Skip to Main Content

The University of Tennessee | Institute of Agriculture

Department of Agricultural and Resource Economics

Frequently Used Tools:




)

Weekly Livestock Comments

By Dr. Andrew P. Griffith

May 26, 2017


Listen to the comments or download the file

click to subscribe to rss feed for Podcast Click to subscribe to podcast

FED CATTLE: Fed cattle traded $2 to $3 lower on a live basis compared to last week. Prices on a live basis were mainly $131 to $132 while dressed prices were mainly $208 to $210. The 5-area weighted average prices thru Thursday were $131.59 live, down $2.68 from last week and $208.60 dressed, down $4.14 from a week ago. A year ago prices were $124.81 live and $196.76 dressed. Though finished cattle prices continue to decline, feedlots continue to be extremely profitable on a cash-to-cash basis. Strong profits are a factor of low purchase price for cattle, low feed costs, and strong selling prices. So far, 2017 is a complete reversal from the market in 2016 which resulted in cattle feeders being left with the short end of the stick and closeouts deep in the red. Prices over the next few weeks will continue to soften, but this should still result in profits for cattle feeders the next few months. More than likely, cattle weights will continue to be moderate and cattle feeders will remain current as cattle are pushed through the feedlot. Profit margins are sure to moderate as feeder cattle prices have escalated.

BEEF CUTOUT: At midday Friday, the Choice cutout was $245.44 down $0.67 from Thursday and down $1.53 from last Friday. The Select cutout was $218.28 down $0.70 from Thursday and down $6.84 from last Friday. The Choice Select spread was $27.16 compared to $25.81 a week ago. The month of May is generally the strongest beef demand month starting with Mother’s Day and then really catching support leading up to Memorial Day. May 2017 is not here to disappoint as packers have been able to ride high flying demand to very strong prices. The demand side has been strong in both the domestic market and the export market which has resulted in beef moving very quickly. Strong demand has helped pull beef cold storage stocks down to 458.5 million pounds as of the end of April. Cold storage stocks are primarily made up of boneless beef which is 4.0 percent lower than April 2016 and 1.6 percent lower than last month. The prices packers are receiving make it well worth the dollars they are spending to secure cattle to harvest which has resulted in strong profits the past several weeks. Though prices will likely begin to wane, the beef market should continue to find support through summer grilling. The record high Choice Select spread is almost certain to narrow in coming weeks, but the bar has been set for a new record.

OUTLOOK: The feeder cattle market has once again found a fairly narrow trading range for the first time since early March. Considering the August feeder cattle futures contract, the August contract traded between $120 and $130 from late November through the middle of March. The August contract then made a run from $130 to the $160 mark in the first few days of May. However, the past three weeks have seen daily contract prices close in a $6 range. The difference between today’s trading and the trading from November through March is the trading range in a single day. Trading ranges have been much wider the past few weeks than they were in early 2017 which hints of major uncertainty among traders on which side of the market is most profitable. The somewhat steady trade on the futures market has resulted in a fairly steady trade at local auction markets. Compared to last week, steer prices were steady to $4 lower while heifer prices were steady to $4 higher based on Tennessee weekly auction market data. The market has not been following the seasonal pattern as closely as expected for lightweight calf prices. Lightweight calf prices have remained strong longer than the seasonal tendency would indicate. However, there is a good possibility the lightweight calf market will begin to soften as summer heat takes the place of spring temperatures. Alternatively, the feeder cattle market has followed the seasonal trend fairly well. Feeder cattle markets strengthened through late winter and early spring and the expectation is for prices to hold fairly steady the next few months. If there is concern of declining prices then producers would be wise to use a price risk management tool. Similarly, the slaughter cow market has been close to seasonal. Producers with cows that need to be marketed should consider doing so in the next few weeks as prices could soften. Slaughter cow prices have been fairly steady the past few months, but most of the risk is to the downside with little upside potential.

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, 2017 totaled 11.00 million head, up 2.0% compared to a year ago, with the pre-report estimate average expecting an increase of 0.9%. April placements in feedlots totaled 1.85 million head, up 11.1% from a year ago with the pre-report estimate average expecting placements up 7.2%. April marketing’s totaled 1.70 million head up 2.7% from 2016 with pre-report estimates expecting marketings up 1.7%. Placements on feed by weight: under 600 pounds up 4.2%, 600 to 799 pounds up 21.1%, 800 to 999 pounds up 7.0% and 1,000 pounds and over down 6.7%.

ASK ANDREW, TN THINK TANK: It is often said for a person to make a million dollars farming they need to start with two million. Or, the only people who can make a living farming are those who inherit or are given a farm. Thus, how can a young person afford to farm starting with little to nothing? First, do not listen to all the people that say it cannot be done. They are probably correct that it cannot be done if a person tries to farm like the naysayers think farming is performed. Second, don’t try to farm like well established farms. A beginning farmer does not have the resources of established farms so it may take some innovation to be profitable. Third, be willing to ask questions and take advice from experienced producers. Not all advice is good advice but much of it will be beneficial. Fourth, take some risks, because risk is necessary. However, it does not have to be uncalculated. Fifth, do not be afraid of failure or mistakes. All educations cost something, but the plan is for this one to not be too expensive.

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 –June $122.70 -1.23; August $118.95 -2.45; October $115.10 -2.85; Feeder cattle –August $146.95 -4.18; September $146.75 -4.23; October $145.78 -4.28; November $144.28 -4.30; May corn closed at $3.74 up $0.05 from Thursday.