FED CATTLE: Fed cattle traded $5 lower compared to a week ago on a live basis. Prices on a live basis were mainly $120 to $121 while dressed prices were mainly $193 to $194.
The 5-area weighted average prices thru Wednesday were $120.77 live, down $5.17 from last week and $193.82 dressed, down $8.06 from a week ago. A year ago prices were $125.64 live and $206.08 dressed.
Last week, the extremely strong basis in live cattle was mentioned. It was mentioned that the cash price was $6 to $7 higher than April live cattle futures resulting in a strong basis. Give the market one week and the basis narrowed $2.
The expectation is for the cash price and futures price to converge as the futures contract nears expiration. This can happen by the cash price moving to futures, futures moving to cash, or both cash and futures moving toward each other.
This week, the cash price did most of the moving as prices declined rapidly in one week’s time. Of the three alternatives to price movement in the coming weeks, it would appear the cash price will likely do the most moving and move lower towards the April contract.
BEEF CUTOUT: At midday Thursday, the Choice cutout was $221.60 down $0.02 from Wednesday and down $2.52 from last Friday. The Select cutout was $217.73 down $1.34 from Wednesday and down $7.44 from last Friday. The Choice Select spread was $11.31 compared to $6.39 a week ago.
Wholesale beef prices continue to struggle leading up to grilling season. Some would say the Lenten season negatively influences the meat markets. However, it likely has a much smaller impact in today’s market compared to previous years.
If it does have a negative influence, that influence should be negated this coming week as Easter is celebrated on April 1. The Lenten season is not the only factor pushing wholesale prices lower.
Federally inspected beef production is up 2.6 percent year to date which is an increase of 147 million pounds of beef. Similarly Federally inspected pork production has seen an increase of 197 million pounds or an increase of 3.3 percent year to date.
The negative price pressure is expected to continue as cattle dressed weights continue to exceed year ago levels and more animals are expected to be harvested. One piece of information that is a positive for the beef market is a reduction of beef in cold storage.
Beef in cold storage at the end of February was 8.4 percent lower than one year ago but that is only a reduction of 42 million pounds.
OUTLOOK: Steer prices were $2 to $5 lower this week compared to last week based on Tennessee weekly auction market data while heifer prices were $2 to $9 lower compared to a week ago. The calf and feeder cattle market are really beginning to be muddled between a softening finished cattle market and grass fever purchases. This has resulted in a very unsettled market with uncertainty among many in the industry.
As is normal, beef cattle industry participants are trying to process many pieces of information. As the information is gathered, industry participants use that information to make decisions which impacts prices of calves and feeder cattle.
The piece of information that has been on the list for a long time is the number of cattle placed on feed in the past five or six months. Though this piece of information is not new, it continues to be a major factor in decision making as many in the industry expect a wall of cattle to be harvested in the next few months and thus a wall of beef and beef products to be marketed.
Another factor that has been in play is the drought conditions that have dominated most of the Southern Plains and Southwest United States for the better part of four or five months which impacted wheat pasture placements and could potentially influence spring and summer marketings at the calf and feeder cattle level.
Still, another factor is international beef trade from a retaliatory tariff standpoint and restructuring trade agreements with major beef export markets.
All of the stated factors plus many more weigh in the decision making process of those in the industry. Supply and demand ultimately determine cattle and beef prices, but participants’ expectations of future supply and demand influence the current price.
Sometimes these participants have a bullish outlook on the market which drives prices higher. At other times, these participants have a bearish outlook which pushes the market lower. It appears there is more bearish information in the market given softening prices.
ASK ANDREW, TN THINK TANK: A few questions in relation to retained ownership have been asked at a couple of recent meetings. The focus of the questions has been in relation to the cow-calf producer harvesting more of the value from genetic selection improvements and value added management practices such as weaning, vaccinating, and backgrounding cattle. These are good questions for producers to be asking. However, a producer has no idea if their genetic selections have actually resulted in improvements until they put cattle in the feedlot and see data on how the cattle performed. In no way is the previous statement suggesting that producers retain ownership of their cattle and send them to the feedlot. There are risks involved in such an endeavor. Alternatively, if there are producers interested in retaining ownership and receiving data, I coordinate the Tennessee Beef Evaluation which is a program where cattle are sent to a feedlot in Iowa and data is collected. If anyone has interest then please contact me.
Please send questions and comments to email@example.com 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: Thursday’s closing prices were as follows: Live/fed cattle –April $113.75 -2.25; June $102.58 -3.00; August $101.48 -2.98; Feeder cattle –April $133.33 -4.50; May $134.03 -4.48; August $140.43 -4.00; September $141.33 -3.98; May corn closed at $3.88 up $0.14 from Thursday.