Weekly Livestock Comments
By Dr. Andrew P. Griffith
May 22, 2015
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FED CATTLE: Fed cattle trade was $1 lower on a live basis compared to a week ago. Live prices were mainly $159 to $161 while dressed prices were mainly $251 to $253. The 5-area weighted average prices thru Thursday were $159.98 live, down $0.84 from last week and $251.66 dressed, down $4.89 from a week ago. A year ago prices were $144.69 live and $232.26 dressed. Packers bought cattle early this week instead of waiting for the last call. They were probably just happy to secure cattle at a lower price than in previous weeks. The fed cattle market is likely to soften through the summer as is the seasonal tendency. Another factor that may contribute to a fed cattle price decline is the entry of heavy animals in the feedlot. The May Cattle on Feed report is slightly bearish for cattle prices as the number of cattle on feed increased relative to one year ago. Similarly, as has been the case for several months, the number of cattle placed in feedlots weighing over 800 pounds continues to increase relative to the previous year. What is unknown about these animals is how much over 800 pounds they are when entering the feedlot.
BEEF CUTOUT: At midday Friday, the Choice cutout was $260.80 down $1.42 from Thursday and down $1.89 from last Friday. The Select cutout was $248.00 down $1.32 from Thursday and down $2.52 from last Friday. The Choice Select spread was $12.80 compared to $12.18 a week ago. The beef cutout had a strong run through the first three weeks of May as the market approached Memorial Day weekend. However, prices began to falter late in the week as retailers had already secured most of their beef items for the upcoming holiday. There will be some support following the holiday as retailers, restaurants and food service providers look to restock shelves and inventory. However, the support will be short lived as the price descent is likely to continue through the summer. This statement does not mean beef cutout prices will be low. It simply means that it is highly unlikely the beef cutout can maintain the current price level in the near term. A price decline may not result in a terrible situation for packers as most of their gains will actually be made by a decline in live cattle prices as opposed to gains in beef prices. Alternatively, if fed cattle prices do not recede the next few weeks then packers will have to continue managing chain speed and beef production to further artificially manipulate beef prices.
TENNESSEE AUCTIONS: On Tennessee auctions this week compared to a week ago steers and bulls were steady to $6 higher. Heifers were steady to $6 higher. Slaughter cows and bulls were mostly steady to $2 higher. Average receipts per sale were 674 head on 10 sales compared to 624 head on 8 sales last week and 695 head on 10 sales last year.
OUTLOOK: Many parts of the state received some much need precipitation in the past seven days. The precipitation received will likely promote pasture growth as well as promote hay production later this summer. Except for the Pacific Coast states, the drought situation across the country is rather moderate relative to recent years. As of Monday, only 12.0 percent of pasture and range acres were in poor or very poor condition compared to 22.0 percent in poor or very poor condition one year ago and a five year average for the current week of 19.2 percent in poor or very poor condition. Pasture and range conditions bode well for continued beef cattle herd expansion, and it appears producers are still willing to pay strong prices for bred heifers. The willingness of producers to provide strong bids for bred heifers is evidenced by the West Kentucky Select Bred Heifer sale which took place earlier this week. The sale featured 195 bred heifers due to calve between late August and November with an average sale price of $3,065 per head. The average bred heifer price witnessed at the aforementioned sale is not out of the realm of feasible, but it could be difficult for producers to return much of a profit on the investment in some cases. Many producers would say the ability to profit from these heifers will be determined by future calf prices and that is not necessarily wrong. However, the overriding aspect to the profitability of these bred heifers will be their ability to stay in the herd by producing a calf every year.
The May cattle on feed report for feedlots with a 1000 head or more capacity indicated cattle and calves on feed as of May 1, 2015 totaled 10.64 million head, 0.8% higher than a year ago, while the pre-report estimate average had cattle on feed up 1.7%. April placements in feedlots totaled 1.55 million head, down 4.6% from a year ago with the pre-report estimate average expecting placements up 2.4%. April marketing’s totaled 1.64 million head down 7.8% from 2014 while the pre-report estimate expectation was down 7.6%. Placements on feed by weight: under 800 pounds down 11.2% and 800 pounds and over up 6.7%.
TECHNICALLY SPEAKING: Based on Thursday’s closing prices, June live cattle closed at $152.38. Support is at $151.82, then $150.67. Resistance is at $152.97 then $154.12. The RSI is 54.90. August live cattle closed at $150.90. Support is at $150.22, then $148.84. Resistance is at $151.59, then $152.97. The RSI is 56.09. October live cattle closed at $152.63. Support is at $152.60, then $151.40. Resistance is at $153.05, then $153.08. The RSI is 57.54. August feeders closed at $217.73. Support is at $217.01, then $215.58. Resistance is at $218.43 then $219.86. The RSI is 55.99. September feeders closed at $216.83. Support is at $215.98, then $215.88. Resistance is at $217.53 then $218.03. The RSI is 55.61. October feeders closed at $215.90. Support is at $215.30, then $214.90. Resistance is at $216.65 then $217.13. The RSI is 55.61. Friday’s closing prices were as follows: Live/fed cattle –June $152.13 -0.25; August $150.70 -0.20; October $152.60 -0.03; Feeder cattle - August $219.00 +1.28; September $218.00 +1.18; October $217.00 +1.10; November $216.30 +1.18; July corn closed at $3.60 down $0.05 from Thursday.
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