Market Highlights: Have Calf Prices Peaked?
It may be likely that the spring calf market has peaked.
By: Andrew P. Griffith, University of Tennessee
FED CATTLE: Fed cattle trade was not well established at time of publishing. Bid prices on a live basis were $160 to $162 while ask prices were $165 to $166. A stronger market is expected. The 5-area weighted average prices thru Thursday were $163.98 live, up $2.48 from last week and $260.00 dressed, up $4.72 from a week ago. A year ago prices were $152.26 live and $243.48 dressed.
Cattle feeders continue to hold out for higher prices as April live cattle futures traded more than $4 higher than last Friday and have increased more than $9 in the past two weeks. The increase in futures prices have fueled the fire for continued strength in the live cattle market.
Packers on the other hand have little interest in purchasing cattle at such levels. Though packers seem steadfast in toeing the line and moderating fed cattle prices, all indications are for the market to continue strengthening and further eroding packer margins.
Cattle feeders will maintain leverage over packers at a minimum until late spring or early summer which may provide cattle feeders an opportunity to make a little profit.
BEEF CUTOUT: At midday Friday, the Choice cutout was $250.43 down $0.24 from Thursday and up $6.05 from last Friday. The Select cutout was $246.62 down $0.34 from Thursday and up $2.04 from last Friday. The Choice Select spread was $3.81 compared to -$0.18 a week ago.
Packers continue to closely monitor chain speeds to manage beef cutout prices. They have again slowed chain speeds to a crawl as margins are being squeezed because of increasing fed cattle prices. Thus, their only recourse to capture margins is to try to push cutout prices higher. There is some indication that cutout prices may make a run this spring as retailers and food service participants begin making purchases for the summer grilling season, but the magnitude of such a run is extremely uncertain.
Consumers seek Choice quality middle meats for summer grilling purposes, but some consumers have been forced to trade down to ground beef or competing proteins. Consumers will continue to face record beef prices while pork and poultry prices will remain low relative to the price of beef. Demand for beef was strong throughout 2014, and there is no indication 2015 should be much different. Consumers will vote with their dollar just as they have always done. Beef demand in 2015 may shed some additional light on consumers’ devotion to beef.
TENNESSEE AUCTIONS: On Tennessee auctions this week compared to a week ago feeder steers were $3 to $8 lower while feeder bulls steady to $2 higher. Heifers were $3 to $4 lower. Slaughter cows and bulls were mostly steady to $2 higher. Average receipts per sale were 1,177 head on 9 sales compared to 944 head on 9 sales last week and 700 head on 12 sales last year.
OUTLOOK: Auction market activity continued to pick up this week as several days of warm and precipitation free weather spurred producers to gather calves and ship them to town. Cattle buyers were prepared for the rush with cash in hand and pastures ready to receive lightweight calves.
The past couple of weeks have provided many stocker cattle producers the opportunity to secure grazing inventory for the spring and summer. Though many producers would have liked to have purchased calves several weeks earlier, they now have a few animals to begin harvesting early forage production. The expectation of favorable weather conditions for moving cattle next week should continue to support spring calf marketings in the short term.
The question now is if the market has already experienced its spring peak in lightweight calf prices. Steers weighing 525 pounds lost $6 per hundredweight from the previous week while 625 pound steers fell $5 per hundredweight. Similarly, heifers weighing 525 and 625 pounds fell $3 and $4 per hundredweight respectively.
It may be likely that the spring calf market has peaked. The seasonal tendency for 500 to 600 pound steers is for prices to peak in March to early April and then decline throughout the year. Based on the last ten years of price data in Tennessee, 500 to 600 pound steers generally experience a 13 percent price decline from March to November which could result in 525 pound steers falling to $235 per hundredweight.
Same weight heifers on the other hand generally experience their price peak in April or May and then fall off about 13 percent by November. If heifer prices have already reached their apex then that may put 500 to 600 pound heifer prices near $206 per hundredweight.
The use of seasonal price trends alone is not a sufficient means of determining future prices. However, cattle prices have strong seasonal influences from the standpoint of seasonal supply and demand of calves, feeder cattle, fed cattle and beef. The supply and demand tendencies along with external factors greatly influence prices paid and received.
TECHNICALLY SPEAKING: Based on Thursday’s closing prices, April live cattle closed at $161.68. Support is at $161.02, then $159.77. Resistance is at $162.27, then $163.52. The RSI is 66.39. June live cattle closed at $152.00. Support is at $151.43, then $150.15. Resistance is at $152.70 then $153.97. The RSI is 63.59. August live cattle closed at $149.05. Support is at $149.00, then $148.10. Resistance is at $149.60, then $150.33. The RSI is 62.22. April feeders closed at $217.36. Support is at $215.87, then $213.02. Resistance is at $218.72 then $221.57. The RSI is 64.77. May feeders closed at $215.78. Support is at $215.00, then $213.43. Resistance is at $216.13 then $217.55. The RSI is 62.72. August feeders closed at $217.20. Support is at $216.50, then $216.08. Resistance is at $217.75 then $219.25. The RSI is 62.85. Friday’s closing prices were as follows: Live/fed cattle – April $162.63 0.95; June $152.98 0.98; August $149.95 0.90; Feeder cattle - April $219.28 2.05; May $218.13 2.35; August $219.23 2.03; September $218.10 1.83. May corn closed at $3.91 down $0.01 from Thursday.
