However, the current market situation creates significant disparities between the current supply and demand situation and expectations for coming supply and demand conditions. The result is a number of seeming paradoxes between different cash cattle and beef markets and between cash and futures markets.
Fed and feeder cattle markets have exhibited extreme volatility while balancing current market conditions and expectations for the future. As the Dow Jones fell from over 29,000 in the third week of February to less than 19,000 one month later, live cattle futures fell from about $112 per hundredweight (cwt) to $86 cwt (June contract) over the same period. The markets reflect the ongoing concern about the weakening U.S. and global macroeconomic conditions resulting from COVID-19. June Live cattle futures recovered to $97 per cwt before dropping again late last week to $89 per cwt. Live cattle futures have also reflected the risk that labor disruptions could disrupt packing plant operations.
Cash fed cattle prices declined from nearly $120 per cwt in mid-February to a low around $106 per cwt in mid-March. Cash fed prices declined on broader concerns reflected in the live futures as well as the supply pressure of increased beef production. Year-to-date beef production is up 6.3% through mid-March. In the past two weeks, cash fed cattle prices rebounded to about $119 per cwt as packers increased beef production in response to the sharp demand increase for retail beef. Beef production is estimated to be up over 11% the last two weeks of March. Saturday cattle slaughter the past two weeks is estimated to be up 90% year over year and contribute to a 5.9% year-over-year increase in total cattle slaughter for the two-week period. Carcass weight continue well above year-ago levels.
Feeder cattle futures markets also reflected the macroeconomic uncertainty and declined from over $143 per cwt in mid-February to a low of about $109 per cwt by mid-March (May contract). Feeder futures continues to exhibit tremendous volatility trying to balance the longer-term macroeconomic concerns with short-term market conditions.
Cash feeder cattle prices followed futures with the Oklahoma combined auction prices for 500- to 550-pound No. 1 steer prices dropping from about $184 per cwt in the third week of February to a low near $152 per cwt one month later. Prices for 750- to 800-pound No. 1 steers declined from about $139 per cwt to $117 per cwt over the same period. The sharp drop in cash prices resulted in a sharp drop in feeder cattle marketings. Combined auction totals for Oklahoma declined 59% year over year in the last three weeks of March. Nationally, total feeder and stocker receipts are down 56% in the last three weeks of March. The squeeze on available feeder supplies pushed feeder prices sharply higher last week by 10% to 12% over the previous week. Ripple effects will likely impact feeder cattle markets in the coming weeks.
The different patterns of boxed beef, fed and feeder cattle prices in the past six weeks illustrates vividly the fact that these markets operate with very distinct dynamics. These dynamics have become very apparent as the distinction between the current market situation and expectations for future supply and demand conditions has widened. 
This originally appeared in the March 30, 2020, OSU Cow/Calf Corner newsletter.
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Derrell S. Peel
- Livestock Marketing Specialist
- Oklahoma State University Extension
