Market Highlights: Don't Panic About Recent Cattle Price Volatility
By: Andrew P. Griffith, University of Tennessee
FED CATTLE: Fed cattle traded $2 lower compared to last week on a live basis. Live prices were mainly $126 to $127 while dressed prices were mainly $205 to $206.
The 5-area weighted average prices thru Thursday were $126.34 live, down $3.66 from last week and $205.60 dressed, down $1.99 from a week ago. A year ago prices were $120.97 live and $192.33 dressed.
It turned out to be another tough week for cattle feeders as finished cattle prices took a strong blow. The cash price plummet was not expected, nor did many in the industry expect April live cattle futures to decline more than $2.50 since last Friday.
The waves or price fluctuations of the nearby futures contract should not incite panic among producers or industry participants. March is generally a month of soft beef demand which can lead to softer prices in the finished cattle market. Alternatively, April tends to bring optimism to the market from a beef demand standpoint and thus finished cattle. If the cattle market falters in April and May then producers may have a reason for concern.
BEEF CUTOUT: At midday Friday, the Choice cutout was $226.01 down $1.43 from Thursday and down $3.15 from last Friday. The Select cutout was $219.34 down $0.18 from Thursday and up $1.12 from last Friday. The Choice Select spread was $6.67 compared to $10.62 a week ago.
Wholesale Choice boxed beef prices declined for the first time in eight weeks which means the price of Choice beef increased from the beginning of February through last week before faltering to close out the month of March. During the price run, Choice beef prices increased $15 per hundredweight while Select box prices only increased $5 per hundredweight over the same time period.
Some of the price support in the beef market through the first quarter of 2019 could be considered artificial to some degree due to reduced steer slaughter. However, the other portion of the support is not a manipulation of production and quantity of beef supplied.
It is true supply and demand determining prices with lighter carcass weights that are a function of the tough feeding conditions across much of cattle feeding country and strong demand for high valued beef cuts. Middle meats have traded at or above year ago levels through the first quarter of the year. The chuck has likely been the most disappointing primal thus far and continues to restrain beef cutout values.
OUTLOOK: Tennessee auction markets had another strong run of cattle this week to follow up last week’s abnormally large run. The strong run of cattle the past couple of weeks is largely due to producers not having the ability to get cattle out of rained soaked pastures that have now been dry for two consecutive weeks. Though the run of cattle remained large, prices were a mixed bag.
Based on Tennessee weekly auction market price averages, steers weighing less than 600 pounds were $4 to $7 higher than last week while steers weighing 600 pounds or heavier were steady to $2 higher than a week ago. Similarly, heifer prices were steady to $3 higher compared to last week. Though the calf market was well supported, slaughter cow prices were $3 to $4 lower than last week while slaughter bull prices were $6 to $8 lower than a week ago.
The calf and feeder cattle markets continue displaying a lack of continuity as the calf market showed considerable strength while the feeder cattle market held the status quo. There does appear to be some optimism in the feeder cattle market as the August feeder cattle futures price is trading at an $11 premium to the April contract. What does this mean for the future? It means the cash price has a long way to go and a spring and summer to get there or the futures market is overvaluing feeder cattle. The educated guess at this point is that the cash price of feeder cattle will begin a strong advancement to the upside in the coming months to fall more in line with what is expected for live cattle.
Moving from feeder cattle to slaughter cows, the slaughter cow market has hit another bump in the road. The slaughter cow market painfully made its way through the late fall and winter marketing months before finding some semblance of normalcy in early March. However, it would appear someone swiftly and covertly let all the air out of the market.
ASK ANDREW, TN THINK TANK: An opportunity recently presented itself to visit with several young people ranging in age from elementary school to high school. This particular event provided an opportunity to share agriculture with these young folks and to make them aware of the vast array of occupations directly associated with agriculture. Going into an event such as this, it is difficult to know what to expect from the students and how they will perceive agriculture in general and potential educations and careers in agriculture. Sparing the details, the one thing that always caught the students’ attention was mentioning the word money. They all seemed to know it had some type of value. This concept is not new as people reading this place value on money and many others measure their success by how much money they make. I am guilty but not proud of it. Just think what this world would be like if people put as much effort into taking care of others as they put into making money that they cannot take with them. I guess I needed this short sermon today!
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 –April $125.70 -0.83; June $119.00 -0.63; August $115.68 -0.83; Feeder cattle –April $145.25 -0.70; May $148.78 -0.90; August $156.25 -0.60; September $157.73 -0.30; May corn closed at $3.57 down $0.18 from Thursday.
