JANUARY 28, 2020  








Cash Cattle


Cronovirus scares were dominating the markets at the begining of the week. Estimates of 1 million upcoming infections and 8% mortality were spreading, sending stock and commodity prices lower. Resturants closings were impacting food sales and posing threats to normal food consumption patterns.


A proper evaluation of disruptions to the food chain are difficult to complete and disruptions to our food production is highly speculative at this point. Concerns of managed futures funds often trigger decisions to exit a position and await further news. These decisions to exit then hit stop loss orders or automated sell orders based on little more than running through a price point. Nervous markets turn emotional and logic is disgarded.


Last week posted steady prices of $124 live and $199 dressed. Slaughter jumped to 647,000 head for the largest week of the year and 20,000 head more than last year. Demand for beef will set the tone for cash prices in the next few weeks as cattle owners price cattle higher.


Cattle Futures. Futures crashed Monday with more scares about the Chinese virus. Futures prices for both live and feeder contracts have moved limit down taking the futures down $6 in the last few trading sessions on the live cattle and down $11 on the feeder cattle.      


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 moved up 3# to 884# which remains 21# over last year. Quality grade grading increased .1% from prior week to  82.9%.  The improved grading has quickly narrowed the choice/select spread from a high of $26 to the current $2.


Forward Cattle Contracts:  Most of the forward sales last week were in the end of the year contracts mostly at .50 over the base month.


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. The cutout prices were flat to soft in early week trading. The unusually wide choice premiums of the past few months has now been corrected and the choice/select spread narrowed to $3 as grading nationally improved. The first quarter seasonally is the narrowest choice/select spread of the year.


The retailers have not followed the box prices lower. Retail prices moved higher [6% over last year] following the Tyson fire and have not moderated since the plant's recovery and consumers are currently paying high prices threatening the competitiveness of beef on the meat counter. 


Beef Feature Activity Index. Middle meats are losing ground in pricing in post holiday trading.


Cutout Values as of Tuesday, January 28, 2020
Choice CutoutChoice Price Change
212.85Down $0.74
Select CutoutSelect Price Change
212.16Up $1.66
Choice/Select Spread


Replacement markets


The rapid rise in calf prices has paused and turned lower. In the short period of time since the beginning of the year calf prices have shot $25 higher and now posting prices well above last year. This has happened while feeder futures have taken a nose dive. Margins for grazing operations have disappeared.


Placements of cattle into feedyards have kept a rapid pace and feedyards in Texas, Colorado, and Kansas are full to the brim. The weights of incoming cattle are dropping so the heavy placements will spread the marketings and there continues to be large placements of heifers on feed when compared to prior year. This has changed the mix of heifer/steers in total placements meaning fewer heifers retained for breeding.


Some of the lightly grazed wheat fields of the fall will be supplemented with additional cattle into the spring. The heavier placements into feedyards of mid winter might be followed with lighted placements this spring.


The large cow slaughter for 2019 has continued into January of this year keeping the non-fed slaughter well above historic numbers as a percent of the total slaughter. This will likely signal the end of expansion of the national cattle numbers. Likewise the calf crop and feeder supplies both are likely to have peaked. Heavy heifer placements over steers is expected to subside during the next few months. Numbers of cattle on feed and placements will enter a leveling out period.


Oklahoma City. The auction market report reported sharply lower prices for alll classes of cattle.  


Feeder Cattle Futures. Feeder futures moved limit down taking the recent decline to over $11 cwt.. The rapid sell off in the feeder futures may be overdone, but emotions are high over food or health threats.


Feeder Cattle Cash Index. Futures prices have outrun the index in leading prices downward. The January index is converging with the futures as the contract expires.


Forward cattle contracting. Inventory price levels of pasture cattle are favorable to stocker operators and some will forward sell with other waiting for a spring rally. Bids are $3-5 under the board for 800# steers delivered to the Texas Panhandle.       


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


Grain Futures. Corn moved sharply lower early Monday following estimates that farmers may plant 95 million acres of corn -- 5 million more than last year. The corn basis is at 65 over the March board in Guymon, Oklahoma. Corn is now pricing into ration at $7.80 cwt. in the Oklahoma Panhandle.




Cattle on Feed Inventory, Placements, Marketings, and Other Disappearance on
1,000+ Capacity Feedlots - United States: January 1, 2019 and 2020
[December preceding year]
                                        :          Number           :  Percent of  
                  Item                  :---------------------------:              
                                        :    2019     :    2020     :previous year 
                                        :   ---- 1,000 head ----        percent    
On feed December 1 .....................:   11,739        12,031          102      
Placed on feed during December .........:    1,767         1,828          103      
Fed cattle marketed during December ....:    1,741         1,834          105      
Other disappearance during December ....:       75            67           89      
On feed January 1 ......................:   11,690        11,958          102      

Cattle on Feed by Class on 1,000+ Capacity Feedlots - United States: January 1, 2019 and 2020
                                        :          Number           :         Percent of          
                  Item                  :---------------------------------------------------------
                                        :    2019     :    2020     :previous year :  inventory   
                                        :    ---- 1,000 Head ---        percent        percent    
Class on feed January 1                 :                                                         
  Steers and steer calves ..............:    7,280         7,373          101             62      
  Heifers and heifer calves ............:    4,410         4,585          104             38      

Cattle on Feed Inventory on 1,000+ Capacity Feedlots by Month - States and United States:
2019 and 2020
                  :                 :                 :              January 1, 2020               
                  :                 :                 :--------------------------------------------
       State      : January 1, 2019 :December 1, 2019 :              :  Percent of  :  Percent of  
                  :                 :                 :    Number    :previous year :previous month
                  :     --------------- 1,000 head --------------          ----- percent ----      
Arizona ..........:        295               256              253           86             99      
California .......:        535               550              540          101             98      
Colorado .........:      1,010             1,100            1,090          108             99      
Idaho ............:        280               300              300          107            100      
Iowa .............:        690               690              670           97             97      
Kansas ...........:      2,330             2,430            2,420          104            100      
Minnesota ........:        155               140              135           87             96      
Nebraska .........:      2,560             2,480            2,460           96             99      
Oklahoma .........:        315               325              330          105            102      
South Dakota .....:        245               250              245          100             98      
Texas ............:      2,730             2,930            2,960          108            101      
Washington .......:        225               240              235          104             98      
Other States .....:        320               340              320          100             94      
United States ....:     11,690            12,031           11,958          102             99      




The day of snide remarks and snickers when climate change is the topic is over if American agriculture is to thrive and survive. Globally, agriculture is $2.5 trillion dollar industry and no industry is more vulnerable to climate change. Beef producers have a vested interest in joining the sustainability crowd and if they are smart, they will take the lead in demonstrating their concern both for the environment and the protective measures necessary to assure a future for our children and grandchildren. No business has a greater need for healthy soil, clean water, healthy productive animals and a stable climate.


 The scope of involvement is broad, and commitment will be judged in actions and not words. Already underway and worth publicizing are the many initiatives currently in progress to increase beef production without additional burdens on the earth’s natural resources. Genetics has allowed us to add more pounds of beef to each animal. Researchers are working on a seaweed that added in just .5% to a feed ration could reduce methane emissions by 70%. Grasslands across the country provide the nutrients for converting otherwise worthless land to protein using ruminants to the benefit of human health without reliance on processed foods like plant-based proteins.  


Beef producers will now turn to new issues where environmental problems require innovation to help create solutions. Overuse of antibiotics must be replaced with improvements to the animal’s immune system. Breeding for immune responses is possible but so is Crispr, a new technology used in human medicine for altering DNA to improve animal’s defenses against pathogens. Biodigesters will process our manure and the results will be new energy sources that can run our trucks and feedmills. Solar and wind energy will get cheaper and more efficient for use on the farm. GPS guidance systems will send feedtrucks around the feedyard without drivers. Driverless tractors will plant our crops.  


Embracing change and demonstrating with solid commitments of both money and time to the environment will pay big dividends. Winning buy in from the young people today will cultivate the consumer for our beef products tomorrow. Whether the consumer is in a fast food location or a supermarket store, we want their belief that purchasing a beef product is supporting an industry dedicated to protecting the environment and executing steps to ameliorate global warming.






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 Steer1,065.75142.10
Cost of Gain 600 pounds495.590.83
Estimated Interest(Prime + 1%)37.06 
Current Breakeven1,591.07117.86
Current Futures1,490.40110.40
Net Profit / Loss-100.67-7.46


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 ago1,065.00142.00
Cost of Gain 600 pounds488.600.81
Estimated Interest(Prime + 1%)30.94 
Resulting Breakeven1,584.54117.37
Current Texas Panhandle Cash1,672.38123.88
Net Profit / Loss87.846.51



Click here to "Check out the markets "
Click Here to send your comments