Date: July 27th, 2020
Livestock futures were mixed last week with cattle futures lower week over week while the nearby August lean hog futures contract continues to hold a higher trend. Cash feedlot trade was steady to higher compared to the week previous at mostly $95 to $96 live in the South and $98 to $100 live and $157 to $160 on a dressed basis in the North. US cattle total inventory up slightly from a year ago yet beef cattle slightly lower with dairy higher. As of July 1st, the US has a total of 103 million head of cattle and calves and of that total, 41.4 million cows and heifers have calved. July 1 Cattle on Feed was slightly below last year’s record amount, placements at 102% and marketings at 101% which is neutral to friendly.
USDA released a report last week on its ongoing boxed beef and fed cattle price spread investigation, which revealed no wrongdoing, but also said it continues to examine potential violations of the Packers & Stockyards Act and will offer support for the ongoing U.S. Department of Justice investigation. The report, prepared by USDA’s Agricultural Marketing Service, in coordination with the Office of the Chief Economist, summarizes market conditions, fed cattle prices, boxed beef values and the spread before and after the fire and closure at the Tyson Holcomb plant, as well as before and during the COVID-19 pandemic.
While the report does not examine potential violations of the Packers & Stockyards Act, USDA staff have maintained a cooperative relationship with staff at the DOJ Antitrust Division and have discussed allegations of anticompetitive practices in the meat packing industry. Should USDA find a violation of the Packers & Stockyards Act, it is authorized to report the violation to DOJ for prosecution.
The report discusses several policy considerations in light of the desire by many market participants for improved price discovery, reinvigorated competition and a more transparent relationship between the prices for live cattle and the resulting products. Considerations include potential updates to Livestock Mandatory Reporting to reduce instances of non-reporting and increase percentages of negotiated cash transactions, risk management outreach, education and product improvements for small and medium-sized producers, small to very small meat processor outreach and opportunities and enhancements to the Packers & Stockyards Act investigative and enforcement tools.
NATIONAL FEEDER & STOCKER CATTLE SUMMARY – WEEK ENDING 07/24/2020
RECEIPTS: Auctions Direct Video/Internet Total
This Week: 128,100 79,500 96,600 304,200
This Week: 149,100 96,100 325,400 570,600
Year Ago: 131,200 62,500 113,800 307,500
Compared to last week, steers and heifers sold steady to 4.00 higher. Sale barns in the Northern Plains are on their summertime schedules and are piecing together larger sales every other week as a bidding competition can occur when those long strings of yearlings coming off summer grass or out of backgrounding yards are met with good to very good demand. Plenty of buyers in the seats this time of year as buyer’s commissions can sometimes be few and far between during the dogdays of summer and no one wants to miss out on a possible deal.
For the week, Friday July 17th through Friday July 24th, August Live Cattle -$1.95, October -$1.77, August Feeder Cattle -$.65, September -$.57, August Lean Hogs +$1.20, October -$.92. Boxed Beef, Choice +$1.30 @ $201.77, Select +$.32 @ $190.63. Pork Carcass Cutout -$.66 @ $70.53.
Cattle slaughter from Friday estimated at 113,000 head, down 2,000 from the week previous and down 6,000 from last year. Saturday’s kill was estimated at 61,000 head bringing week to date up to 646,000 head, down 4,000 from the week previous and down 6,000 from last year. Beef production estimated at 537.3 million pounds last week compared to 538.4 the week previous and 525.9 million pounds last year. Year to date beef production is down 2.8% vs. a year ago with slaughter down 5.4%.
Hog slaughter from Friday estimated at 472,000 head, up 10,000 compared to the week previous and up 15,000 compared to a year ago. Saturday’s kill was estimated at 231,000 bringing the week to date up to 2,589,000 head, up 71,000 compared to the week previous and up 230,000 compared to a year ago. Pork production was estimated at 550.0 million pounds last week vs. 536.5 the week previous and 491.8 million pounds last year. Year to date pork production is now up 1.4% compared to last year and slaughter is up 0.6%.
Boxed beef cutout values steady to lower with 117 loads sold on Friday.
Choice Cutout__201.77 -.49
Select Cutout__190.63 -.16
CME Feeder Index__137.96 +1.54
CME Lean Hog Index__50.13 +.44
Pork Carcass Cutout__70.53 +.86
IA-S.MN Wtd Avg Carcass Base__39.16 +2.28
National Wtd Avg Carcass Base__37.87 +2.88
August live cattle holding a higher trend over this past month with resistance around $104 then $106 and support at $98.40. August feeders also holding a higher trend, a much more impressive run though since early April, with resistance at $144 then $146 and support at $133. August lean hogs also a month long higher trend after bottoming out in late June at $47.52 with resistance at $55 then up at $58.
Wheat was the leader to end the week as EU and Black Sea wheat values rally and dry conditions continue over Russian spring wheat areas. China’s buying spree of U.S. Ag products continued last week with new crop soybean sales 4 of the 5 days. The markets will be watching for additional sales this week as China tries to hold up their end of the deal on Phase 1 of the trade agreement. The heat looks to break this week, decent rains fell over the western and northern Corn Belt but were not present over the weekend in dry areas of the Eastern Corn Belt.
For the week, Thursday July 17th through Friday July 24th, September Corn -$.06 ¾, December -$.04 ¾, August Soybeans +$.06 ¾, November +$.04 ¼, September KC Wheat +$.00 ¾, December +$.00 ½, September Chicago Wheat +$.04 ¾, December +$.04 ¾, September MPLS Wheat +$.02 ½, December +$.01 ¼, August Soybean Meal +$4.30/T, December +$4.50/T.
Overnight, grains were mixed with corn and soybeans fairly quiet while wheat gave up most of Friday’s gains. Corn finished the overnight fractionally lower, soybeans steady to 1 higher and wheat 3 to 7 lower.
Chinese corn futures rallied to a record high price overnight. Customs data showed June 2020 soybean imports for China at a record volume with Brazil shipments up 91% from a year ago.
USDA announced private sales of 132,000 MT or 4.85 MBU of new crop soybeans sold to China this morning and 250,371 MT or 9.2 MBU of new crop soybeans sold to Mexico.
Rains yesterday stretched from the Southwest to Great Lakes, catching part of IL with IN and OH still dry over the weekend. The 6-10 day outlook finally breaking with below normal temps centered over the Midwest and above normal in the Southwest with below normal moisture in the West and Great Lakes and normal to above normal in the Southeast to the East Coast.
September corn remains choppy with resistance around $3.34, support at $3.22 and the contract low down at $3.15. August soybeans holding a higher trend over these past few months with resistance up at $9.23 and support at $8.70. September KC wheat trying to hold a higher trend since the late June contract low at $4.23 ¾ with resistance at $4.64. September Chicago wheat holding the best breakout higher with resistance up at $5.51 then around $5.70 and support at $5.16.
Wishing you all a great start to this week, this is Matt Hines with Loewen and Associates. We can be reached toll free at 866-341-6700 or check us out online at www.loewenassociates.com for additional commentary and information.