Market Highlights: Trade Concerns Haven't Slowed Beef Exports
FED CATTLE: Fed cattle traded steady compared to a week ago on a live basis. Prices on a live basis were mainly $126 to $127 while dressed prices were mainly $203 to $204. The 5-area weighted average prices thru Thursday were $126.76 live, down $0.04 from last week and $203.84 dressed, down $0.45 from a week ago. A year ago prices were $125.25 live and $201.57 dressed.
Cattle feeders and packers started trading cattle and dollars early this week as margins for both parties remain positive. The futures market did very little early in the week to show a price direction which likely had both parties eager to take their positive margins to the bank instead of waiting each other out to see what could happen. Cattle feeders will find it difficult to push fed cattle prices higher moving through the spring as the market is likely to have a contraseasonal tendency this year.
The futures market is telling cattle feeders to sell inventory today because prices tomorrow are going to be lower. This marketing strategy may be worth considering for spring marketings.
BEEF CUTOUT: At midday Friday, the Choice cutout was $222.76 up $0.74 from Thursday and up $1.86 from last Friday. The Select cutout was $217.91 up $1.13 from Thursday and up $3.33 from last Friday. The Choice Select spread was $6.71 compared to $8.18 a week ago.
Spot market beef prices have been the highlight of the cattle industry the past few weeks. The market has certainly started showing some of the signs of grilling demand, but better yet, the market has been showing signs of strong beef demand. The strong beef demand is not only coming from the domestic market but also from the international market as exports continue to be strong.
Beef exports in January totaled 105,486 metric tons which is a 9 percent increase from January one year ago. Not only did beef export volume increase, beef export value increased 21 percent compared to the same month last year and totaled $624.4 million. This means that exports in January accounted for 12.4 percent of January beef production. January exports are a good sign of maintaining growth in the beef export market.
There are some international issues lurking that could hamper the market, but nothing has slowed the market. Packers may have to be innovative in coming months to keep wholesale beef prices elevated.
OUTLOOK: Feeder cattle futures have been on a steady decline the past three weeks with losses on most contracts ranging from $6 to $9 during that time period. The current explanation for the decline is that feeder cattle futures are following live cattle futures. Is this the pressure that has been talked about by market analysts since last fall? It appears the market is in a bit of a correction mode as feeder cattle futures contracts have been tracing their steps back to early January lows.
The next big question is if the market will continue tracing its steps to the December low. There is no way to tell at this time how low prices will go, but there is strong support at the December lows which means prices should not push lower than December lows. Readers of this article should not take the previous statement as a death sentence in the cattle markets. However, producers should understand and make note that there is downward price pressure and it could persist.
Some producers may be questioning what is being said here as some producers have been experiencing stronger cattle prices. The market has seen some divergence as it is related to freshly weaned calves and feeder cattle. The calf market has really started gearing up as grass fever is on many stocker producers’ minds.
Lightweight calf prices on Tennessee weekly auctions are $18 per hundredweight higher than the start of the year. Alternatively, the yearling market has started to experience some softening in the past few weeks. Based on Tennessee weekly auction data, yearling prices are $9 per hundredweight higher than the start of the year.
Though yearling cattle prices are higher than the start of the year, the market has started to slow with increased cattle on feed numbers and increased beef production. It may be the third quarter of the year before significant price support is witnessed in the feeder cattle market.
ASK ANDREW, TN THINK TANK: Several questions have been filtering in concerning a survey that was recently administered by me and a group of researchers in the Department of Agricultural and Resource Economics. The survey was developed so we could get a better understanding of the types of pasture being utilized by producers, grazing management strategies being utilized, and to evaluate incentives for producers to diversify grass species across the operation. In less words, we are trying to determine if producers are utilizing cool and warm season forages to manage risk in the operation and if so what benefits they are experiencing from forage specie diversification. If producers are not using both warm season and cool season forages, we are trying to determine what incentives are necessary to induce inclusion of multiple forage species. A link to the survey was sent via email on March 2nd. If readers of this article received that email, we would greatly appreciate your input.
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 $123.13 +1.35; June $114.30 +1.03; August $111.65 +0.40; Feeder cattle –March $142.53 +0.78; April $143.15 +0.15; May $144.65 +0.20; August $149.75 -0.23; March corn closed at $3.83 down $0.03 from Thursday.
