FED CATTLE: Fed cattle traded $2 to $3 lower compared to last week on a live basis. Live prices were mainly $112 to $114 while dressed prices were mainly $183 to $185.
The 5-area weighted average prices thru Thursday were $113.51 live, down $2.15 from last week and $184.16 dressed, down $2.29 from a week ago. A year ago prices were $114.25 live and $180.90 dressed.
The story in the finished cattle market continues to be the strong basis where live cash prices are trading $5 to $6 higher than June live cattle futures. For cattle feeders that hedged the sale of these cattle prior to April 23rd, the positive basis is a money making proposition as the futures hedge will have protected against the huge futures price decline and cattle feeders are capturing the value in the positive basis. At the same time, the positive basis provides good reason to stay current with marketings which will keep pulling cattle through the system. For those that went unhedged, margins on cattle closeouts are most likely in the red and only declining further as feed prices escalate.
BEEF CUTOUT: At midday Friday, the Choice cutout was $222.31 up $0.06 from Thursday and down $1.51 from last Friday. The Select cutout was $207.61 up $0.46 from Thursday and down $0.60 from last Friday. The Choice Select spread was $14.70 compared to $15.61 a week ago.
April beef and veal trade data was released this week with little to no excitement or profound information. Beef and veal exports in April were 4.0 percent lower than April 2018 on a carcass weight basis and totaled 243.5 million pounds. Through the first four months of 2019, beef and veal exports have totaled 939.4 million pounds which is 4.5 percent lower than the same four months in 2018. Through the first four months, Japan remains the largest export market for U.S. beef and veal accounting for 27.2 percent of export quantity, but that quantity is 3.9 percent below year ago levels. Exports to South Korea have increased 11.5 percent through the first four months compared to last year and they have accounted for 22.0 percent of total exports. Imports of beef and veal in April totaled 272.9 million pounds representing a 15.7 percent increase compared to April 2018. Imports through the first four months total 1.01 billion pounds which is 5.6 percent higher than the previous year. Imports of beef and veal from Canada are up 13.4 percent and up 8.9 percent from Australia.
OUTLOOK: Based on Tennessee weekly auction market price averages, steer prices were $5 to $10 lower than last week while heifer prices were $5 to $8 lower than a week ago. Slaughter cow prices were steady to $3 higher than the previous week with slaughter bull prices were $2 to $5 higher than the prior week. This week’s lower cash prices in the calf and feeder cattle markets reflect last week’s late week drop off in feeder cattle futures. The turbulence in the market is difficult to fully understand. Higher expected corn prices due to the inability to get corn planted is definitely a factor weighing negatively on the feeder cattle market as is the continued trade tensions. However, there are factors in the marketplace that should benefit the beef and cattle complex including African Swine Fever which is reducing the quantity of meat protein on the global market and the easing of some non-tariff trade barriers with key trading partners. The easing of the trade barriers was expected to have a small impact at best, but they have seemed to go unnoticed. The question is how bad is the calf and feeder cattle market? Given the most recent weekly average prices in Tennessee, 525 pound steers are valued near $743 per head while 579 pound steers averaged $787 per head. Heifers of the same weight were about $100 per head back of the steer values. This would essentially result in revenue of $700 per cow that calved assuming 50 percent heifers and 50 percent steers. What this does not account for is retaining heifers or for death loss. These values would not be too concerning if it was September through November, but it is June which means the calf market has plenty of time to decline and most likely will. Given the most recent prices, it is reasonable to anticipate 525 pound freshly weaned steers to be valued near $700 per head during the fall marketing months which will likely put heifer values closer to $600 per head for the same weight class. These types of values make it difficult to turn a profit.
ASK ANDREW, TN THINK TANK: A question this week was directed toward how I market the commodities I produce. My first thought was if this person wanted the strategy for my occasional successful marketing or wanted the general strategy that is keeping the bottom line out of the red. The truth is that my successful marketing has nothing to do with skill. The two aspects of marketing that I believe are integral to doing it successfully are maintaining flexibility and analyzing and using the marketing and risk management tools available. Most agricultural commodity producers market their product the same way each and every year which may be sufficient. However, maintaining marketing flexibility and utilizing risk management tools often provide opportunities to capitalize on a few more dollars. The reason producers do not use these tools is because they do not always understand them and they are often afraid they will miss out on higher prices. The primary objective is to make enough money for a living and survive to do it again next year.
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 $106.93 -0.68; August $103.30 -1.50; October $104.50 -1.25; Feeder cattle –August $137.25 -2.03; September $137.35 -2.25; October $137.38 -2.38; November $137.35 -2.70; July corn closed at $4.16 down $0.05 from Thursday.