Market Highlights: Wet Winter Should Mean Good Summer Cattle Grazing

FED CATTLE: Fed cattle trade was not well established at press. Asking prices were mainly $128 on a live basis while bid prices were mainly $123.

The 5-area weighted average prices thru Thursday were $124.98 live, up $0.24 from last week and $201.00 dressed, up $1.80 from a week ago. A year ago prices were $128.15 live and $204.45 dressed.

The February live cattle futures contract price closed $2.05 per hundredweight higher this Friday compared to last Friday. One might surmise that cash cattle trade should be $2 higher this week than last week, but packers and feedlot managers both wanted to see the January Cattle on Feed report from USDA before making any deals this week. This is understandable since this report was first scheduled to be released one month ago and has resulted in the February Cattle on Feed report being delayed until the second Friday in March.

The expectation over the next few weeks is for continued strength in the finished cattle market as seasonal trends from a supply and demand standpoint support prices.

BEEF CUTOUT: At midday Friday, the Choice cutout was $219.39 up $1.32 from Thursday and up $2.45 from last Friday. The Select cutout was $212.19 up $0.78 from Thursday and up $1.15 from last Friday. The Choice Select spread was $7.20 compared to $5.44 a week ago.

Weekly Choice boxed beef prices have been running above year ago levels since January 1st and are averaging $7.44 per hundredweight over last year for the first seven weeks of the year. The dichotomy in the market is that finished cattle prices are now trading below year ago levels as are most classes of cattle which means beef packers are on the winning side of the margin war.

Through the first seven weeks of the year, finished cattle prices are nearly $1 per hundredweight lower than last year while feeder cattle prices are well below year ago levels. Though Choice boxes have showed tremendous strength the first couple of months of 2019, they are going to have to push $8 higher over the next four weeks to keep pace with weekly prices from last year. An $8 price increase is a small step considering the $16 price increase over the same four weeks one year ago.

The boxed beef price movement is setting up an interesting situation across cattle markets as other sectors will begin holding the line to capture some of the value being passed down by consumers.

OUTLOOK: Based on Tennessee weekly auction market averages, steer prices were steady to $6 higher this week compared to last week while heifer prices were steady to $2 higher than a week ago. Slaughter cow prices continued to firm with $1 to $3 gains this week compared to last week while slaughter bull prices were $2 to $3 higher.

The main issue with marketing cattle in Tennessee and much of the Southeastern United States is the ability to get in and out of fields with a truck and trailer. February 2019 is shaping up to be one of the wettest February’s on record which is delaying calf marketing as well as slaughter cow marketing in the Southeast region of the country.

The same abundant moisture that is keeping producers from marketing cattle is also setting cattle country up for favorable grazing conditions this spring and is also positively influencing summer grazing pastures. Thus, the rain may be benefiting cow-calf producers in two ways. The first is that it is forcing producers to hold onto calves in the near term which will likely mean more pounds to sale when the trailer can get to the loading chute. The second is that grass cattle will be in high demand because of positive grazing prospects which should mean higher prices. Thus, higher prices and heavier calves should result in more dollars to the cow-calf producer.

From the stocker producer standpoint, higher priced calves could mean small margins to work with if yearling cattle prices do not pick up their pace. However, stocker producers using grass may be able to put more pounds on cheaper with the expectation of abundant forage.

Changing gears to slaughter cows. Producers should continue to keep their eyes on slaughter cow prices as they continue their upward trend. Prices for slaughter cows peaked in March last year and then began declining which is not typical. It is generally June or July before the market turns.

The January cattle on feed report for feedlots with a 1000 head or more capacity indicated cattle and calves on feed as of January 1, 2019 totaled 11.69 million head, up 1.7% compared to a year ago, with the pre-report estimate average expecting an increase of 2.3%. December placements in feedlots totaled 1.77 million head, down 1.8% from a year ago with the pre-report estimate average expecting placements up 2.0%. December marketing’s totaled 1.74 million head down 0.6% from 2017 with pre-report estimates expecting a 0.1% decrease in marketings. Placements on feed by weight: under 700 pounds up 2.8%, 700 to 899 pounds down 5.1%, and 900 pounds and over down 10.3%.

Capture1

ASK ANDREW, TN THINK TANK: There have been several questions this week with many coming from programming I have been doing across the state. Many of them have dealt with cow-calf profitability and either backgrounding cattle, stockering cattle, or retaining ownership through the feedlot. Each question was unique to the producer, but each answer had at least one similar theme. The similar theme was that each enterprise or each stage of production has to stand on its own which means increasing profits. At the same time, a decision maker has to determine how the production change influences the whole system. For instance, one stage of production may appear to have negative returns while it positively influences the returns from another stage of production. In many cases, this occurrence is due to not allocating costs to the appropriate entity. This may not matter though if the system is more profitable with the change.

Please send questions and comments to agriff14@utk.edu 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 –February $128.68 +1.05; April $128.88 +0.28; June $119.48 +0.23; Feeder cattle –March $142.90 -0.33; April $145.30 -0.23; May $146.85 -0.03; August $151.05 -0.15; March corn closed at $3.75 unchanged from Thursday.

Capture

Comments