FED CATTLE: Fed cattle traded mostly $2 higher compared to a week ago on a live basis. Prices on a live basis were mainly $125 to $126 while dressed trade was mainly $195 to $196.
The 5-area weighted average prices thru Thursday were $124.96 live, up $4.01 from last week and $193.62 dressed, down $0.31 from a week ago. A year ago prices were $144.68 live and $229.86 dressed.
The negative $20 basis on June live cattle continued this week. Futures traders continue to be very bearish on the market with expectations of live cattle collapsing in the next few weeks. This expectation is led by an increase in cattle coming off feed in the next couple of months.
As a cattle feeder, this could be cause for concern as a $20 per hundredweight price decline could be devastating. However, it may offer the opportunity to price as many cattle out in the future today for a small discount and then take advantage of a possible arbitrage situation in the futures market.
It is not likely June futures will be below its current price at expiration as convergence will come from a declining cash price and an increasing futures price.
BEEF CUTOUT: At midday Friday, the Choice cutout was $227.95 up $0.39 from Thursday and up $6.66 from last Friday. The Select cutout was $209.53 up $0.36 from Thursday and up $4.95 from last Friday. The Choice Select spread was $18.42 compared to $16.71 a week ago.
Choice boxes are trading at their highest price level in over ten months but are still about $6 lower than the same week one year ago. The price surge the past few weeks for Choice beef is being led by the loin and rib primal as retailers and food service participants are seeking middle meats to meet consumer demand.
The rib primal price has increased a little over $30 per hundredweight in the past two weeks while the loin primal price has increased about $40 per hundredweight over the same time period. This is a very seasonal price movement as retailers are making purchases to fulfill the summer holiday demand which kicks off with Memorial Day weekend.
Consumer support for beef in the marketplace is further supported by the Restaurant Performance Index (RPI). The RPI for March was 101.8 which represents a period of expansion. The RPI is made up of the Current Situations Index and the Expectations index. The Current Situation Index, which measures current trends, increased 1.0 percent from February to March while the Expectation Index increased 0.4 percent.
OUTLOOK: Tennessee auction markets were active again this week with strong marketings based on the 11 markets reported. This week’s weather offered many producers their first opportunity to get into fields and gather cattle in somewhat dry conditions relative to most of March and April.
Steer prices this week were a mixed bag based on Tennessee weekly auction market data. Calves weighing less than 600 pounds were mostly $2 to $4 higher while steers weighing more than 600 pounds were unevenly steady compared to a week ago. Similarly, heifer prices were steady to $4 higher than last week. This type of price action should probably have been expected considering the day-to-day up and down price movement that was experienced on feeder cattle futures market this week.
It was stated last week that orders for lightweight calves were thinning locally, but recent rainfall in the Southern Plains might boost buying interest of these calves. Was that what happened this week to result in higher calf prices? The answer is probably not.
Price improvements in lightweight calves this week were probably a function of local stocker operators looking for a few more calves as fescue production has really started to blossom in the past week to ten days. The potential problem with this scenario is that fescue pasture will soon be maturing and producing seed heads which will slow growth rates on these calves until warm season forages such as crabgrass and Johnson grass fill in the gaps.
The mention of forage brings to light that hay production season has started for some and will soon begin for others. It appears the weather conditions in April slowed cool season pasture and hay production. Thus, it is unlikely producers are going to have a bumper spring hay crop. For those who purchase hay, it may be wise to buy hay early and often until the expected winter feed needs are met. Hay stocks may be difficult to come by this hay season.
ASK ANDREW, TN THINK TANK: This week the topic of pregnancy checking was discussed. There are several producers who use palpation, ultrasound, or blood test to determine the pregnancy status of cows in the herd. However, there are more producers who use either the eye test or fail to pregnancy check at all. Regardless of what one may think, every producer is faced with the cost of pregnancy diagnosis. On average, pregnancy diagnosis immediately following the breeding season using palpation, ultrasound, or blood test will cost $5 to $10 per head. Alternatively, unless actively looking for signs of a cow returning to estrous, the cost of pregnancy diagnosis is the cost of feeding the cow from the end of the breeding season until the end of the calving season and then finding out the cow was not bred. That cost can vary depending on the time of year and weather conditions but will generally range from $200 to $400 per head. Thus, finding one open cow in a herd of 40 will essentially pay for pregnancy checking.
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 $106.05 -0.48; August $105.08 -0.45; October $108.45 -0.53; Feeder cattle –May $140.40 -0.40; August $146.33 -0.25; September $146.78 -0.28; October $147.00 -0.28; May corn closed at $3.99 down $0.01 from Thursday.