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Market Highlights: Futures Look Bright

June 10, 2014
Stocker Cattle Grass
The cattle futures market looks bright.   

The cattle futures market looks bright.

By: Andrew P. Griffith, University of Tennessee

FED CATTLE: Fed cattle traded steady to $1 higher on a live basis compared to last week. Prices on a live basis were mainly $145 while dressed trade was not well developed at press. The 5-area weighted average prices thru Thursday were $145.13 live, up $0.97 from last week and $231.84 dressed, up $1.08 from a week ago. A year ago prices were $123.40 live and $195.80 dressed.

The strength in the futures market has cattle feeders pushing for higher prices this week. However, packers are holding out because the beef market is seasonally softening, and it is expected to do so through the heat of the summer.

Slaughter

The leverage has been shifting to packers for several weeks as the market ready supply of cattle has been seasonally increasing. However, feedlot managers are willing to take a few risks at this point and push for higher prices, because cattle marketings are fairly current and the year-over-year supply is rather tight. Feedlot marketings are current do to previously high prices pulling some cattle forward even when packers were slowing chain speeds to support cutout prices.

BEEF CUTOUT: At midday Friday, the Choice cutout was $229.94 down $1.05 from Thursday and down $3.38 from last Friday. The Select cutout was $221.16 down $0.73 from Thursday and down $1.58 from last Friday. The Choice Select spread was $8.78 compared to $10.58 a week ago.

Beef markets sizzled through the cold weather and it appears they are ready to fizzle during the summer heat. Choice and Select beef cutout prices showed signs of strength since setting records earlier in the year, but they were not able to match such prices during the time period when beef demand is traditionally its strongest.

Boxed Beef

Some late Father’s Day purchases likely helped keep beef prices supported immediately following Memorial Day. Similarly, it likely provided some support this week, but it will be difficult for packers to keep prices elevated with the heat of summer and seasonally increasing slaughter rates. It is not surprising beef prices could not outperform record prices. However, it is surprising the strength of Select beef relative to Choice beef.

The Choice Select spread normally widens during May and early June before narrowing during summer. However, the spread stagnated during that time period. Part of this is due to an increase in beef grading Choice or better while some of it is likely due to consumers trading down to lower quality but more affordable beef.

TENNESSEE AUCTIONS: On Tennessee auctions this week compared to a week ago steers and bulls were steady to $2 higher. Heifers were steady to $3 higher. Slaughter cows and bulls were steady to $2 higher. Average receipts per sale were 764 head on 12 sales compared to 590 head on 10 sales last week and 630 head on 10 sales last year.

Tennessee

TrendsOUTLOOK: The local cash feeder cattle market has showed signs of reaching a summer lull, but the uptrend in feeder cattle futures has allowed the cash market to continue marching forward. August through November feeder cattle futures have all exceeded the $200 per hundredweight mark which was largely thought of as a resistance point, but it appears feedlots are willing to pay up to fill the pens. When supplies of feeder cattle are tight, feedlots are very competitive in placing calves in the pens and cash and futures prices are reflective of this competitive nature. This competitive nature has resulted in calf and feeder cattle markets failure to follow normal seasonal tendencies which can increase the complexity of the marketing strategy for many producers.

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