FED CATTLE: Fed cattle traded mostly $4 higher compared to a week ago on a live basis. Prices on a live basis were mainly $121 to $122 while dressed trade was mainly $195.
The 5-area weighted average prices thru Thursday were $121.31 live, up $3.84 from last week and $187.21 dressed, down $0.41 from a week ago. A year ago prices were $131.62 live and $209.22 dressed.
The stronger prices are welcomed by cattle feeders, but feeding margins remain tight on cattle being harvested in today’s market.
Assuming these steers were placed in early November, a truckload of 800 pound steers in Tennessee would have cost $1,280 per head before freight. If the cost of gain was $0.80 per pound for 600 pounds then that is an additional $480 per head resulting in a cost of $1,760 per head. The revenue from a 1,400 pound steer would total $1,708 if the sale price is $122 per hundredweight. Thus, the feedlot would have a $52 loss before freight, fixed costs, and death loss are added to the cost category.
Cattle feeders have definitely made it through tougher times than these but mounting red ink is troublesome.
BEEF CUTOUT: At midday Friday, the Choice cutout was $211.55 up $0.21 from Thursday and down $1.29 from last Friday. The Select cutout was $199.81 up $1.33 from Thursday and down $0.37 from last Friday. The Choice Select spread was $11.74 compared to $12.66 a week ago.
Should the beef market be impressed by strong beef demand or upset that winter weather continues to hang on? The resounding answer is “Yes” on both accounts. Wholesale beef prices have remained fairly strong given that the early grilling season has yet to materialize in most areas of the country.
The demand for U.S. beef both domestically and internationally appears fairly strong, and one would have to assume consumers will be chomping at the bit to throw a few steaks on the grill once spring like temperatures stick around for more than a few hours at a time. Demand has been bullish for beef prices while supply worries have led to bearish trade.
It would seem the market has consistently been more concerned with increased supply as opposed to recognizing strong consumer demand. As the calendar moves deeper into spring and as the unofficial start of summer begins with the Memorial Day weekend, the market will have a better idea of beef demand which should provide a more consistent price direction for beef.
OUTLOOK: There are several big storylines in the cattle industry with the number of cattle on feed and a wall of cattle on its way to a store near you being one of the big headlines. Though cattle on feed numbers are amazingly high, the headlines that are bringing more devastation include the wildfires in Oklahoma and the drought that covers Kansas, western Oklahoma, the Texas Panhandle, West Texas, and the states that make up the Southwest.
If lower cattle prices do not put a halt to cattle herd expansion then drought will not only halt expansion, but it can and will lead to cattle herd contraction. That may be somewhat of a drastic statement, but recent experiences of long-term drought in the Southern Plains and Southwest United States remain branded on many cattle producers’ brains.
At this time, there is no way of knowing how long the drought conditions will persist, but it is certain that scorched grazing lands will have no grazing until precipitation is present. While some are dealing with drought and wildfires, other cattle producers continue to wait on spring temperatures.
Cool season grass production has been delayed in many parts of the country resulting in a longer hay feeding period which is sure to weigh on the May 1 hay stocks number just like the drought and wildfires will do. The best advice for this year’s hay season is to fill up the hay barns as early as possible because hay may be in short supply this coming fall and winter.
To change from negative sentiment to a more positive tone, demand for lightweight grass cattle in Tennessee remains strong. Steer and heifer prices were steady to $4 higher this week compared to last week based on weekly auction market report data. Steers weighing 525 pounds averaged $825 per head this week while same weight heifers were $105 per head behind steer values.
There is still something to be desired in the yearling cattle market as 800 to 850 pound steers are bringing $1,100 to $1,150 per head. Industry participants should be prepared for lightweight cattle prices to decline in coming months as yearling cattle prices may find some limited support.
The April cattle on feed report for feedlots with a 1000 head or more capacity indicated cattle and calves on feed as of April 1, 2018 totaled 11.73 million head, up 7.4% compared to a year ago, with the pre-report estimate average expecting an increase of 7.6%. March placements in feedlots totaled 1.92 million head, down 9.3% from a year ago with the pre-report estimate average expecting placements down 9.1%. March marketing’s totaled 1.84 million head down 3.9% from 2017 with pre-report estimates expecting marketings down 4.0%. Placements on feed by weight: under 700 pounds down 11.9%, 700 to 899 pounds down 13.0%, and 900 pounds and over up 3.2%.
ASK ANDREW, TN THINK TANK: Weaning and providing a preconditioning program is a topic consistently discussed by cattle industry participants. This week, a couple of producers who have been preconditioning cattle for several years asked if preconditioning was really worth the cost and effort. From a reputation standpoint of producing low risk cattle, the simple answer is yes. However, the answer is really not that simple. The answer may be yes for some producers and no for others. At the end of the day, a health program pays for itself but the added value is in the added pounds. Thus, if a producer is going to go to the effort to wean calves and provide a complete health program then 45 days of preconditioning may or may not result in a positive return. In most instances, a producer should background that group of calves 90 to 120 days to capitalize on the weight gain that can be achieved. Again, this is not a concrete answer. Market conditions will ultimately determine what is most profitable.
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 –April $119.35 +1.55; June $103.73 +0.73; August $103.80 +0.68; Feeder cattle –April $137.30 +0.08; May $139.33 +0.90; August $144.50 +0.80; September $145.58 +0.58; May corn closed at $3.77 down $0.06 from Thursday.