Market Highlights: Beef Exports on the Rise

FED CATTLE: Fed cattle traded $5 lower compared to a week ago on a live basis. Prices on a live basis were mainly $116 to $117 while dressed prices were mainly $187 to $188.

The 5-area weighted average prices thru Thursday were $116.33 live, down $4.64 from last week and $187.65 dressed, down $4.68 from a week ago. A year ago prices were $121.71 live and $197.37 dressed.

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June and August live cattle contracts spent some time under the $100 price level this week before barreling back. At this juncture, it would seem that it would be difficult to push finished cattle prices below the $100 per hundredweight price line this summer.

There is plenty of bearish information such as the number of cattle on feed and heavier carcass weights increasing beef supply, but that should be priced into the market at this time.

The summer months will drag cash prices for finished cattle lower as is normally expected, but below $100 seems like a stretch. The key for cattle feeders the next several months is to stay current with marketings and look to the margin on the next set of feeder cattle to place.

BEEF CUTOUT: At midday Friday, the Choice cutout was $214.54 down $0.55 from Thursday and down $7.06 from last Friday. The Select cutout was $206.92 up $0.61 from Thursday and down $10.81 from last Friday. The Choice Select spread was $7.62 compared to $11.31 a week ago.

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The beef export market remained strong through the end of February based on information collected by the Foreign Agricultural Service division of USDA. Beef exports in February totaled 74,554 metric tons which is 9.5 percent higher than February 2017.

As it relates to the primary destination of U.S. beef, exports to Hong Kong were up 38 percent compared to one year ago while beef exports to South Korea increased 23 percent compared to last year. Beef exports to Japan were down 13 percent compared to last year, but the tide may well turn in Japan as the safeguard tariff rate declined from 50 percent to 38.5 percent on April 1st.

The international market is an integral component of the U.S. beef sector. However, the domestic market plays a much bigger role in the business since only 10 to 12 percent of production is exported.

The talking point from the domestic market is the impending grilling season. The question now is how strong demand will be and if consumers will spend some earnings from the reduced federal tax withholdings on beef.

OUTLOOK: Feeder cattle futures have been on the decline for six straight weeks. From February 20th through April 3rd, April feeder cattle futures lost about $22 per hundredweight which is equivalent to $176 per head.

Similarly, the August feeder cattle contract declined about $18 per hundredweight over the same time period. The cash market for calves and feeder cattle has been under the same duress. Based on Tennessee weekly auction market price data, steer calves and feeder cattle prices have declined $8 to $15 per hundredweight in the past six weeks.

Though calf and feeder cattle prices are not immune to broader market signals, the cash market for calves and feeder cattle has held up nicely compared to the futures market. Despite a tough month and a half in the cattle markets, a little life came back in the market this week.

Wednesday and Thursday trade pushed April feeder cattle $5.50 higher. This may not result in much fan fair at the local stockyard or immediately stronger prices, but it is a step in the right direction for producers needing to market animals.

The advent of green pastures continue to support the grass cattle market as many stocker producers are looking for lightweight calves to turn out on grass. The grass cattle market will soon begin to deteriorate as May approaches. Alternatively, technical indicators and seasonal expectations should support yearling cattle prices from May through August.

As producers move through the spring calf and feeder cattle market, it is important to remember the seasonal strength in the slaughter cow market. Slaughter cow prices have declined slightly as the calf and feeder cattle market have softened, but the slaughter cow market remains relatively strong as prices are in the $54 to $56 per hundredweight range.

Prices for slaughter cows have the potential to sneak higher if nothing befalls the market. The only hesitation to saying prices will not soften is if there is a major sell off in the dairy cow herd.

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ASK ANDREW, TN THINK TANK: With the announcement of the retaliatory tariffs by China, several questions concerning this topic have risen. The primary agricultural products that could be impacted are soybeans and pork as China is the top export market for both of these products. The Chinese have also levied import tariffs on products such as beef, corn, cotton, and many other items. However, exports of these products are relatively small, and it is unlikely an import tariff by China will greatly influence the market of any of these goods. The one negative for the beef sector is that China is a market that was just reopened to U.S. beef last summer. The domestic beef cattle industry had and continues to have high hopes that opening the Chinese market to beef will provide support to domestic producers and processors. It will take time for everything to shake out, but there does not appear any reason to fret at this time as this should accelerate trade talks with China.

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 $112.23 -2.08; June $102.33 -2.73; August $102.78 -2.10; Feeder cattle –April $135.33 -2.15; May $135.63 -2.43; August $141.45 -1.23; September $142.30 -1.65; May corn closed at $3.89 down $0.01 from Thursday.

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