FED CATTLE:Fed cattle traded $3 higher on a live basis compared to a week ago. Prices on a live basis were mainly $114 to $115 while prices on a dressed basis were mainly $175 to $176. The 5-area weighted average prices thru Thursday were $114.14 live, up $3.08 from last week and $174.915 dressed, up $2.04 from a week ago. A year ago prices were $123.41 live and $194.44 dressed.
The Fed Cattle Exchange again led off cattle marketings for the week as the early Wednesday trade spurred further action in cattle feeding country. Finished cattle had another strong week of cash trade as the seasonal price increase seems to finally be in full swing.
The higher prices have resulted in feedlot managers seeing black ink for the first time in two years which may be as rare as the legendary unicorn considering the two years of losses. However, the higher prices were not viewed positively by everyone as live cattle futures dipped modestly on Thursday and even further Friday. The action by the futures market will likely be short lived as live cattle prices are not expected to come under severe pressure the next few months.
BEEF CUTOUT:At midday Friday, the Choice cutout was $187.79 down $0.22 from Thursday and up $2.50 from last Friday. The Select cutout was $171.27 up $0.66 from Thursday and up $2.32 from last Friday. The Choice Select spread was $16.70 compared to $16.52 a week ago.
The immediate weeks following Thanksgiving are generally favorable for beef markets as the demand for Choice grade middle meats surge during the holiday season. Retailers place considerable efforts on featuring beef items even though ham is a popular Christmas center piece.
The emphasis on Choice middle meats and consumers' demand for high quality grade items this time of year results in a widening of the Choice Select spread. The spread has been steadily widening since the first week of September and has tripled since that time. The spread may widen a little more the next couple of weeks, but it is doubtful the spread will reach the June peak that was just shy of $24.
Choice meats will be the focus the next few weeks, but the focus will shift to Select grade end cuts as colder temperatures dig in their heels. Packers continue to experience positive profit margins even though the increase in boxed beef prices is not completely keeping pace with increases in finished cattle prices. This just goes to show how well packers were doing when finished cattle prices were reeling.
OUTLOOK:In four weeks, 500 to 600 pound steer prices have increased $19 per hundredweight based on Tennessee weekly auction average prices as reported by Market News. The price run in calves and feeder cattle that is being witnessed is uncommon for this time of year. However, it continues to lend credence to the idea that calf and feeder cattle were extremely undervalued in October.
Current support for calf prices is largely related to demand from winter grazing operations while feeder cattle prices are being supported by farmer feeders who are trying to find a higher value for their corn. The Southern Plains region of the country has been slow to stock winter wheat pastures this year. The wheat in the Southern Plains got off to a good start, but producers were hesitant to purchase calves as a few dry weeks brought back recent drought memories. However, rainfall in November has supported forage growth and encouraged producers to source more animals.
The recent rains in parts of the Southeast may be too late to spur much calf demand. There will be a few stocker producers that can take on animals, but if winter grazing was the expected feed resource then the number of cattle entering winter grazing operations will be low relative to previous years.
On the side of feeder cattle, this is the time of year when farmer feeders in the Midwest are sourcing cattle to fill pen space. Low corn prices and relatively low cattle prices support the purchase of these animals. Farmer feeders tend to be able to pay more for cattle, because they own the feed which will push prices higher.
Several loads of feeder cattle sold this week in Tennessee either through alliance sales, dedicated video sales, or weekly auction markets. Many of these loads of cattle brought $950 to $1,070 per head for steers weighing between 750 and 850 pounds. Upside price potential continues to exist for feeder cattle, but the upside potential is beginning to be much smaller than the downside potential. It may be wise to consider some price risk management strategies in the coming weeks.
ASK ANDREW, TN THINK TANK:Producers are reminded to check with marketing agencies about their holiday schedule as it relates to sale dates around the Christmas and New Year holidays. Many livestock marketing agencies will not operate on their normal schedule the last couple of weeks of the year and many will be closed for at least one if not two weeks. Thus, if a producer needs to market cattle before the end of the year then they have a few weeks to get the chore completed. A phone call is much less expensive than loading the calves on the trailer and hauling them to town just to find out the market will not be hosting a sale that week. Most marketing agency management will be more than glad to answer questions about their sale schedule.
Please send questions and comments firstname.lastname@example.org 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 $108.23 -2.35; February $108.88 -2.50; April $109.05 -2.18; Feeder cattle -January $124.60 -3.18; March $121.53 -2.73; April $121.25 -2.78; May $120.33 -2.68; December corn closed at $3.38 up $0.06 from Thursday.