April 15, 2021









Cash Cattle


Packers are demonstrating a comfort level from last week's large purchases and next to no cattle have sold this week amid higher box prices. CBP sold a few pens of cattle on a sealed bid format at $121.50 in the south on Tuesday. No additional trade was noted in all regions. Bids of $121 in the south and higher in the north failed to attract sellers leaving price points unresolved in late week action. Cattle owners are showing more cattle and pricing them higher.


Grain continues as a prominent force in determining the price and cost of all meats. Corn is hovering around $6 -- a new benchmark. Planting intentions will now translate into planting completion with monitors watching progress and for any signs of final acres and successful and timely planting of the crop. This week both grains have been moving sharply higher.


Pork prices are playing a supporting role for beef. Pig numbers have been over-reported according to recent monthly inventory reports. Lean hog futures and cash pig prices have been moving sharply higher propelled by broad demand and in the background they provide support for beef as an alternative meat. Beef as a alternative is becoming more attractive.


Cattle Futures. Futures prices were lower with the spot April contract only showing a small loss compared to larger losses in the deferreds. June remains discount to current cash and this position always encourages more selling of finished cattle now -- whether hedged or not.


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 8# at 866#. Benchmarking weights against last year will be meaningless so we will discontinue the practice. Quality grade grading was up .6% at 84.40%.


Forward Cattle Contracts:  Forward contracts will always bear some relationship to the corresponding futures month closest to the delivery month for the cattle. Basis levels will move up and down as processors want to add to forward contracts or not. Sometimes the forward contracts are associated with forward sales of beef and sometimes not. Packers may simply try to add an extra margin for taking the price risk off the hands of the producer. 


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" where packers purchase cattle at $1-2 over the highest price paid in any given region.


The Cutout. Box prices were higher as processing volumes fail to satisfy buying interest. Buyers will carefully watch the size of the slaughter volumes. The market will monitor the processor's ability to serve the needs of beef buyers with seasonally improving beef demand.


Choice CutoutChoice Price Change
276.62Up $3.71
Select CutoutSelect Price Change
268.43Up $1.12



Beef Feature Activity Index. Both retail and hotel/restaurant trade are planning springtime beef features. Grocers will plan features on steaks for spring cookouts in the coming weeks.



Replacement markets


Replacement prices are running backwards as grain prices surge. The decline in feeder futures gave some producers an opportunity for an improved basis on hedged feeder cattle. Grain will continue as a dominating factor in replacement cattle prices. Light calves remain in high demand as a mixed grazing profile enters the spring picture. New Mexico and areas west are in the midst of a serious dry period while Oklahoma is wet.


Feedlot placements will be entering a period when year on year numbers are meaningless. With a slightly smaller calf crop, fewer cattle will be available for the balance of the year but how those placements move into feedlots will best be measured with 3 and 5 year averages.


Two factors will be favoring better prices for replacement cattle. The smaller calf crops of the past two years will shorten supplies of feeder cattle. Next, expect more corn acres reported this spring as farmers jump in to capitalize on high corn prices. Additionally, many feedyards have switched to wheat in feedlot rations lowering feed cost along with declining prices for fall corn prices on the board.


Oklahoma City. Feeder prices were higher Monday but retreated by mid week. Calf prices fell after posting gains for several weeks. Moisture conditions across a broad region of the plains turned more mixed with some expectations of relief in the current forecast. Grain prices loom in the background as the largest threat to feeder prices. 


Feeder Cattle Futures. Feeder futures were sharply lower as grain prices surged.  


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


Forward cattle contracting. Stocker operators are hoping basis levels for spring feeder cattle will narrow. Many operators are finding hedged inventory on pasture facing losses on futures positions. Feedlots, with much uncertainty about feed costs, are cautious establishing basis bids. Basis levels for all replacement feeder cattle have been unusually wide.


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


Grain Futures. Corn prices turned sharply higher this week. Government estimates of corn use are not recognizing the current switch from corn use to wheat use in feed rations.





The weekly price increase for boxed beef prices was unprecedented for a normal spring week. Prices spiked higher every day driven by both export and domestic demand. Restaurants are reopening. Government largesse has extended cash payments to all consumers and beef has always been popular when price is not the deciding factor. These fundamental drivers have been accompanied by normal increases caused by a seasonal increase in demand for beef. The choice boxed beef cutout added over $20 cwt. this past week leaving the cutout at $270.


Two years ago the Lancet -Eat report recommended people eat less red meat for health and environmental reasons. Bill Gates has suggested less cattle might slow global warming despite claiming hamburger as his favorite food. In the interim, epidemiologists are inquiring into increased vulnerabilities to Covid of seniors with low red meat consumption in their diet in nursing homes. Health studies had previously established a link in nursing homes between flu and pneumonia cases being more likely among residents will less red meat in their diet. Health is always an important driver for diet.


This week's massive increase in beef prices was different in that producers shared in the price increases for the first time this year. Numbers tightened in the northern regions of the country and processors pushed for larger inventory volumes and the result was daily increases in prices in all regions with northern areas reaching $125 - a high for the year. All regions shared a $5 rise in prices. For those producers, who had witnessed large increases in packer margins before, only to see live cattle prices rise a meager $1 or less, this was welcome news.


Sharp spikes in beef prices are never healthy for beef demand. Quickly raising prices is a method for rationing scarce products and this means some buyers are not getting the product they desire. Moreover, sharp spikes in price also discourage some use of the beef that will never be regains because a consumer opts for another meat product or a meatless protein. The reality is, plenty of cattle are available, but we are unable to process them for distribution.


It is too early to herald the change in leverage as sustainable and futures prices commented on this fact when they lost ground on Friday. Much will depend on the processing industry's ability to sustain a weekly slaughter level of 650,000 head or more. A permanent solution will only come with added slaughter capacities. Small increases are occurring daily and every incentive is in place to ramp up and deliver available cattle supplies to the eager consumer market.






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 Steer1,050.38135.05
Cost of Gain 600 pounds662.561.10
Estimated Interest(Prime + 1%)28.14 
Current Breakeven1,734.55128.48
Current Futures1,665.63123.38
Net Profit / Loss-68.92-5.10


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 pounds692.411.15
Estimated Interest(Prime + 1%)23.08 
Resulting Breakeven1,690.49125.22
Current Texas Panhandle Cash1,626.75120.50
Net Profit / Loss-63.74-4.72



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