FED CATTLE: Fed cattle traded $6 to $7 lower on a live basis compared to last week. Prices on a live basis were mainly $137 to $139 while dressed prices were mainly $219 to $221. The 5-area weighted average prices thru Thursday were $137.86 live, down $6.82 from last week and $220.53 dressed, down $9.33 from a week ago. A year ago prices were $132.63 live and $208.57 dressed.
There is no guarantee last week’s prices were the spring high given the large price swings experienced the past few weeks. However, it would appear the spring high is in on finished cattle following the large price decline experienced this week.
Cattle feeders continue to be profitable at current price levels, and will continue to be profitable for several more weeks. The expectation is for finished cattle prices to begin moving lower through the summer and early fall.
Though this is the expectation, cattle feeders are extremely current in their marketings and the cattle on feed numbers continue to be in favor of cattle feeders. Cattle feeders will use this leverage to support prices for several more weeks.
BEEF CUTOUT: At midday Friday, the Choice cutout was $247.22 up $0.36 from Thursday and up $9.45 from last Friday. The Select cutout was $225.12 down $1.54 from Thursday and up $7.12 from last Friday. The Choice Select spread was $22.10 compared to $19.77 a week ago.
There may have been a reversal in cattle prices this week to the downside, but wholesale beef prices continued their strong advancement. The beef market is being driven by grilling season demand.
The Memorial Day holiday is only a couple of weeks away which means retailers are stocking up on high end beef items. Memorial Day weekend is the pinnacle for beef movement, and there is no reason to believe this year will be any different.
The Choice Select spread continues to widen as most of the focus is on Choice grade middle meats. Choice grade beef from the rib and loin tend to be of most interest this time of year because they are easily thrown on the grill.
Following the price run to Memorial Day, cutout prices will likely soften heading into the summer months as consumers shift some of their focus to grilling hamburgers and hotdogs. It will be interesting to see how consumers react to a rebound in retail beef prices the next few months. Strong beef demand continued through the first retail price surge, but their reaction to the price reversal should shed some light on the beef industry.
OUTLOOK: Calf and feeder cattle markets were a mixed bag this week with steers less than 600 pounds $4 to $9 lower while steers 600 pounds and heavier were $1 to $3 lower compared to last week based on Tennessee weekly auction market data. Heifers less than 650 pounds were $1 to $3 lower while heifers 650 pounds and heavier were $2 to $3 higher.
Cash feeder cattle prices followed the trend of feeder cattle futures which was lower on the week. The futures market has seen increased volatility the past couple of weeks which could put producers in a precarious situation.
The positive trade news for beef being shipped to China is definitely on the plus side for cattle producers. There remains one more hurdle to overcome and the expectation is for that hurdle to be cleared in the next couple of months. If beef trade is reopened to China and shipments begin moving by late summer then the summer and fall cattle markets will gain significant support.
Access to the Chinese beef market would be a huge accomplishment for folks in the beef and cattle business. China can be a market shifter in the beef industry if beef begins to move freely. Alternatively, an open market with very little trade would do little to bolster the domestic industry.
Trade deals are always questionable until product actually begins moving and payment is received. As China continues to be a wait and see situation, beef exports have remained strong which has provided price support all the way back to cow-calf producers.
Cattle prices are plenty high to be profitable in 2017 but cost management strategies could be the icing on the cake. As fall calving herds move through the weaning and backgrounding stages of production this summer, it would be prudent to consider feed sources and costs.
Grass may be plentiful in May but a dry spell seems to always come around during June or July. The cattle market is primed and offering nice profits. Producers should take advantage of the situation.
ASK ANDREW, TN THINK TANK: Does breed matter? A producer who retains ownership of his cattle through the feedlot stage of production asked this question recently. His thought was that breed does not matter whereas most people in the industry would hold a contrary opinion. Breed does matter from marketing weanling calves all the way to when the animal is marketed to a packer. All breeds are different. Some breeds generally have carcass characteristics that command premiums at all levels of the marketing chain while other breeds may have superior growth characteristics resulting in reduced feed expenses. The market favors black hided animals and this is largely due to Certified Angus Beef premiums at the packer level. The final answer on this question is for a producer to choose a breed or crossbreed that best fits their environment and their marketing plan. Being profitable is one goal so choose something that will be profitable.
Please send questions and comments to firstname.lastname@example.org 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 $125.63 +1.70; August $121.78 +2.10; October $118.50 +2.85; Feeder cattle –May $144.55 +2.18; August $151.83 +4.50; September $151.93 +4.50; October $151.13 +4.50; May corn closed at $3.62 up $0.01 from Thursday.