Weekly Livestock Comments
By Dr. Andrew P. Griffith
April 21, 2017
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FED CATTLE: Fed cattle traded $2 to $4 higher on a live basis compared to last week. Prices on a live basis were mainly $130 to $132 while dressed prices were mainly $210 to $212. The 5-area weighted average prices thru Thursday were $131.62 live, up $3.50 from last week and $209.22 dressed, up $3.88 from a week ago. A year ago prices were $125.58 live and $205.36 dressed. It has been 22 months (week ending June 21, 2015) since the 5-area weekly weighted average price exceeded year ago prices from the same week, but it is sure to have happened this week. Fed cattle continued their price ascension as cattle feeders have not let off the gas. The price increase this week keeps cash trade at a premium to futures prices as traders have been reluctant to fully close the gap. Additionally, the June live cattle contract continues to trade at a $13 to $15 discount to this week’s cash prices which means there is a lot of distance to cover to reach convergence. Fed cattle prices are certain to soften heading into late May and early June, but it is difficult to fathom a $15 price break in finished cattle over the next two months.
BEEF CUTOUT: At midday Friday, the Choice cutout was $217.69 up $1.97 from Thursday and up $5.65 from last Friday. The Select cutout was $204.06 up $0.49 from Thursday and up $4.95 from last Friday. The Choice Select spread was $13.63 compared to $12.93 a week ago. Wholesale beef prices continue to strengthen with all eyes on the Choice boxes. Beef industry participants will be focused on Choice quality meat as the Lenten season and Easter are a distant memory for the meat industry as a whole. As the market moves toward the summer grilling season, Choice middle meats will be the primary supporter of box prices, but lean grinding beef will also be in high demand. The stronger wholesale beef prices the past couple of months have resulted in slight increases at the retail level. The all fresh retail beef price for March was $552.20 per hundredweight which was an increase of $2.70 from February. Though prices inched forward in March, they were still $31.50 lower than March 2016. Similarly, the Choice retail beef price increased $6.40 per hundredweight to $590.40 from February to March, but the March 2017 prices lags the March 2016 price by $31.90. The retail price of beef for April will likely continue to show higher prices, but higher prices will be tempered as the market moves into the summer months.
OUTLOOK: Feeder cattle future prices have advanced $13 to $18 in a seven week period. Higher prices on the futures market is a function of several factors including a strong and steady live cattle cash price, strong slaughter numbers, lighter finished cattle carcass weights, inexpensive feed, and pen space cattle feeders are looking to fill. Though all the aforementioned factors contribute to higher feeder cattle prices, these conditions have been part of the marketplace for several months. The stronger prices for feeder cattle today is more a factor of the market realigning itself with where it should have been months earlier. In other words, it is a price correction. For several months, deferred live cattle futures have traded at severe discounts to the nearby contract and cash trade. The discounts in future months forces feedlot managers to be cautious with prices paid for current month placements. However, feedlot managers appear to be cautiously optimistic concerning finished cattle prices in the future. Cash prices of finished cattle have remained strong all year which has forced live cattle futures to play catch up each time a new contract rolls into the nearby position. With that being said, cattle feeders have slowly and steadily pushed feeder cattle prices higher the past couple of months as they expect finished cattle prices to exceed the expectations of the futures market this summer and fall. Producers with inventory to market should consider marketing inventory in the near term if at all possible. It would not be unprecedented for prices to continue to escalate. However, it will become more difficult for feeder cattle prices to continue the price ascension unless finished cattle prices continue to escalate. Stocker producers should stay tuned to market reports heading into the summer. Summer usually offers some buying opportunities on lightweight calves that can be grazed on summer annuals or warm season perennials.
The April cattle on feed report for feedlots with a 1000 head or more capacity indicated cattle and calves on feed as of April 1, 2017 totaled 10.90 million head, unchanged from a year ago, with the pre-report estimate average expecting a decrease of 0.3%. March placements in feedlots totaled 2.10 million head, up 11.1% from a year ago with the pre-report estimate average expecting placements up 6.0%. March marketing’s totaled 1.91 million head up 9.6% from 2016 which corresponds closely with pre-report estimates. Placements on feed by weight: under 700 pounds up 2.9%, 700 to 799 pounds up 26.5%, 800 pounds and over up 8.0%.
ASK ANDREW, TN THINK TANK: The two most common questions directed toward livestock economists with a focus on marketing, what are prices going to be, and what is a bred heifer worth? No answer will be supplied in this short section today, but there will be an answer supplied at an educational program addressing heifer development. University of Tennessee Extension in Marshall County is hosting a beef heifer development school on May 4th from 10:00 am to 4:00 pm at the Dairy Research and Education Center in Lewisburg, TN. The school will include talks concerning forage, nutrition, health, reproduction, and economics. This is a one stop shop for heifer development information as well as information related to managing a custom heifer development operation. For additional information, please contact Matt Webb (firstname.lastname@example.org, (931)359-1929).
Please send questions and comments to email@example.com 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 $129.80 +0.18; June $116.70 +0.23; August $112.78 -0.03; Feeder cattle –April $138.55 +0.65 May $139.25 -0.50; August $142.25 -0.20; September $142.33 -0.10; May corn closed at $3.57 down $0.01 from Thursday.
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