FED CATTLE: Fed cattle traded mostly $2 to $3 higher compared to a week ago on a live basis. Prices on a live basis were mainly $124 while dressed trade was not well established.
The 5-area weighted average prices thru Thursday were $120.84 live, down $0.47 from last week and $193.93 dressed, up $6.72 from a week ago. A year ago prices were $136.25 live and $216.81 dressed.
The talk around cattle pens is not about how impressive live cattle prices are but rather how steep a discount June live cattle futures are relative to current cash prices. The live cattle market is experiencing a record strong basis for the June contract.
Currently, cash live cattle trade is $17 per hundredweight higher than where the June contract is trading. If futures were assumed to be correct then it will take a precipitous decline in live cattle prices the next two months to have convergence of the futures price and cash prices.
It is difficult to say how convergence will occur, but both prices are likely to move some. In the meantime, cattle feeders are likely to take advantage of the strong basis on hedged cattle.
BEEF CUTOUT: At midday Friday, the Choice cutout was $221.29 up $1.14 from Thursday and up $9.74 from last Friday. The Select cutout was $204.58 up $0.10 from Thursday and up $4.77 from last Friday. The Choice Select spread was $16.71 compared to $11.74 a week ago.
Wholesale beef prices surged this week with strength in the loin and rib primal driving prices higher. The price strength in Choice boxes is largely due to grilling season demand as this will be the first weekend of the year where most of the United States has favorable enough weather to throw beef on the grill.
Demand for Choice beef was fair to good with the daily load count averaging nearly 71 loads per day for Monday thru Thursday. One load is equivalent to 40,000 pounds resulting in over 11.3 million pounds of Choice beef being traded in a four day period.
Similarly, the Select beef average daily load count for Monday thru Thursday was 37.5 loads accounting for 6 million pounds of beef trade with scheduled delivery in the next three weeks. The quantity of beef coming to market in the next couple of months is sure to escalate as the industry works through calf fed animals and animals that departed winter grazing prematurely.
Expected increases in quantity supplied has some experts concerned, but strong consumer demand should absorb the production.
OUTLOOK: Based on Tennessee weekly auction market averages, steers weighing less than 600 pounds were steady to $2 lower compared to a week ago while steers weighing 600 pounds or more were $1 to $5 higher. Heifer prices were unevenly steady compared to last week.
The spring run for grass cattle is coming to a close in the Southeastern United States. There are a few remaining orders for cattle, but orders are thinning as many producers have stocked pastures.
Alternatively, the orders for cattle to be placed on grass in the Southern Plains may have just got a boost with substantial rainfall this week. It is not as if this week’s rain will result in forage production immediately, but it will go a long way to rejuvenating native grass pastures that have been managed through severe drought conditions. Thus, the lightweight calf market could find extended support into May if producers in the Southern Plains start placing orders to purchase calves for summer grazing.
This may have major implications for fall calving herd managers who have recently weaned calves or will wean calves in the next few weeks. Weaning time is a decision point in which one can sell or choose to add weight. It is important to consider the value of the calves at weaning and what they are expected to be worth after a backgrounding phase.
If the futures market is any indication, producers can expect yearling cattle prices to escalate $6 to $7 between May and August which may or may not be enough to make it worth one’s time and effort. The futures market has already priced in a seasonal price increase for feeder cattle which may or may not come to fruition.
The basic thought is that the seasonal tendency will remain and feeder cattle prices will move higher from May through August. At this point there is very little reason to be bearish on this price move expectation. In actuality, one might have a tendency to be a little bullish towards this market since prices have held serve with strong cattle on feed numbers and several international trade issues.
ASK ANDREW, TN THINK TANK: A question was asked this week concerning why the trends for Tennessee feeder cattle in this report differed from the trends reported by USDA Market News in their weekly summary released on Mondays. The main difference is the trends used here are from auctions taking place from the previous Friday thru Thursday while Market News is utilizing auctions in a calendar week. The primary difference is from Saturday auctions in the state. Additionally, trends for extremely light and heavy cattle are not considered in this report due to the low number of cattle in the data set. It is difficult to set a trend with small numbers and quality can end up being the price difference instead of a change in the market. Regardless of where the trends are reported, it is important for producers to look at the individual weight classes and the change from one week to the next. This will help one understand how seasonality plays into the market.
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 –June $107.00 +2.65; August $105.98 +1.95; October $109.40 +1.48; Feeder cattle –May $142.03 +1.73; August $148.25 +1.75; September $148.35 +1.10; October $148.20 +0.65; May corn closed at $3.90 up $0.04 from Thursday.