Market Highlights: Variety Meats Helping Increase Beef Export Values

FED CATTLE: Fed cattle traded steady compared to last week on a live basis. Live prices were mainly $128 while dressed prices were mainly $205.

The 5-area weighted average prices thru Thursday were $128.10 live, up $0.10 from last week and $204.96 dressed, up $2.45 from a week ago. A year ago prices were $126.76 live and $203.84 dressed.

Packers and feedlot managers found a way this week to start trading cattle before the eleventh hour as light trade occurred on Thursday with more business on Friday. Cattle feeders were not able to push prices higher this week, but packers were willing to pay steady money.

Live cattle continue to trade with a negative basis compared to the April contract but there was some narrowing of the basis this week with softer live cattle futures. The seasonal trend in the cash market would tend to say there is still upside in the finished cattle market, and there may be a few dollars left. However, the wind appears to have been taken out of the sails the past couple of weeks with cash prices failing to push closer to $130.

BEEF CUTOUT: At midday Friday, the Choice cutout was $226.44 up $0.40 from Thursday and up $5.47 from last Friday. The Select cutout was $218.93 up $0.39 from Thursday and up $2.24 from last Friday. The Choice Select spread was $7.51 compared to $4.28 a week ago.

Beef exports in 2018 totaled 2.30 billion pounds which is a 9.9 percent increase compared to 2017 beef exports. These beef exports were valued at $7.44 billion which represents a 16.4 percent increase in beef export value relative to 2017. Thus, the average value of beef exports in 2018 was $3.24 per pound of beef.

Beef muscle cuts are not the only thing exported. Beef variety meats are also a part of the export equation. In 2018, beef variety meat exports totaled 686 million pounds and were valued at $890 million. This represented a 1.3 percent decline in quantity but a 1.7 percent increase in value compared to 2017.

The key export destinations for U.S. beef continue to be Japan, South Korea, Mexico, Hong Kong and Canada. South Korea imported 32 percent more beef on a quantity basis and 46 percent more on a value basis in 2018 than in 2017 which was the biggest growth market in 2018. The top destinations for beef variety meats include Mexico, Egypt, and Japan. This information confirms the strength of international demand for U.S. beef.

OUTLOOK: Local cattle markets continued to demonstrate the strength in the calf and slaughter cow markets this week. Based on Tennessee weekly auction market averages, steer prices were $1 to $4 higher compared to last week while heifer prices were $1 to $5 higher than a week ago. Slaughter cow and slaughter bull prices were both $1 higher this week compared to last week.

With many producers beginning to run low on hay resources, this may be the time to take advantage of marketing cows that need to exit the operation. A producer has the opportunity to reduce hay needs by marketing a few mouths that are consuming expensive hay while also capitalizing on favorable slaughter cow prices. At this point, slaughter cow prices may increase a few more dollars per hundredweight, but it is not likely to be a large enough increase to offset the cost of feeding the cow if she is in a body condition score of 5 or higher.

Changing gears to look at calf prices, grass cattle prices made a strong run through the month of February with 550 pound steer prices moving from $142 per hundredweight to $152 per hundredweight. The $55 gain per head was welcomed by sellers, but the average price of these animals stalled and has remained steady for three consecutive weeks based on reported weekly auctions in Tennessee. The stagnation that has occurred in the calf market is likely brought on by the less than stellar feeder cattle market that has been dismal since November. The calf market still has the potential to reach the $160 price mark, but this will only occur if the cash feeder cattle market displays some life in the next few weeks.

At this moment in time, August futures are showing a little promise in the feeder cattle market while the March contract weighs heavily on the mind of market participants. Is it worth trying to add weight with cash prices of feeder cattle lagging or should the producer bear the risk? There is no good answer to this question until the cash feeder cattle market shows a direction.

The February cattle on feed report for feedlots with a 1000 head or more capacity indicated cattle and calves on feed as of February 1, 2019 totaled 11.68 million head, up 0.4% compared to a year ago, with the pre-report estimate average expecting an increase of 0.2%. January placements in feedlots totaled 1.96 million head, down 5.3% from a year ago with the pre-report estimate average expecting placements down 6.5%. January marketing’s totaled 1.91 million head up 2.8% from 2018 with pre-report estimates expecting a 2.4% increase in marketings. Placements on feed by weight: under 700 pounds down 1.2%, 700 to 799 pounds down 11.4%, 800 to 899 pounds up 0.5%, and 900 pounds and over down 15.0%.

ASK ANDREW, TN THINK TANK: The Tennessee Forage and Grassland Council meeting that was conducted in Jackson this week turned out to be a very informative meeting with good discussion. There were several questions asked with several related to reproduction. Many times, producers do not know if they are hitting the mark with pregnancy rates, calving rates and weaning rates because they only have their information in which to compare. As a benchmark, cow-calf producers should be shooting for at least a 95 percent pregnancy rate, a 94 percent calving rate, and a 90 percent weaning rate. These reproduction benchmarks are a good mark to shoot for in the near term. After meeting these benchmarks, producers should be trying to exceed these points if it is not costing an exorbitant amount in dollars and labor. A few practices that will help achieve these benchmarks include a short defined calving season, pregnancy evaluation shortly after the breeding season, and a strict culling regiment.

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 $129.68 +0.73; June $120.95 +0.60; August $117.18 +0.65; Feeder cattle –March $143.93 +1.03; April $147.70 +1.70; May $148.53 +1.45; August $152.70 +0.90; March corn closed at $3.55 down $0.01 from Thursday.