Beef prices soared on coronavirus fears. Consumers have been hoarding food stuffs ever since states started shutting down restaurants and schools. The Choice cutout was about $35 higher for the week, rising to $249.87, and Select followed to close at $241.06, the highest cutout values since 2015. Sales volume averaged 225.14 loads a day last week. Beef demand is good, and cattle prices should move higher.
Packers have been aggressive on the cash market and have somewhat ignored the futures market for price discovery. Packers were paying asking prices for cattle early in the week, giving $105 on Monday, $108-110 on Tuesday and on Wednesday we saw some cattle trade at $113 live with the dressed market trading between $175- $180 and moving higher. Packers bought 119,768 head through the afternoon, USDA reported. The average cash price was $109.71 live and $173.03 dressed.
Fed markets are recovering slowly as packers realize the pipeline is empty. Futures markets have been in a tailspin most of the last two weeks but turned stronger last Thursday with the board moving higher on all cattle contracts.
ShayLe Stewart at DTN said, “The live cattle contracts are adamant about pushing prices as close to $3.00 gains as possible throughout both nearby and deferred contracts. April live cattle are up $3.00 higher at $95.10, June live cattle are up $3.00 at $88.92 and August live cattle are up $3.00 at $89.65. The cash cattle market has been relatively quiet with only a few scattered bids being reported. Asking prices for cattle still left on show lists are priced at $115 in the South, and $178 in the North.”
Cassie Fish, analyst with Consolidated Beef Producers, is getting a little tired of the futures market’s behavior. “Though long hedgers get zero attention, there are thousands of contracts of fixed long-term ratio basis contracts for multiple beef cuts that are tied to futures. These contracts are hedged by value; not pounds. It equals thousands and thousands of futures contracts. Those long hedgers today are getting annihilated on hedges. Fixed price beef ships weekly and hedges are methodically liquidated. Because the relationship between cash cattle prices and futures cattle prices is being destroyed, long hedgers are taking a huge hit.”
Cash feeder cattle markets were much lower on light offerings. Most ranchers are waiting to see how this market recovers. There is good demand for feeder cattle, but the cattle are not showing up at the markets. Feeder futures were also much stronger but recovering from a $25 drop in two weeks. It will take some time to recover but beef demand is too strong. Some markets have closed amid the COVID-19 episode.
ShayLe also said, “Feeder cattle contracts were $2.62 to $4.50 higher on Thursday. March feeders were up $4.50 at $117.07, April feeders were up $4.50 at $114.12 and May feeders were up $4.50 at $113.02. Although contracts are moving steadily higher it’s hard to get excited about Thursday’s positive trade until it develops into something more than just a day’s trade. A week’s worth of steady, gradual gains would be noteworthy, but the back and forth choppy trade of higher and lower aren’t solidly beneficial.”
The major market-making auctions reported sharply lower receipts as cattlemen wait the storm out. The CME Feeder Cattle Index was lower to $123.36.
Most markets are reporting a stronger slaughter cow and bull market with stronger high-yielding cows trading between $69-78 cwt and fleshy bulls between $80-89 cwt on the West Coast markets. The cow beef cutout is at $178.85.
OKC West Stockyards in El Reno, OK reported 1,918 head offered compared to 6,932 head last week. Feeder steers sold $4-$8 lower. Feeder heifers were $10-$12 lower on very limited receipts. Steer and heifer calves not well tested so no trend available, but a lower undertone was noted. Demand was called light with quality average to mostly attractive. Heavy rainfall across the trade area for the past several days in combination with lower CME markets have both buyers and sellers hesitant.
Oklahoma City’s National Stockyards also reported lower receipts, with 1,208 head offered compared to 6,932 head last week. Feeder steers and heifers sold $9-$15 lower. Steer and heifer calves were too lightly tested for an accurate trend; however, a sharply lower undertone is noted. Demand was light. CME Live and Feeder Cattle contracts continued the sharp decline, causing nervousness within the market.
Joplin Regional Stockyards in Missouri offered 1,724 head compared to 5,627 the week prior. Feeder steers and heifers were $10-15 lower, with some steer calves $20 lower. Demand was moderate to light on a light supply. Live Cattle and Feeder Cattle futures closed limit or near limit down on sale day. — Pete Crow, WLJ publisher