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The University of Tennessee | Institute of Agriculture

Department of Agricultural and Resource Economics

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Weekly Livestock Comments

By Dr. Andrew P. Griffith

March 24, 2017


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FED CATTLE: Fed cattle trade was not well established but trade appeared firmer compared to last week. Prices on a live basis were mainly $131 to $137 while dressed prices were mainly $212 to $215. The 5-area weighted average prices thru Thursday were $128.95 live, up $0.20 from last week and $212.97 dressed, up $4.96 from a week ago. A year ago prices were $136.01 live and $217.70 dressed. Trade on the Fed Cattle Exchange this week was stronger than the previous week, but the broader cash trade market found it difficult to push prices higher. The April futures market contract continues to trade at a discount compared to cash prices which encourages producers to market animals in the near term with a strong positive basis. Similarly, deferred contract months support marketing cattle earlier rather than later. Cattle feeders will continue to move animals through the pens with the strong positive margins being experienced. However it is difficult to determine if cattle feeders will be aggressive due to strong margins or cautious with feeder cattle purchases since futures are pricing in lower fed cattle prices.

BEEF CUTOUT: At midday Friday, the Choice cutout was $222.09 down $0.19 from Thursday and down $1.09 from last Friday. The Select cutout was $215.56 down $0.21 from Thursday and up $0.65 from last Friday. The Choice Select spread was $6.53 compared to $8.27 a week ago. Boxed beef prices were mixed compared to a week ago with lower prices for Choice boxes and slightly stronger Select boxes. The slowdown in increasing prices could be looked at positively or negatively. If one desires to look at it negatively then it could be assumed prices are beginning to stagnate and this could result in a situation where finished cattle prices and calf prices stagnate or begin to decline. Alternatively, one could view the positive side which means retailers and grocers may still be able to feature beef products this spring and summer at fairly low prices. If wholesale prices continue to escalate then most retailers will slow down featuring beef items and move to pork and poultry items. Higher prices are not a bad thing, but they can result in negative consequences at times. Prices will likely be supported through the early spring grilling season before declining with increased beef production during the summer months. Another supporting factor in the near term and maybe longer term is the slowdown in beef movement from Brazil to its export partners.

OUTLOOK: It was another good week for producers marketing cattle as steers were $3 to $5 higher compared to the previous week based on the Tennessee weekly auction market summary. Similarly, heifer prices were $1 to $5 higher while slaughter cow prices were $2 to $3 higher. Calves ready to go to grass remain a hot item but so do yearling cattle headed to the feedlot. Buyers have been willing to pay a strong price for good quality cattle, but the current market is not like 2014 and 2015 when lower quality cattle also brought a healthy return. As availability of animals ready to enter the feedlot increases, feedlot managers will be ever more cognizant of the quality at time of purchase and bid accordingly. The grass cattle market has a few more weeks of relatively strong prices, but producers looking to market calves this spring should likely make that move within the next month since the seasonal tendency is for lightweight calf prices to begin a long descent through the summer and fall months. Slaughter cow prices will continue their upward price trajectory for another couple of months and may be aided by the Brazilian situation in which several countries have halted imports from Brazil due to an investigation of Brazilian meat packers bribing inspectors to overlook sanitation issues. Brazil primarily exports lean beef. Countries deciding to halt imports from Brazil will be looking to other markets to import this product which will result in a shift in trade across many countries. This will also mean a shift in U.S. beef imports and exports. The U.S. primarily imports lean grinding beef and exports beef from cattle finished on grain, also known as fed cattle. The need for lean grinding beef could push slaughter cow prices a little higher until Brazil is able to move the quantity of beef it was exporting prior to the investigation. This may provide cattlemen an opportunity to market cows with less than economically optimum production characteristics.
The March cattle on feed report for feedlots with a 1000 head or more capacity indicated cattle and calves on feed as of March 1, 2017 totaled 10.77 million head, unchanged from a year ago, with the pre-report estimate average expecting an increase of 0.1%. February placements in feedlots totaled 1.69 million head, down 0.9% from a year ago with the pre-report estimate average expecting placements down 1.2%. February marketing’s totaled 1.65 million head up 3.6% from 2016 which corresponds closely with pre-report estimates. Placements on feed by weight: under 600 pounds down 6.0%, 600 to 799 pounds up 10.1%, 800 to 999 pounds down 9.7%, 1,000 pounds and over down 27.3%.

ASK ANDREW, TN THINK TANK: A question was raised this week about rolling heifers from one breeding season to the next breeding season if they did not breed the first time they were exposed to the bull. Thus, the question was about moving heifers from the spring calving herd to the fall calving herd and vice versa if the heifer did not get bred. The thought is a producer has significant development costs in the heifer and it may pay off to hold her six more months to give her another chance. Then again it may not pay off and the producer has six more months of costs attributed to the heifer. Research has shown heifers failing to breed the first year and retained have an average lifetime calf crop of 55 percent while herd mates bred in the first year have an average lifetime calf crop of 86 percent. In most cases, it is a better decision to sell a young open heifer than continuing to throw good money after bad money.

Please send questions and comments to agriff14@utk.edu or send a letter to Andrew P. Griffith, University of Tennessee, 314B Morgan Hall, 2621 Morgan Circle, Knoxville, TN 37996.

FRIDAY’S FUTURES MARKET CLOSING PRICES: Friday’s closing prices were as follows: Live/fed cattle –April $122.10 +0.33; June $112.85 +0.05; August $107.80 -0.10; Feeder cattle –March $133.38 -0.33; April $135.58 +0.23 May $133.80 -0.23; August $135.28 -0.20; March corn closed at $3.56 down $0.01 from Thursday.