Market Highlights: Cattle Traded Between $160-161

Live cattle trade for $160 to $161, while beef prices were up from the previous week.
By: Andrew P. Griffith, University of Tennessee

FED CATTLE: Fed cattle trade was not well established at time of publishing. Limited trade indicated a steady to firm market compared to a week ago. Live prices were primarily $160 to $161. The 5-area weighted average prices thru Thursday were $161.50 live, up $0.72 from last week and $255.28 dressed, down $3.81 from a week ago. A year ago prices were $150.10 live and $240.11 dressed.

Fed cattle trade was slow to develop this week as there was much anticipation of the cattle on feed report. The nearby live cattle contract price increased about $5 from Monday through Friday as there was and still is anticipation that the spring market will seasonally pick up. Similarly, many of the deferred futures contract prices increased $3 to $5 per hundredweight.

The increase in futures was welcomed by feedlots that would like to market cattle at higher prices while the packing sector could only hold out hope that the cattle on feed report would result in news that was in their favor and give them reason to bid lower prices. At some point the packer will regain leverage over feedlots which will result in lower fed cattle prices.


 
BEEF CUTOUT: At midday Friday, the Choice cutout was $244.38 down $2.23 from Thursday and up $0.31 from last Friday. The Select cutout was $244.56 down $0.23 from Thursday and down $0.03 from last Friday. The Choice Select spread was -$0.18 compared to -$0.52 a week ago.



Boxed beef prices were stagnant this week compared to a week ago as they found little room to press forward and nothing really set them back. Retailers and food service participants will be gearing up for the grilling season in the near future as the unofficial start of summer begins on Memorial Day.

Generally speaking, the start of grilling season results in an increase in boxed beef prices as consumers begin purchasing Choice middle meats. However, it will be interesting to see what retailers feature and what consumers purchase considering beef prices will remain at record levels and pork and poultry prices are expected to continue to decline.

Relative prices of competing meats compared to beef may not allow cutout prices to reach their full potential had poultry and pork prices remained elevated similar to a year ago. Another topic of interest is the percent of cattle grading Choice or higher. For the week ending March 6th, over 74 percent of the graded cattle graded Choice or better compared to 71.5 percent a year ago. This is one reason for a narrowing of the Choice Select spread.

TENNESSEE AUCTIONS: On Tennessee auctions this week compared to a week ago steers and bulls were $1 to $9 higher. Heifers were $2 to $7 higher. Slaughter cows were $2 to $3 lower while slaughter bulls were steady to $2 higher. Average receipts per sale were 819 head on 9 sales compared to 644 head on 9 sales last week and 675 head on 12 sales last year.

OUTLOOK: As was suspected after numerous weeks of unfavorable weather to move cattle, weekly auction markets experienced a strong uptick in calf marketings as calves were hauled to town. Cow-calf producers had not been able to move cattle for several weeks until this week.

The inability to get calves to market put stocker producers behind in securing grass cattle inventory and thus placed them in a situation where they had to get cattle purchased. The price of 450 pound steers has increased $25 per hundredweight in March while 550 pound steer prices increased $24 per hundredweight over the same time period. Similarly, the price of 450 and 550 pound heifers has increased $18 and $16 per hundredweight respectively through the month of March.

This week’s prices helped a few cow-calf producers realize record profits, but calf prices are not anticipated to hold at the stated levels as the market moves into April and May. Alternatively, stocker producers may find it difficult to pencil a profit on cattle purchased this week unless feeder cattle prices continue strengthening through the summer.

Some stocker producers may benefit from delaying calf purchase further into the spring months as calf prices tend to moderate in spring and through the summer months. Most feeder cattle futures contract prices have increased about $20 since the end of February, but that does not mean producers can guarantee a profit using price risk management. The uncertainty of returning a profit or the inability to pencil a profit may mean a few stocker producers sit this one out on the sidelines until the spring highs in calf prices subside.

The March cattle on feed report for feedlots with a 1000 head or more capacity indicated cattle and calves on feed as of March 1, 2015 totaled 10.66 million head, down 0.5% from a year ago, which is consistent with pre-report estimates. February placements in feedlots totaled 1.52 million head, down 8.1% from a year ago with the pre-report estimate average expecting placements down 7.0%. February marketing’s totaled 1.52 million head down 2.1% from 2014 while the pre-report estimate expectation was down 2.6%. Placements on feed by weight: under 700 pounds down 16.7%, 700 to 799 pounds down 7.2%, and 800 pounds and over up 2.9%.

TECHNICALLY SPEAKING: Based on Thursday’s closing prices, April live cattle closed at $158.00. Support is at $156.79, then $154.69. Resistance is at $158.89, then $160.99. The RSI is 60.69. June live cattle closed at $150.23. Support is at $148.84, then $146.67. Resistance is at $151.22 then $153.59. The RSI is 62.19. August live cattle closed at $147.53. Support is at $146.40, then $146.28. Resistance is at $147.55, then $147.75. The RSI is 61.45. March feeders closed at $214.05. Support is at $213.50, then $212.43. Resistance is at $214.58, then $215.65. The RSI is 61.87. April feeders closed at $216.02. Support is at $214.27, then $211.27. Resistance is at $217.27 then $220.27. The RSI is 66.07. May feeders closed at $215.68. Support is at $213.43, then $208.93. Resistance is at $217.18 then $221.00. The RSI is 66.56. Friday’s closing prices were as follows: Live/fed cattle – April $158.35 0.35; June $150.48 0.25; August $148.10 0.58; Feeder cattle - March $214.88 0.83; April $216.20 0.18; May $215.40 -0.28; August $216.08 -0.43. May corn closed at $3.85 up $0.12 from Thursday.