Just when it felt like the industry had finally hit its max on “black swan events” and market disruptions, a cyberattack on JBS unexpectedly shattered the markets. Futures were able to mostly regain their losses, but boxed beef prices capitalized on the diminished slaughter numbers.
Live cattle futures tanked Tuesday, but were able to recover their losses and then some on Wednesday. By Thursday, futures were headed downward again. The June contract closed at $116.77, about 40 cents higher than the prior Thursday. The August contract settled at $118.52, about 90 cents lower.
A fair amount of cash trade took place last week, although prices have not budged much over the past few weeks. Live steers sold between $118-121 and dressed steers at $190-193. Formula cattle continue to see higher premiums in the mid-$190s.
Cash trade through May 30 totaled 82,863 head. Live steers averaged $119.64 and dressed steers averaged $190.62, mostly unchanged from the week prior.
The Fed Cattle Exchange held a special auction earlier in the week. On Wednesday, the exchange listed 11,159 head, of which 1,255 head sold. Opening prices ranged from $116-119 and high bids ranged from $119-199.50. All of the cattle that sold came from Texas.
The cyberattack on JBS severely reduced slaughter numbers for the week, as the company is responsible for about 20 percent of all processed beef in the U.S. Plants were closed Monday for the holiday, shuttered Tuesday, and operating at reduced throughput Wednesday. JBS said Thursday was going to be the first day the company was going to be able to get fully back on track.
The numbers proved this statement true, as slaughter for Thursday was projected at 120,000 head—back to typical levels. Only 2,000 head were processed Monday due to the holiday, and slaughter reached a dismal 94,000 head on Tuesday. Wednesday saw an increase in numbers at 105,000 head, but was still below usual trends.
Through Thursday, slaughter totaled 321,000 head. This was over 150,000 head behind recent weeks, with the prior Thursday reaching 478,000 head. Slaughter through the last week of May is projected at 629,000 head. USDA released actual slaughter numbers for the week ending May 22, which totaled 672,197 head. This was one of the first weeks to achieve over 670,000 head, which is what economists estimate needs to be reached every week to account for summer demand.
“An attack on one company in the supply chain is an attack on all beef production because of the interconnectivity of the supply chain,” remarked the Cattle Report. “Not only does the beef product move through the pipeline of connectivity but the data accompanying the products flows over computer networks serving the entire industry.”
With processing numbers still not as high as needed, concerns over the price of wholesale beef continue to grow. The holiday-shortened week in conjunction with the cyberattack gave boxed beef prices an opportunity to climb, just as they were starting to settle down. Both cutouts gained over $10 in just a week, with the majority of gains seen during the Tuesday and Wednesday cyberattack recovery period. As of Thursday, the Choice cutout was recorded at $340.55 and the Select cutout at $313.16.
“Will boxed beef prices eventually correct?” asked Cassie Fish, market analyst in The Beef. “The answer is yes, while ‘when’ and ‘how much’ are questions that remain elusively unanswerable.”
Feeder cattle futures followed the same pattern as live cattle, with contracts in the red across the board toward the beginning of the week, but generally recovered by the end. The August contract settled at $152.95 and the September contract at $155.50. The CME Feeder Cattle Index closed at $136.65, up slightly from the week prior. The corn contract was down about 2 cents from the week prior at $6.62.
“The futures find absolutely no hope from the cash cattle market as cash cattle prices hold steady for the sixth week in a row and concerns about supplies building up are on the forefront of minds,” remarked ShayLe Stewart, DTN livestock analyst, in her Thursday midday comments.
“As we know all too well from last year’s experiences, a backlog in supplies for the feedlot industry not only affects the cash cattle market’s ability to find upward momentum, but it also affects feeder cattle prices as buyers have limited pen space and lost money on cattle sitting idly.”
Stewart did note that with fewer calves to be marketed this summer and fall, it could be the saving grace the market needs.
Some auction markets were closed last week due to the Memorial Day holiday.
Iowa: Russell Livestock in Russell sold 5,250 head on Monday. Compared to the previous auction, steer calves under 650 lbs. sold mostly $2-4 higher, steers 650-750 lbs. sold $3-5 higher, while the heavier steers ended mostly steady to $2 lower. Heifer calves under 650 lbs. were $2-6 higher and heavier heifers were mostly steady to $2 higher. Benchmark steers averaging 768 lbs. sold between $138.75-152.50 and averaged $147.94.
Kansas: Winter Livestock in Dodge City sold 1,230 head Wednesday. Compared to the prior sale, feeder steers 700-1,000 lbs. sold steady and 575-700 lbs. sold $2-3 higher. Feeder heifers 575-925 lbs. sold $1-2 lower. A group of benchmark steers averaging 779 lbs. sold for $142.
New Mexico: Roswell Livestock Auction in Roswell sold 473 head Tuesday. Compared to the week prior, steer calves under 600 lbs. sold $4 higher and feeders over 600 lbs. sold steady, with a few 700-750 lbs. selling $4 higher. There was no comparison on heifer calves under 600 lbs. except a few 500-600 lbs. sold $2 higher. Feeders over 600 lbs. sold mostly $2 higher. A pair of benchmark steers averaging 755 lbs. sold for $146.
Wyoming: Torrington Livestock in Torrington sold 1,603 head on Friday. Compared to the last auction, slaughter and feeder cows traded $3 higher. Benchmark steers averaging 798 lbs. sold for $152.25
South Dakota: Sioux Falls Regional Cattle Auction in Worthing sold 5,744 head Monday. Compared to the week prior, feeder steers were $1-4 higher with the exception of 700-750 lbs. sold steady to $2 lower; and 800-850 lbs. sold steady to $1 higher. Heifers sold steady to $2 higher with the exception of 550-600 lbs., which sold $3-6 higher. — Anna Miller, WLJ managing editor