September 17, 2020







Cash Cattle


The weakest sellers yesterday were in Kansas where cattle traded for $103. Iowa sellers held and received $104 while Texas sold from $103-103.50. Nebraska feeders were not yet ready to sell and were holding for higher prices with many cattle priced at $105. These prices were $1-2 higher but the week is not over and the weaker sellers have sold. Packers will need fill in buying today and tomorrow.


Some of the custom feeding yards were encouraging customers to accept $103 bids, having commitments to take large shipments of yearlings off grass from other customers. Some of those customers were kicking back --complaining of being pushed to market cattle without proper attention to achieving best prices. It is sometimes difficult for a custom feeding yard to balance the various and conflicting interest of different customers.


There are warning signs for the beef market. Heavy cattle continue to add tonnage to the market. The Covid 19 damage to the economy continues. Placements continue at a heavy pace. Domestic institutional purchases lag normal years and purchases for school programs, hotel and restaurant trade and other routine outlets for beef have lagged.


Cattle Futures. Futures prices were mixed with disappointment in the cash sales at $103 pulling the front end lower. Basis levels for all sellers of cash cattle are wide and hedged cattle owners struggled to find good prices to cover the hedges and some have learned the dangers of waiting -- hoping for convergence.


The large premiums built into live cattle futures for the deferred month contracts is not an assurance those prices will be realized. Historically it has changed marketing plans for cattle owners with more sellers choosing to delay sales plans in the hopes of reaching out for higher pricing. The premiums are built on the idea of shortages from March and April placements occurring in October through year end.  


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 8# higher at 897# which remains 29# over last year. The extra tonnage continues as a burden on the market and will continue through the fall. Quality grade grading was flat at 82.6% remaining seasonally high.


Forward Cattle Contracts:  The level of futures prices relative to breakevens is a guidepost in establishing volumes of forward sales at even given point in time. Smaller volumes of forward sales are occurring as prices decline. 


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. Seasonally, the period after Labor day is not a strong period for beef demand. Box prices have lost $10-15 in the past couple weeks and may have more decline before improving demand in October. The export market is also expected to revive as global demand improves with world supplies tight. Australia is producing 20% less beef this year due to fires and drought. This redirects purchasing by beef importing countries to the United States. The choice/select spread is $9.


The decline in the value of the dollar has made our exports cheaper and imports more expensive. The dollar reached a two year low in cross currency trading. The increases in the prices of our beef will partially be eliminated by the fall in the value of the dollar.


Choice CutoutChoice Price Change
215.05Down $0.33
Select CutoutSelect Price Change
203.39Down $1.12





Beef Feature Activity Index. Retailers will turn their focus to fall features. Beef features are currently increasing as weather cools and outdoor cooking increases. Beef features are currently the top seller in many markets around the country. 



Replacement markets


Stocker and feeder prices are adjusting to the larger supplies currently moving into mostly full feedyards. This will pressure the basis through October as peak supplies are brought to market. Prices are higher this week and much will depend on the success of fed cattle owners to advance prices. Large placements patterns continue threatening fed prices in the new year. The heaviest placement weeks of the year are in front of us. The auction receipts and feedyard placements will be closely watched for the next 60 days. Basis levels will widen during this period.


The heavy marketing months of fall are the largest of the year with both yearlings and calves moving off summer grazing locations to the feedyards. Fall also brings the largest variances in prices for all classes of cattle. Temperature changes bring herd health to the forefront. It also is a period when many ranchers try to differentiate their product based upon a wide variety of categories: 1) are the calves weaned; 2) if so, for how long; 3) vaccination regimes; 4) antibiotic and hormone representations; and 5) genetics.  Buyers parse through the list of attributes in an effort to find value and each rancher attempts to tell a story that will resonate with the buyer pool. At the extremes, this can result in as much as $20 cwt. difference in pricing.


Oklahoma City. Feeder cattle were $4-8 higher and calves mixed in broad demand. Differentiation between weaned and unweaned calves spreads the pricing at the widest level of the year.


Feeder Cattle Futures. Feeder futures were lower following disappointing cash sales of fed cattle and increasingly wide basises for feeder cattle. Higher corn prices also threaten feeding costs.


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


Forward cattle contracting. Occupancy levels at the nation's feedyards goes a long ways towards establishing the basis for trading feeder cattle. Sellers are interested in forward contracts as bids and basis levels widen. Improvement in prices has also increased forward contracting.


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


Grain Futures. Corn prices moved higher in mid week trading. USDA lowered this year's crop estimate by 2% but still the largest on record. Corn prices firmed at week's end. New crop corn bids and basis levels are erratic during harvest and jump up and down with weather news. Harvest is starting across the southern plains and moving north. Offers are more normalized for OND corn at 60-70 over the December board in Guymon, Oklahoma. Corn is now pricing into ration at $7.50 cwt. in the Oklahoma Panhandle.




Historic ranches are part of the legacy of the west. The grasslands on the southern plains were first occupied by British and Scottish land companies until many discovered operating a cattle operation from a continent away was problematic and most bowed out after a severe drought before the turn of the last century. New land owners appeared and most were independent types who took the challenge and established empires that often faded through the future generations. Recently two Texas megastars of the past have passed. The Waggoner ranch near Wichita Falls sold a couple years ago and now the famous 6666 ranch in about to be sold.





Among the thousands of buy/sell transactions in the livestock business, the vast majority fail in their primary mission -- finding the best available price for the seller. Sometimes the seller find the best buyer but fails to make the buyer pay the highest available price. The problem is little changed over the years and structuring a trade platform for a diffuse pool of buyers and sellers across the entire country, allowing best buyer to find best seller at any given point in time, is a difficult proposition.


Sometimes matching best buyer with best seller is obvious. The stocker operator has 250 steers running on a wheat field 2 miles away from a large commercial feedyard. The seller propositions the feedyard about a potential sale, but the bid seems low. The stocker operator turns to the video sale and is able to sell for $2 cwt. higher than the feedlot bid. The problem is the marketing fees were $3 cwt.. Other problems could develop between the relationship between the stocker operator and feedyard. The feedyard might be full, or a customer feedyard, and not feeding cattle for their own account. There also is the possibility the feedyard will be the best buyer on the video sale and pay a higher price than they would pay directly to the stocker operator.


When buy/sell transactions occur with cattle, the product is not fungible like a kernel of corn or a share of stock in a large corporation. Every 800# steer is not the same. There are quality differences, background differences, differences in implant and heath regimes, and finally genetic differences. Each buyer evaluates the cattle and has differing criteria for purchase, from other buyers looking at the same cattle. Each buyer looks at the available information in their own buying lens with their own historic records. Those judgments made by multiple buyers are what makes a market and they don't have to be right.


The challenge is to build a trading platform allowing the buying pool to include all parties having an interest in purchasing the type of cattle offered by the seller. The requirements of the trading platform are the ingredients that make it possible for the seller to find best buyer and make the best buyer pay the highest available price. Those requirement are:

1). Regularly scheduled sales on an internet website.

2). A pool of bona fide buyers registered on the exchange.

3). Complete and accurate information on the cattle offered for sale.

4). Settlement and clearing services to assure proper electronic payment in collected funds.

5). Low cost transaction fees.


Many selling vehicles for cattle have struggled with allowing the seller the option of passing out the highest bid -- P.O. the cattle. This has proven difficult to administer and irritating to buyers who risk their time and money competing in the market only to have the cattle jerked out from under them. P.O. should be allowed but the selling fees should be split between best buyer and the exchange.


Ag trading has been slow to move to the web hampered by an aging population in the livestock business who are slow to change and not drawn to computers and web trading. New attempts to find the right mix on the web have not all been unsuccessful. Smaller niche markets like dairy calves or registered bulls have found useful platforms for trading cattle. Mainstream trading will happen and sellers will be able to find best buyer and best available price through web auctions.







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 Steer1,049.48139.93
Cost of Gain 600 pounds494.680.82
Estimated Interest(Prime + 1%)26.52 
Current Breakeven1,565.80115.99
Current Futures1,590.03117.78
Net Profit / Loss24.231.79


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 ago975.00130.00
Cost of Gain 600 pounds498.060.83
Estimated Interest(Prime + 1%)21.38 
Resulting Breakeven1,494.44110.70
Current Texas Panhandle Cash1,368.09101.34
Net Profit / Loss-126.35-9.36



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