FED CATTLE: Fed cattle trade was not established at press as bid prices were $114 to $116 and ask prices were near $120 on a live basis.
The 5-area weighted average prices thru Thursday were $116.41 live, up $0.95 from last week and $182.88 dressed, down $0.20 from a week ago. A year ago prices were $117.47 live and $187.03 dressed.
Limited cash trade for the week had occurred prior to this writing. Packers and feedlot managers were in a complete standoff with both holding paper knives. Feedlot managers appeared to hold leverage over packers with live cattle futures closing this week stronger than the previous week, but a paper cut is the extent of the wound they can inflict this week.
The short term story for cattle is always interesting, and it can bring tremendous volatility at times. However, the long term expectation of the market is where decisions are made and dollars are made or lost. Cattle on feed will remain elevated in 2019 which should put pressure on prices, but international demand is difficult to predict.
BEEF CUTOUT: At midday Friday, the Choice cutout was $213.57 up $0.90 from Thursday and up $0.78 from last Friday. The Select cutout was $200.25 up $2.03 from Thursday and up $1.61 from last Friday. The Choice Select spread was $13.32 compared to $14.15 a week ago.
The domestic cattle markets continue to be supported by international beef demand based on strong October export quantities and values. From January through October, the United States has exported 1.91 billion pounds of beef (does not include variety meats) which is 12 percent higher than the same ten months one year ago.
Similarly, the value of beef exports from January through October of 2018 was 19 percent greater than the same months in 2017 and totaled $6.19 billion. Demand from the top export destinations of Japan, Korea, and Mexico continues to strengthen year over year as exports to Taiwan, Philippines, Vietnam, and Indonesia continue to expand in both quantity and value. Beef exports to China are slowly increasing, but they remain a small export market for U.S. beef.
Though growth is evident for the top three beef export destinations, beef exports to Canada are 3 percent lower than last year on a quantity basis and 6 percent lower on a value basis. Beef exports to Hong Kong are a mixed bag with a 5 percent decline on a quantity basis but a value increase of 17 percent.
OUTLOOK: Calf prices found some support the week following Thanksgiving and that may have been because there were some favorable weather conditions, but the market did not maintain support this week as Tennessee calf and feeder cattle prices declined compared to last week.
By this time of year, the fall run of cattle is generally complete. However, there may still be some calves coming to market due to the frequent precipitation received during the traditional marketing time period that is keeping downward pressure on calf prices.
There is still an expectation for calf prices to turn the corner before the end of the year, but time is limited with only two marketing weeks before many auction barns close the gates for Christmas and the New Year holiday. Given that calf prices have been sluggish this fall, producers still hanging on to the calf crop may benefit from hanging on a little longer as January generally brings slightly higher prices.
The market is still several months from the “grass fever” time period which will provide little to no support for calves that are ready to be weaned today. It is not only the cash market that is acting sluggishly. Feeder cattle futures have been testing the bottom end of their five month trading range this week with several contracts trading below support levels. It is becoming increasingly difficult to understand the feeder cattle market price declines with the live cattle contract heading in the opposite direction and only marginal increases in the grain markets.
One reason for lower prices may be due to cattle feeders having less cash in hand due to several months of negative margins, but margins have been positive the past couple of months. Another reason may be due to the number of cattle on feed which is high at this time. Regardless of the reason feeder cattle prices are struggling, stronger finished cattle prices are sure to pull feeder cattle prices to the upside and result in positive gains for feeder cattle producers.
ASK ANDREW, TN THINK TANK: University of Tennessee Extension has a group of area farm management specialists that have been working with farm families for more than 30 years as it relates to record keeping and financial analysis. A new project the group is starting in 2019 is a program called Beef Gauge. Beef Gauge is a project where area specialists will work with cow-calf producers to begin benchmarking production practices being performed by producers, herd data statistics, production costs, and revenue. The goal of the program is to help producers identify efficiencies and inefficiencies in their operation so they can improve profitability of the operation. With adequate participation, analysis of producer data should allow one to determine the factors that increase profitability. Beyond improving producer efficiency, a producer will be able to compare his or her farm to the averages of farms in their area and across the state. If a reader has interest, please contact the county Extension office and request the contact information for the area farm management specialist.
Please send questions and comments to [email protected] 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 –December $117.90 -0.05; February $121.53 -0.28; April $123.63 +0.15; Feeder cattle –January $144.38 +0.18; March $141.88 -0.08; April $142.53 +0.00; May $142.85 -0.20; December corn closed at $3.74 up $0.02 from Thursday.