July 15, 2020  








Cash Cattle


Broad sales of fed cattle occurred on Tuesday across most regions of the country at steady to modestly higher prices. In the south most cattle sold for $95-96 or one dollar higher than last week. In Iowa sales were mostly steady at $99-100 live and $160 dressed.


English breeds suffer with excessive heat and humidity in the summer. Bloats increase and consumption declines and with it the rate of gain. With heat also comes dust in many feedyards and dust pneumonia can be a problem. The high performance of springtime turns to disappointing performance of a hot summer. Handling cattle also become more difficult and early mornings are chosen as optimum times for processing and cattle movements. Brahmin cross cattle tolerate the heat much better.


The coronavirus resurgence will once again trouble the markets as restaurants close once again. The reopening and normalizing of activities will once again be restrained and beef demand will be erratic as a result.  School lunch programs will be on hold in some locations like California where the fall term has been cancelled. Summer heat that was thought to degrade the virus has not seemed to slow its spread. The new developments make it more likely we will not see normalized life until the arrival of a vaccine.


Dressed sales last week ranged from $153 to $160 with the $160 in Iowa, while live sales are from $94-$100 with the $100 in Iowa. The online fed auction posted light sales at $95-95.25 with any cattle priced higher resulting in a no sale. Sales volumes in all areas except Nebraska were large.


Cattle Futures. Futures prices were sharply higher Wednesday as expectations for higher cash develop. Hedged owners of cattle will watch for signs the negative basis will improve with cash prices. Index funds [longs] have moved out of the August contract and into the October. 


The Comprehensive Fed Cattle Weekly Report offers the most current information on the current status of fed cattle being harvested. The report is published each Tuesday and includes the previous week's change in carcass weights and quality grading. The latest report shows carcass weights up 1# at 875# which remains 34# over last year. The weight gaps between this year and last are narrowing indicating cattle owners are managing to move heavier weight cattle to market. Quality grade grading was higher by .3 at 82.7% remaining seasonally high.


Forward Cattle Contracts:  Few forward contracts of fed beef cattle are occurring. In periods of uncertainty, buyers tend to shy away from forward contracting. Forwards for July through year end are half of normal volumes. Dairy cattle continue to be contracted at normal basis levels of minus $10-12.


Weekly graphs on the Comprehensive Weekly Fed Cattle Report break down the categories of trade for the week according to 1) formula cattle; 2) negotiated live; 3) negotiated dressed; 4) and forward contracts. Some cattle included in the formula category are week to week negotiated grids and not committed cattle to one plant. Other cattle designated as formula are "over the tops".


The Cutout. Box prices were lower. The choice cutout is holding barely above $200. The dog days of summer have never been high demand periods of beef but falling prices for consumers might stimulate demand. Grading remains well over prior year. Over finished cattle has produced a high percent of choice and prime and as you might expect and lots of YG 4&5s. The choice/select spread was $10 -- a low number for this time of year.


Beef Feature Activity Index. Retailers will turn their focus to fall features. The uncertainty present in all aspects of the economy will cause retailers to move slow on plans for features. Tail gate parties and other sporting events are not yet on the schedule.


Cutout Values as of Tuesday, July 14, 2020
Choice CutoutChoice Price Change
200.92Down $2.34
Select CutoutSelect Price Change
190.85Down $1.03
Choice/Select Spread


Replacement markets


Weather is always a prime influencer of ag markets. Mid summer always seems to feature a super hot period when highs stall over the mid section of the country and threaten the corn crop and livestock grazing areas. The next 30 days is expected to bring 100+ temperatures and little rain to the plains. The drought meter is expanding its reach and some areas of the country will be forced to move cattle early.


Monitoring the video auctions of stocker and feeder cattle is a proving ground for price discrimination. Price discrimination is at the core of good business practices. Buyers are looking for proven value in replacement cattle and at the top of the list is good health. Long weaned calves continue to bring $5-10 premiums. Various all natural programs accompanied by preferred genetics also bring $5-10 premiums. While these representations are important to price outcome, as more producers deliver value added calves, the spreads become narrower and the premium based practices move towards "best management" practices. Generally prices this year have recovered from recent lows caused by the virus crisis, but still lag last year by $5-7 cwt..


Oklahoma City. Feeder cattle and calf prices were generally $5 higher. New crop calves were beginning to show up in the auction barns and with this arrival often comes health problems.


Feeder Cattle Futures. Feeder futures were higher propelled by higher live cattle futures.


Feeder Cattle Cash Index. The index is tracking the moves in cash prices.   


Forward cattle contracting. Improvement in prices has also increased forward contracting. Both buyers and sellers are evaluating market conditions on a day by day basis.        


National Weekly Feeder Summary released on Friday of each week tracks the national prices by region for last week.   


Grain Futures. Corn prices moved lower. Weather conditions favoring this year's crop seems to trump bullish news from exports. The corn basis is 85 over the July board in Guymon, Oklahoma. Corn is now pricing into ration at over $7.00 cwt. in the Oklahoma Panhandle.








Whether you are the manager of an independent store or a multi-store supermarket chain, the decisions required this year have been unprecedented in meat retailing history. Supermarkets and meat marketing plans are generally established weeks or months in advance and over time are slow to change. The changes that occur are generally reactions to price changes and are small and subtle.


This year nothing is small and subtle. Everything comes in elephant sized helpings and the problems are complex and sometimes overwhelming. Everything starts with purchasing and delivery. Purchases are generally divided between formula purchases and spot purchases with formula over half of all purchases. Delivery dates and quantities are relied on for efficient execution of marketing plans.


The first wave of problems occurred when the virus hit and stay at home orders were issued causing consumers to stock up and make a run on grocery store supplies. This created the need to jump into the spot market for extra meat needs and those were not always available. The next wave of purchasing problems were caused by the processing plant slowdowns or shutdowns. Contracts for purchasing were not fulfilled and force majeure clauses invoked. In both instances, stores were not able to keep products on the shelves and satisfy consumer demand. Delivery logistics were also disrupted with failed and modified delivery schedules, a daily occurrence.


Pricing the products became a nightmare. Traditional price changes are usually small and incremental. Sharp spikes up or down are bad news for market managers and their feelings are joined by consumers who react negatively to increases but never notice decreases. A common practice is to slow the price movements up and down in order not to alarm consumers. A doubling of beef prices in a matter of a few weeks can not be ignored or slowly compromised in pricing increases. Managers were faced with on the fly decisions about pricing and no two stores followed the same path. Similar problems are occurring now as prices fall back to pre-virus levels and below.

Diversity of beef cuts has also undergone a change during this crisis period. As plant processing volumes declined, the processing firms varied the cuts in the fabrication areas. Less end meats were cut and more of those muscle cuts were tossed into the grind where less labor is required. The idea was to keep some beef available on store counters. Likewise, as more normalized slaughter is returned, retailers will be working with processors to provide more affordable selections on the meat counter as out of work consumers struggle to keep beef choices in their budget.


The brunt of the damage falls on the livestock producers. Consumers can simply choose not to buy. Beef producers are harmed by lost sales during the periods of shortages caused by plant slowdowns, but more importantly they suffer from a loss of leverage in trading with processors for months to come. Built up supplies provide the packers with the leverage necessary to trade cattle on their terms and not those of the sellers.








Below are links to articles published in the Cattle Report pertaining to industry change. Two important changes are on the table for progress -- supply chain management and animal ID. Both applications will transform and disrupt the industry.






The Case for National ID for Cattle


Reforming the Futures Contract and Cash Trading of Cattle





Sections of the newsletter are redesigned with hyperlinks to the appropriate source pages. The hyperlinks are in light blue within the report.







Regional differences in grain and cattle basises create a difficulty in modeling a national composite for current close outs or a proforma forward look at a breakeven. Readers should consider your own area for adjustments to these models. 




The Cattle Report introduces the FEEDER METER. The report estimates profit or loss for currently purchased feeder steers and projects a result 150 days out.  The chart is interactive and updated every 15 minutes in real time based on changes in futures markets in grain and cattle. Corn basis information is based on current trade prices adjusted every two weeks. Feeder prices and fed cattle sales are par the appropriate futures contract.

750 # Feeder Steer1,048.73139.83
Cost of Gain 600 pounds478.610.80
Estimated Interest(Prime + 1%)26.34 
Current Breakeven1,548.96114.74
Current Futures1,467.45108.70
Net Profit / Loss-81.51-6.04


The Cattle Report estimates current profit or loss on cattle placed on feed 150 days ago. This report generated from industry averages attempts to simulate a typical close out based on prevailing purchase prices for a feeder steer 150 days ago. The close out assumes grain was purchased at market each month. Selling prices and interest rates are based on prevailing benchmark quoted prices. This chart will change weekly.

750 # Feeder Steer OKC 150 days ago1,087.50145.00
Cost of Gain 600 pounds483.740.81
Estimated Interest(Prime + 1%)23.22 
Resulting Breakeven1,594.46118.11
Current Texas Panhandle Cash1,278.5994.71
Net Profit / Loss-315.87-23.40



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