Market Highlights: Sideways Cattle Futures
FED CATTLE: Fed cattle trade was not well established at press. Asking prices were $126 to $127 on a live basis while bid prices were $121 to $123.
The 5-area weighted average prices thru Thursday were $124.02 live, up $0.90 from last week and $198.52 dressed, down $0.07 from a week ago. A year ago prices were $127.00 live and $201.33 dressed.
The market has been kind to cattle feeders the past couple of months as finished cattle prices surged in December and then exceeded year ago levels in early January. However, some of the excitement was tempered as the stronger prices stalled and left finished cattle trading below year ago prices.
The stall in prices would not be as big of a deal if cattle were not being negatively impacted by feeding conditions, but many of the cattle being harvested have gone through muddy pens and tough weather. Live cattle futures would suggest prices will continue to move sideways into April, but untethered optimism holds the hope that prices will increase a few more dollars heading towards grilling season.
BEEF CUTOUT: At midday Friday, the Choice cutout was $215.71 down $1.00 from Thursday and up $1.64 from last Friday. The Select cutout was $211.04 down $0.49 from Thursday and down $2.14 from last Friday. The Choice Select spread was $4.67 compared to $0.89 a week ago.
The World Agricultural Supply and Demand Estimates report for February showed an expectation that 2018 U.S. beef production will total 26.864 billion pounds which is 75 million pounds less than the December projection. Despite the marginal decline in estimates from December, the February estimate for 2018 beef production still represents a 677 million pound increase from 2017 actual production while the 2019 projection is 27.61 billion pounds.
The February estimate for 2018 pork production was 26.32 billion pounds representing a 10 million pound increase from the December projection and a 736 million pound increase from 2017 pork production. The 2019 U.S. pork production estimate is 27.34 billion pounds. The U.S. poultry situation is not much different with 2018 production pegged at 48.967 billion pounds compared to 48.178 billion pounds in 2017 and a projection of 49.561 billion pounds in 2019. This information may seem unimportant to some, but the fact remains that a lot of meat is going to be produced in 2019. It has to move off shelves to support prices.
OUTLOOK: Cattle marketings in Tennessee were limited last week due to extremely cold temperatures and frozen precipitation which inhibited cattle producers from moving cattle. However, marketings picked up this week with dry weather and temperatures in the well above average category. Eight auctions were reported by market reporters in the current week with the average number of head marketed per sale being over 1,000 head. This number of head may seem small to some regions of the country, but many of the Tennessee livestock auction barns were glad to see such strong numbers.
Based on Tennessee weekly auction market averages, steer prices were unevenly steady compared to last week while heifer prices were $1 to $2 higher than the previous week. Slaughter cow prices have begun their seasonal ascent as they were $2 to $3 higher compared to a week ago while slaughter bull prices were steady compared to last week. Prices of calves, feeder cattle, and slaughter cows are in no way considered strong by those who are selling, but the prices are showing improvement which brings optimism to the industry.
The most favorable aspect of the market may be that seasonal price trends continue to work their way into the market which can aid producers in decision making because they can use seasonal expectations for purchasing and selling. This is important because seasonal trends for many classes of cattle were shot out of the air during the marketing years 2014 through 2016.
Despite the optimism in the cash market, there continues to be some trepidation in the futures market. The market has been moving sideways for three straight months and there is no sign of it breaking out in either direction. Moving from March through August, the seasonal expectation is priced in the market with the August feeder cattle futures trading $7 higher than the March contract. This does provide a little solace, but it does not provide many opportunities for price risk management.
ASK ANDREW, TN THINK TANK: Warm weather and sunshine have resulted in many pastures showing a few signs of greening as cool season forages have responded to favorable growing conditions. As advantageous as green grass can be to producer running short on hay, the first thought is to not jump the gun and turn cattle in on pasture that is not ready to graze. There are likely several acres of winter annuals that could stand some grazing pressure in the next couple of weeks, but perennial pastures are not ready to be grazed. This is mentioned by an agricultural economist because too much pressure on forages too early in the year could negatively impact overall forage production and could result in a producer having to purchase other feedstuffs to meet cattle nutrient requirements. One would be better off purchasing feed or hay resources in the near term and delaying grazing so the pasture can reach its full potential and provide more days of grazing.
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 $127.38 +1.08; April $127.93 +1.10; June $118.10 +0.95; Feeder cattle –March $144.10 +0.85; April $145.90 +1.03; May $146.90 +1.00; August $150.90 +0.83; March corn closed at $3.74 down $0.02 from Thursday.
