”
Feeder cattle markets were slow again last week with producers reluctant to market cattle during this uncertain time. The latest CME feeder cattle index was at $116.79. Feeder futures markets were higher by $10-12 to the $118 zone on the nearby contract.
Winter Livestock in Pratt, KS, offered 3,000 head, down from 6,530 the week before. They reported that feeder steers sold mostly $10-12 higher, while heifers sold mostly $6-9 higher. Weaned steer calves sold $4-7 lower with limited comparable weights. Benchmark steers averaged $122.23. —Pete Crow, WLJ publisher
