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The general trend in the cattle markets was higher as packing plants slowly improved slaughter volume. Estimated slaughter for last week was around 550,000 head. Most plants are back online and using about 80 percent of capacity. Some packers are actively supporting the fed cattle markets paying $120 for the better cattle against a $98 futures market.

Cattle futures traded sideways on the live cattle all of last week. The June live cattle contract was $98.80 Thursday, gaining 40 cents on the day, and August was up 60 cents to close at $98.22. Feeder cattle lost ground, about $6 for the week. May went off the board Thursday at $126.02, and August feeders took over, down 12 cents on the day to close at $128.87. September feeders were at $130.12, down 37 cents.

Thursday cash trade was light on moderate demand in all feeding regions. Compared to Wednesday in the Southern Plains, a few live purchases traded steady at $120 in the Texas Panhandle and from $115-120 in Kansas. In Nebraska, a few dressed purchases traded steady compared to Wednesday with purchases from $175-190, bulk from $180-190.

Live purchases in Nebraska on Wednesday traded from $119-120. In the Western Corn Belt, a few dressed purchases traded unevenly steady compared to Wednesday with purchases from $175-190, bulk at $190. Live purchases in the Western Corn Belt on Wednesday traded from $114-115.

The weighted average on live steers was $119.17 and dressed prices averaged $184.40. There were 21,500 head priced on the formula grid weighing 892 lbs. and averaging $181.26.

Beef values continue to decline as more beef comes on the market. Choice product was down $2.23 to $401.81 and Select lost $8.67 to close Thursday at $382.53 on 136 loads. Ninety percent lean traded higher for the week to $304.94 while 50/50 trim was down dramatically to $104.08 on about 900,000 pounds.

Cassie Fish summarized the market since the first of the year. “It’s been almost four months since commodity markets began the first significant decline as the news of the coronavirus and its potential grew. Hedge funds were at the front of the line in selling commodities and equities and that selling fervor persisted through March.

“At that time, no real fundamental damage was done to the cattle market. Instead, the marketing pace was blistering hot, the fed kills huge for any Q1 and the largest weekly slaughter of this expansion phase was posted in March, 682k head.

“The fear played out mostly in futures, culminating in a $43 decline or 36 percent in a little less than three months in Jun LC with a low of $76.60. When cattle futures bottomed April 6, the severe blow to the packing industry’s ability to harvest cattle in a timely fashion was unknown. That week began a long string of sub-550k head weekly slaughters that has resulted in the most serious backlog of market-ready animals in history,” Fish continued.

“That low may well have been the low for the year or even the bear market cycle that began in 2014. Unfortunately, the black swan event due to COVID-19 has deeply altered the fundamental outlook for the cattle market for many, many months. Many want to insist that low will hold but if the last few months have taught anyone anything, it is to expect the unexpected, even the unfathomable.

“This is growing backlog is a gravely serious fact that is being approached gingerly by many. The addition of politics to the mix has added to the strangeness and uncertainty as to how the remainder of the year will unfold as it relates to cattle prices. The dramatic aberration in $4-5-per-pound wholesale beef prices that occurred in April and May due to widespread shortages has led to some packing companies picking what is hoped to be an acceptable price for cattle and paying it each week, rather than buying cattle in a way that resembles price discovery.

“So how do things evolve from here?” Fish ponders. “The key is likely to be found in wholesale beef prices, which will drop lower and lower over the course of the summer as slaughter levels resume some level of normalcy and carcass weights push upwards.

“With Q3 beef production likely its largest in 10 years and the need for beef to compete with pork and poultry high, the path of least resistance for beef prices is sub-$230. This will alter the dynamic around the determination of fed cattle prices as the summer wears on and the need to clear inventory become more urgent.”

While feeder cattle futures were softer on the futures market the country trade was stronger. The latest CME Feeder Cattle Index was at $126.60.

Oklahoma National Stockyards in Oklahoma City offered 9,100 head last Thursday and compared to the week prior: Feeder steers were $1-3 higher; feeder heifers were $2-6 higher under 850 lbs.; and over 850 lbs. were $1-2 lower. Steer calves were mostly steady to firm; heifer calves were $1-4 higher. Demand was considered moderate to good for all classes. Benchmark steers 700-750 lbs. averaged $136.21.

The Hub City Livestock Auction in Aberdeen, SD, offered 5,588 head last Wednesday and reported that compared to last week: steers 600-700 lbs. were mostly steady; 701-750-lb. steers were $4-6 higher; 751-850-lb. steers were mostly steady; and 851-950 lbs. were $2-4 higher.

The best test was on heifers 500-600 lbs., which were $2-4 higher. The report noted moderate to good demand for this large offering featuring many packages and loads including quite a few weaned fall calves and replacement quality heifers.

Light calves, especially those under 600 lbs., saw very good demand. Quality was mostly average to attractive last week and flesh varied, from light to moderate plus with some heavy flesh at times. Market activity was mostly active with many order buyers attending the auction, as well as producers interested in procuring replacement heifers.

On the West Coast special calf and yearling sales are underway with good volume. Turlock Livestock Auction offered 2,942 head at their May 16 special sale, with calves trading between $130-144 and yearling feeders were trading between $108-118. — Pete Crow, WLJ publisher

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