Fed Cattle Prices Tumble

Cash fed cattle prices took it on the chin this week, starting out lower and then growing softer as the week progressed.

Live sales were $3 lower in the Southern Plains at $100 per cwt, $4-$6 lower in Nebraska at mostly $100 and $2-$5 lower in the western Corn Belt at $102-$107. Dressed sales were $9-$10 lower in Nebraska at $160-$166; $7-$9 lower in the western Corn Belt at $163-$166.

Through Thursday, the average Five Area direct price for steers was $4.31 less at $102.31 on a live basis; $5.43 less in the beef at $166.19.

Week to week on Friday, Live Cattle futures closed an average of $3.53 lower through the front three contracts and then an average of 46 cents lower.

There were plenty of potential contributors to the free-fall, from increasing supply and continued logistic challenges left by the Tyson fire (see “Tyson Fire Update” below) to the potential demand impact from Hurricane Dorian to piling on by electronic traders, as well as lower wholesale beef values.

Choice boxed beef cutout value was $4.46 lower week to week on Friday at $227.31 per cwt. Select was $10.33 lower at $201.94. Compared to the Friday of the Tyson fire, that’s still $10.94 higher for Choice and $8.13 higher for Select.

“Unfortunately, there is likely more downside in the finished cattle market as late September and October are always tough months for cattle feeders,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “The only thing a cattle feeder can do at this point is ride the tough times out. Any other plans will likely lead to even greater losses. The market will improve over the next four to six months and profits should be favorable.”

Calf and feeder prices tread water

The generally gloomy outlook weighed on cash calf and feeder cattle prices in most areas.

Nationwide, steers and heifers sold from $3 per cwt lower to $2 higher, according to the Agricultural Marketing Service (AMS). Analysts say the North Central region was on the positive side of neutral, while weakness was widespread at auctions in the Southern Plains and Southeast.

Weaker corn prices and oversold conditions helped Feeder Cattle futures gain about $2 at the front of the week, but they lost much of it by the end of Friday’s session, pressured by cash fed cattle prices.

Week to week on Friday, except for 2 cents lower in Jan, Feeder Cattle futures closed an average of 58 cents higher across a broad range (5 cents to $1.05 higher).

Even for a holiday week, the 179,600 auction, direct and video receipts seemed light.

“Year to date on this report (National Feeder and Stocker Cattle Summary) total receipts tallied 10.066 million head, 4.4% below a year ago and 0.4% below the previous five-year average,” say AMS analysts.

“Historically, fall runs would start gearing up in the next couple of weeks, however the feeder market is not in any position to challenge any highs presently, with fat cattle trade being quite weak in the last month. With the front month of Live Cattle futures being under $100 and packers giving bids of $100, there isn’t much optimism surrounding cattle trade currently.”  

So far, positive forage conditions across much of the country are allowing producers to extend their marketing decisions.

“While the impacts of the Tyson plant fire will likely diminish relatively quickly in the next few weeks, feeder cattle markets are still nervous and defensive about the corn market situation, increasingly shaky macroeconomic conditions and continued global economic turmoil,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his August 26 market comments.

“The uncertainty and volatility impacting feeder cattle markets is likely to continue this fall and winter. This increases the risks of winter stocker production but may also present short-term opportunities for either buying or selling cattle or both. The best advice at this point is to evaluate and reevaluate possibilities frequently and remain as nimble as possible both offensively and defensively.”

Beef Exports Remain Strong

Despite ongoing trade issues, U.S. beef exports continue nearly on par with last year’s record pace, according to data released this week by USDA and compiled by the U.S. Meat Export Federation (USMEF).

Beef exports increased 1% year-over-year in July to 117,842 metric tons. Export value of $720.4 million was slightly less than a year ago but still the seventh-highest monthly total on record.

January-July beef exports were down 2% from a year ago in volume (766,607 metric tons), while export value of $4.75 billion was slightly below last year.

Beef export value per head of fed slaughter averaged $308.47 in July, down 7% from a year ago. January-July export value averaged $311.51 per head, down 2%.

South Korea continued to lead the way for growth with July volume 6% more year over year—a new monthly record—of 25,104 metric tons and value up 7% at $181.3 million, also a record. For January-July, export value was $1.1 billion, which was 14% more than the previous year’s record pace.

“The Korean market is a remarkable success story and a blueprint for what U.S. beef can achieve when consumers are not shouldering such a heavy tariff burden," explains Dan Halstrom, USMEF president and CEO.

“With the duty rate now less than half of its pre-FTA level, U.S. beef is enjoyed by more Korean consumers than ever, and in a wider variety of venues. This will also happen in Japan when duty rates come down, but on an even larger scale.”

Last month, the U.S. reached agreement, in principal, on a bilateral trade pact with Japan, the leading value customer for U.S. beef exports.

At the time, Halstrom explained, “This announcement is tremendous news for U.S. farmers and ranchers, and for everyone in the red meat supply chain, because it will level the playing field for U.S. pork and beef in the world's most competitive red meat import market.

Export competitors gained tariff advantage when the U.S. withdrew from the Trans Pacific Partnership (TPP), while the other 11 nations involved in TPP ultimately agreed to a new deal.

Tyson Fire Update

Tyson Foods beef plant at Holcombe, Kan., could be back up and running by the first of the year.

“By the time we get through our Q1, which would be December, we expect that issue to be behind us and to resume business as usual,” said Noel White, Tyson Foods’ president and CEO last week. This was in a presentation during the Barclays Global Consumer Staples Conference.

White explained the August 9 fire damaged only a portion of the plant.

“The further processing side of the plant was untouched and we are operating a portion of the plant, doing some further manufacturing…,” White explained. He added that Tyson has been able to make up most of the volume lost at the Holcombe plant with other Tyson plants.

So far, packers and feedlots are meeting the logistical challenge of shifting cattle and worker schedules to accommodate the void in fed cattle slaughter of approximately 30,000 head per week, which was left by the fire.

Steer and heifer slaughter averaged 517,434 head for the two weeks following the Tyson fire, according to USDA Actual Slaughter Under Federal Inspection reports. Fed cattle slaughter for the week of the fire was 521,744 head. However, it was 520,702 head the week immediately after and then 514,167, perhaps suggesting logistical kinks may continue.

Based on the latest Cattle on Feed report, feedlot marketing remained aggressive through July. Lighter year-over-year carcass weights and grading data support that notion. However, Brenda Boetel, a livestock economist at the University of Wisconsin-River Falls, noted the estimated supply of cattle on feed for more than 120 days (August 1) was 0.7% more than a year earlier.

“Although cattle are currently being marketed in a timely manner, there is danger that this pace will slow and currentness will slip,” Boetel explains in a recent issue of In the Cattle Markets. “Given the decrease in slaughter capacity due to the Tyson fire, Saturday slaughter will need to continue to keep the market current. Keeping up with the increased supply in the fourth quarter will be a challenge.”

CATTLE MARKET WEEKLY by Wes Ishmael

Calf-Feeder Trade

Regional Steer Price Average

North Central

South Central

Southeast

CME Feeder Index

CME Feeder Cattle Futures

CME Live Cattle Futures

CME Corn Futures

CME Oil Futures (WTI)