Cattle markets were slow to develop last week. Many traders have pointed to uncertainty about the coronavirus and not really knowing what to do. And we’re in a typical seasonal low. But the coronavirus would only have an effect on export markets, or just some reason to take pause and evaluate the fundamentals of the cattle business.
One CME market commenter said that the China trade deal is to kick in soon, especially for pork producers, and was expecting a large rise in pork prices, which should give a boost to beef values as well.
There was a little cash trade at the closing. According to Mandatory Price Reporting last Thursday, 36,118 head had been confirmed traded, live trade averaged $118.94 and $190.50 dressed for the week. Winter weather in much of feeding country may discourage buyers because cattle would be carrying too much mud. And packers appear to have plenty of contract and formula cattle around them.
The Boxed Beef cutout has been on a down trend all week, closing Thursday at $206.01, and Select at $199.99; just $2.66 separates the two grading classes. Trade volume was moderate. Fifty percent trim is at $49 and 90 percent is around $248.00. The markets are just going through normal seasonal patterns. The cow beef cutout value is trading at $180.98, just $20 lower than fed beef.
Slaughter levels are declining. Last week’s slaughter was at 637,000 head but we’re running about 5,000 head behind last year’s pace. Beef production is just three-tenths of a percent higher than a year ago.
Carcass weights have been getting larger. Cattle feeders have enjoyed a mild winter and cattle performance has been excellent. Average weight for fed steers was 948 pounds last week and 848 pounds on fed heifers. These weights don’t suggest that feeders are terribly current on marketings.
As far as the futures market is concerned, Cassie Fish at Consolidated Beef Producers said, “The massive and dramatic open interest purge in live cattle futures—16.8 percent of the total, 67,468 contracts in 14 days—was a harsh reminder as to the precarious nature of the negotiated fed cattle trade.
“The catalyst for the initial break may have been the coronavirus, but while other markets found their footing, cattle did not, weighed down by get-me-out selling, unrelated to immediate fundamentals.
“There were not more cattle that suddenly appeared, no overnight worsening of beef demand. Just two weeks of massive selling, led by managed funds, after three months of price consolidation,” Fish commented.
“What the futures break exposed is how little leverage cattle feeders have when negotiating with packers and how much psychology influences price discovery in 2020 rather than simply supply and demand. What is the latest headline?”
Feeder cattle markets were active last week if they could be delivered between snow squalls. The CME Feeder Cattle index was at $140.98 last week and showing some encouraging signs of strength. Torrington, WY reported 4,420 head offered with 600-700-lb. steers trading between $155-180. Steers weighing 700-800 lbs. traded between $140.50-149.
OKC West-El Reno in Oklahoma reported 4,514 head for sale with 600-700-lb. steers bringing $145-162.00 and 700-800-lb, steers selling between $133-$149.
Hub City market in Aberdeen, SD reported 5,431 head for sale with 600-700-lb. steers trading between $150-$165.75, and 700-800-lb. steers bringing $142.50-153.75.
Producers in Salina, UT reported 1,230 head offered with benchmark steers selling between $121.50-134.50. and 5-weight steer calves trading between $149-163.
The Winter Livestock in La Junta, CO sold a total of 1,506 head with steer calves under 500 lbs. bringing $188-201, while benchmark steers sold between $140-145.
West Coast markets are seasonally slow. Cattlemen’s Livestock in Galt, CA reported 729 head sold with 500-600-lb. steers trading between $150-170 and 600-700-lb. steers at $138-155. Turlock Livestock auction offered 869 head and saw steers under 500 lbs. sell for $200 and benchmark steers trading between $130-140. —Pete Crow, WLJ Publisher