Market Highlights: Winter Weather Holding Cattle Prices Strong

Fed cattle continue to trade higher as feedlot placements increase.

FED CATTLE: Fed cattle traded $1 lower compared to last week on a live basis. Prices on a live basis were mainly $123 while dressed prices were primarily $197.

The 5-area weighted average prices thru Thursday were $123.04 live, down $1.96 from last week and $196.49 dressed, down $0.51 from a week ago. A year ago prices were $123.05 live and $194.00 dressed.

Cattle feeders were able to hold the line this week as prices were mainly steady. The wet and cold pen conditions have cattle feeders on edge because it is negatively impacting feed efficiency and average daily gain. However, the same conditions could be one factor contributing to strong finished cattle prices as slaughter weights are sure to be declining due to the unfavorable conditions.

The conditions will eventually improve, but winter does not appear to be coming to an end anytime soon. This may continue to provide support for cattle prices in the near term, but industry participants should not be surprised if prices falter before the spring market provides support.

BEEF CUTOUT: At midday Friday, the Choice cutout was $212.87 down $0.35 from Thursday and up $4.53 from last Friday. The Select cutout was $212.29 up $0.15 from Thursday and up $2.70 from last Friday. The Choice Select spread was $5.11 compared to $3.28 a week ago.

The latest World Agricultural Supply and Demand Estimates report was released in December. The January report was not released due to the partial government shutdown. However, considering the December report, a lot of meat is going to be on the market in 2019.

United States beef production for 2019 is projected at 27.848 billion pounds which is 846 million pounds more than 2018 projected production and nearly 1.6 billion more pounds than 2017 beef production. Domestic pork production is a similar situation with the December report showing an expectation of 27.729 billion pounds of pork production in 2019 which is an increase of 1.4 billion pounds compared to 2018 and more than a 2.1 billion pound increase from 2017 pork production.

Why stop at red meat? Broiler production is projected to reach 42.787 billion pounds in 2019 representing a 574 million pound increase from 2018 and a 1.57 billion pound increase from 2017. This is a lot of meat and it has to be consumed domestically or internationally. Demand will determine prices.
 
OUTLOOK: Based on weekly auction market average prices, steer and heifer prices were unevenly steady compared to last week while slaughter cow prices were $2 higher and slaughter bull prices were steady to $1 higher. Cattle receipts this week through reported Tennessee livestock auctions were about half of what they were the previous week. The reduction in cattle being marketed was largely due to unfavorable weather conditions to get a trailer in the pasture. The bigger issue may have actually been getting a loaded trailer out of the pasture which becomes a major issue with deeper and deeper mud.

Another factor that may have some producers hesitant to market calves is the failure of prices to experience their typical first of the year jump. Many producers have become accustomed to holding calves through December and marketing them in January. This has become a common practice for some due to tax reasons and more so for others to capitalize on a price increase that has occurred nine out of the last ten years (2008-2017 data) from December to January.

Since the beginning of November, the weekly weighted average 500 to 600 pound steer price has ranged from $138 to $144 per hundredweight with a flat trend and nothing changed this week with an average price of $142. The current value of a 525 pound steer is about $760 per head while the heifer mate at the same weight is only valued at $625 per head.

The expectation would be for calf values to begin increasing slowly over the next couple of months and peak once spring grass is ready to graze. However, calf grazing operations may be hesitant to bid up grass cattle prices with the soft feeder cattle prices that are a drag on the market. One thing is certain, current calf values are unlikely to invoke any major changes by a cow-calf producer from the standpoint of expanding or contracting the cattle herd.

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ASK ANDREW, TN THINK TANK: The partial government shutdown rolls on impacting many facets of the government and the daily lives of many people. This partial shutdown also influences agriculture in that many USDA reports have not been published which influences information transfer. In the short-run, the reduction in information has a small impact on markets and decision making. The longer reports go unpublished, the more influence the reduction in information has on decision making. Some reports that are in jeopardy from the cattle side include cattle slaughter by type, January Cattle on Feed, and January 1 Cattle Inventory. Despite many reports being delayed or canceled, the Agricultural Marketing Service continues to produce price reports so pricing is transparent across the industry. The issue is that market prices are influenced by information contained in many of the reports that are going unpublished. Is this a major issue? It probably is not a major issue today, but it could become one a couple months down the road.

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 $126.05 +0.70; April $126.85 +0.38; June $116.70 -0.30; Feeder cattle –January $143.38 -0.40; March $143.63 -0.70; April $144.73 -0.65; May $145.08 -0.50; March corn closed at $3.80 up $0.03 from Thursday.

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