Tuesday Markets

Cattle futures started heading lower in the morning, but reversed course in the afternoon. April live cattle were up $2.62 to $101.82 and June was up $3 closing at $92.07. April feeder cattle were higher, gaining $1.87 to $121.92. May was up $2 to close at $122.90. Another volatile day.

Boxed beef markets took a big tumble today; the Choice box was down $7.82 to $243.15 and Select was down $9.18 to $228.96 on 151 loads. One could assume that the hoarding has slowed down, and packers are perhaps carrying too much inventory. Slaughter for the week today was 236,000 head, 3,000 head behind last years pace. Some analysts are looking for a 670-680,000 head slaughter this week. There was a story that JBS started to have COVID-19 issues in middle management and will be forced to slow production.

The Cattle Report said, “Box prices turned lower in early week trading. The loss of food service business and distributors will hurt the middle meats. Hamburger and the end meats are moving off the shelves, but a spring warm up could create demand for middle meats as the outdoor cooking season cranks up and stay-at-home families gather outside their homes. The Choice/Select spread was $13.

“Critical to the delivery of beef to consumers, during this period of national shutdown, is a well-functioning beef pipeline. The hard-working employees at feedyards and packing plants must continue to function in an environment vulnerable to infection from the coronavirus. This places a burden on each operation to screen employees and isolate anyone with the virus by removing them from the workforce.

“Retailers are finding a calming and more routine level of traffic in stores across the country. Eating at home will become more routine with regular trips to the market for many Americans during this health crisis. Meat counters were watching the shelves for cut selections of consumers as they plan eat-at-home menus.”

There was no cash trade on fed cattle today. The Fed Cattle Exchange has a good sale planned for Wednesday morning with over 5,000 head offered. The last CME Feeder Cattle Index was at 131.10. Feeder cattle volume in the country markets has dropped again; poor prices have producers holding back calves and the yearling that may be left.

Cassie Fish at Consolidated Beef Producers said today, “There is even more fear and hysteria in the cattle business today than yesterday. As futures leak lower and lower, observers are working overtime to create narratives to support the market break. With the market in its 10th week of decline, some veer further from logic and reason, repeating information out of context or not fully understood.

“Bearish ‘what ifs’ are popular, as are embellishing stories with no facts. Positive news is overlooked, discarded in favor of a news bit that ‘fits’ the moment.

“How does one make sound business decisions in this environment? Cattle futures have already priced a 3 standard deviation cash price decline on March 16 based on the last 30 years of data. So far, those lows stand. But the bears want more.

“A few small-to-tiny eastern packing plants, some kosher and some not, and even a small cow and Holstein plant are experiencing short term interruptions in operations due to the coronavirus. Yet, the industry will still harvest between 67,000 and 68,000 head this week, which will either set a record for the largest kill in late March in history, or the second largest.

“Boxed beef cutout values are finally correcting, down about $9 or 3.5 percent from the record high reached last week. Yesterday’s USDA Comprehensive Boxed Beef report saw another week of huge sales volume with exports and 22+ day sales picking up greatly and formula sales stay very strong.

“The jump in the weekly price pushed packing plant margins to their widest in history, beyond the level reached after the Tyson Fresh Meat’s Finney County plant fire.

“So, what’s a packer to do? CME cattle futures ought to make it easy to buy cattle dollars cheaper. After all, spot April live cattle is more than $20 below last week’s 5-area average negotiated cash cattle price. Even with cutout values backing off, margins are still enormous. Thus far, packers aren’t bidding. What strange times these are.” — Pete Crow

Steve Kay is Editor/Publisher of Cattle Buyers Weekly, an industry newsletter published at P.O. Box 2533, Petaluma, CA, 94953; 707-765-1725. Kay’s Korner appears exclusively in WLJ.

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