Beef Market Highlights: Holding Steady

FED CATTLE:
Fed cattle traded $2 lower on a live basis compared to last week. Prices on a live basis were mainly $144 to $145 while dressed trade was mainly $232 to $234. The 5-area weighted average prices thru Thursday were $144.69 live, down $2.26 from last week and $232.26 dressed, down $1.80 from a week ago. A year ago prices were $124.45 live and $199.85 dressed.

Cattle feeders continue to feel the pressure of a downward moving fed cattle market while also being forced to pay higher prices for the feeder cattle coming in to fill the pens recently vacated. The given market conditions are sure to put some strain on feedlot managers in the coming months as margins will slip and closeouts could easily turn from black ink to red ink. The leverage has finally shifted to the packer as more cattle come to market as is seasonally expected.

Fed cattle prices will likely continue on their downward trajectory for the next couple of months, but the rate and magnitude of that decline could be as variable and volatile as fed cattle prices have been the first five months of the year.

BEEF CUTOUT:
At midday Friday, the Choice cutout was $231.60 down $0.19 from Thursday and up $4.88 from last Friday. The Select cutout was $220.94 down $0.22 from Thursday and up $3.94 from last Friday. The Choice Select spread was $10.67 compared to $9.71 a week ago.

Packers are reaping the benefits of a seasonal increase in fed cattle supply and a slowing of chain speeds. May marks the beginning of grilling season, and it is generally the strongest beef demand month as consumers take advantage of moderate temperatures to do a little backyard grilling.

Neither the Choice nor Select cutouts have rebounded to price highs recorded earlier in the year, but they are favorable prices for a packing industry that has been reeling from sustained fed cattle prices the past few months. Retailers had all but wrapped up their Memorial Day meat purchases prior to this week. However, retailers will be looking to move some of the lingering beef items sitting on store meat counters following the holiday weekend. It may be difficult for packers to push beef prices much higher in coming weeks as the summer slumber will soon hit. Packers will continue to adjust slaughter rates to support wholesale beef prices, but the results from such efforts may be highly variable due to the volatility present in the marketplace.

TENNESSEE AUCTIONS:
On Tennessee auctions this week compared to a week ago steer and bulls were $3 to $5 higher. Heifers were steady to $3 higher. Slaughter cows and bulls were mostly steady. Average receipts per sale were 689 head on 12 sales compared to 658 head on 12 sales last week and 460 head on 10 sales last year.

OUTLOOK:
Calf prices recovered this week from the slight losses experienced last week while feeder cattle prices continue to push forward. Feeder cattle futures prices are climbing the ladder towards the $200 per hundredweight mark which supports the cash price being witnessed locally. There is a lot of concern from producers with regard to the market out pricing consumers, and it is a well-founded concern.

However, out-pricing consumers is not a new happening. There are a number of consumers who either stopped purchasing beef or slowed their beef purchases a number of years ago, and the recent run up in beef prices has resulted in more consumers pulling off or reducing beef consumption domestically. However, it is important to remember that beef is playing in a global market and beef exports remain fairly strong. The increase in prices is a way of rationing the shorter supply of cattle and thus beef. Therefore, prices will remain elevated as long as beef consumers are willing to purchase product and cattle buyers are willing to purchase cattle at the given prices.

What may be more of a concern to cattle producers is not the potential of out-pricing consumers at this point, but the potential repercussions that may occur in future years. One concern may be if consumers will come back to the beef counter when beef production picks back up in future years resulting in lower retail beef prices. The market indicates consumers preference for beef compared to competing meats, but diets do change and a prolonged period of overlooking the beef shelf could result in a slower than desired movement back to the beef counter once prices recede. Ground beef, however, may be the one product that keeps consumers coming back as ground product is always in season with beef consumers. Cattle prices will continue to follow beef prices closely and will respond quickly to changes in beef prices. Look for a significant amount of volatility in the cattle complex in future months.

TECHNICALLY SPEAKING:
Based on Thursday’s closing prices, June closed at $137.60. Support is at $136.88 then $135.33. Resistance is at $138.43, then $139.98. The RSI is 51.65. August closed at $138.65. Support is at $137.93, then $136.16. Resistance is at $139.71, then $141.48. The RSI is 58.54. October closed at $142.68. Support is at $142.60, then $142.30. Resistance is at $143.70, then $144.15. The RSI is 58.23. May feeders closed at $189.07. Support is at $188.89, then $188.52. Resistance is at $189.27 then $189.64. The RSI is 78.16. August feeders closed at $195.38. Support is at $194.23, then $191.58. Resistance is at $196.88, then $199.53. The RSI is 74.88. November feeders closed at $195.25. Support is at $193.28, then $192.43. Resistance is at $195.90 then $196.28. The RSI is 74.42. Friday’s closing prices were as follows: Live/fed cattle– June $136.30-1.30; August $137.13-1.53; October $141.15-1.53; Feeder cattle- August $192.85-2.53; October $194.10-2.40; November $193.33-1.93; January $189.25-0.95; July corn closed at $4.78 up $0.01 from Thursday.