After the recent catastrophic price collapse in cattle futures over the past two months, things may finally be looking up. Cattle futures seem to have found firm footing at these current price levels (not seen since 2009).
While the packer plant predicament is not yet fully solved, momentum seems to be shifting toward plants finding a way to open again soon. Full slaughter capacity may not yet be a realization, however it does seem that efforts are being made to get processing back in line.
Cash Markets
Choice beef values have continued their historic rally to new all-time highs. Boxed Choice beef values traded this week at an astonishing, record smashing, 450.81. Cash trade emerged Wednesday afternoon in Kansas and Texas at 110.00, steady with the high end of last week’s range. Also on Wednesday, there was confirmed cash trade of 115.00 at a regional plant in Tama, Iowa.
So far this week, cattle slaughter is running 7% ahead of last week, but is still down 34% behind the same week last year. It is obvious that meat processors have a lot of ground to make up, but if plants can reopen, and stay open, demand for cattle should pick up rather quickly given the eye popping packer margins.
Domestic demand and exports
Domestic demand for beef continues -- the problem is getting it into the consumer’s hands. I witnessed a near meltdown of a woman at the grocery store earlier this week as she wanted to buy five steaks to grill that night. She became quite agitated when the employee behind the meat counter told her she could not sell her more than two steaks due to recent store rationing rules. In fact, at my local grocery store, people are only allowed to buy two types of fresh meat period, due to limited supplies.
When looking at export demand, recently the U.S. Meat Export Federation released the March 2020 export data. Overall, first quarter of 2020 beef exports were up 11% at 253,885 metric tonnes.
Supplies
The most recent Cattle on Feed Report was actually friendly as it indicated that the number of cattle and calves on feed for the slaughter market in the U.S. for feedlots with capacity of 1,000 or more head was 11.3 million head on April 1, 2020, 5% below April 1, 2019. The inventory included 7.08 million steers and steer calves, down 5% from the previous year. Heifers and heifer calves accounted for 4.22 million head, down 7% from 2019. Placements in feedlots during March totaled 1.56 million head, 23% below 2019. Placements were the lowest for March since the series began in 1996.
With the historically low placement number, deferred cattle futures have friendly fundamental support. Unfortunately, the friendly tone of this report was over-shadowed by the COVID-19 issues.
With grilling season here, demand strong, and packer plants making efforts to re-open, it does indeed feel like the tide is finally turning in cattle futures.