Beef and cattle prices both fall.
By: Andrew P. Griffith, University of Tennessee
FED CATTLE: Fed cattle traded $2 lower on a live basis compared to a week ago. Prices on a live basis were $158 to $160 while dressed prices were between $250 and $253. The 5-area weighted average prices thru Thursday were $158.91 live, down $3.80 from last week and $252.14 dressed, down $3.82 from a week ago. A year ago prices were $146.68 live and $236.00 dressed.
Cash cattle traded early this week as the nearby live cattle futures softened early on and feedlot managers thought there was no direction but down. However, futures contracts turned quickly on Thursday and started making advances.
The increased futures contract price led to higher asking prices by Friday, but packers seemed to have little interest in bidding very many cattle higher. The opposite directions of the cash and futures market this week has essentially narrowed the basis and made the basis practically nil to slightly positive. Cash cattle prices are expected to continue softening through the summer as the quantity of market ready cattle increases and as temperatures rise.
BEEF CUTOUT: At midday Friday, the Choice cutout was $258.78 down $1.23 from Thursday and up $1.09 from last Friday. The Select cutout was $249.28 down $1.76 from Thursday and down $2.17 from last Friday. The Choice Select spread was $9.49 compared to $6.25 a week ago.
Packers have gained leverage over cattle feeders the past several weeks and will likely maintain that leverage for several weeks to come. The shift in leverage has also shifted profits from cattle feeders to packers while cattle feeders are beginning to struggle with closeouts written in red ink.
Beef packers have had numerous weeks of losses as they continued paying higher prices for fed cattle. The high fed cattle price forced packers to slow chain speeds considerably in order to manage the quantity of beef product available and support wholesale beef prices. However, as the number of market ready finished cattle seasonally increases, cattle feeders are being forced to move more animals at a lower price than in previous weeks.
The reduction in fed cattle prices and the ability of packers to maintain relatively strong beef cutout prices has resulted in a more favorable situation for beef packers. The Choice Select spread has shown the desire to widen the past few weeks, and it is likely it will do so as the market heads into the summer grilling season.
TENNESSEE AUCTIONS: On Tennessee auctions this week compared to a week ago steers and bulls under 500 pounds were $8 to $11 lower with those over 500 pounds $3 to $6 lower. Heifers were steady to $6 lower. Slaughter cows were steady to $4 higher while bulls were steady to $1 lower. Average receipts per sale were 591 head on 10 sales compared to 688 head on 8 sales last week and 625 head on 12 sales last year.
OUTLOOK: It now seems certain the spring price run peaked in the third week of March. Based on Tennessee weekly auction average prices, steers weighing between 400 and 500 pounds have lost $19 per hundredweight since the week ending March 20th while 600 to 700 pound steers have only experienced a $6 per hundredweight price decline during the same time period.
The cash price movement being witnessed in 2015 is a common seasonal price adjustment that did not occur in either 2013 or 2014. The calf market is expected to continue declining through the summer and into the fall while the yearling market is expected to remain steady and possibly even strengthen in mid to late summer.
Alternatively, heifer prices have done a tremendous job of maintaining prices since the March time period. Heifers weighing between 400 and 500 pounds have only lost $6 per hundredweight since March 20 while 600 to 700 pound heifer prices have only declined $2 per hundredweight during the same time period. The market appears to be paying producers to continue putting weight on heifers while it is not nearly as favorable for steer and bull calves.
The one market that seems certain to have a strong May and June is the slaughter cow market. Slaughter cow prices generally peak in May and June because there is a low supply of cows coming to market and there is high demand for lean beef due to grilling season. The one factor that could hold prices of slaughter cows in check is dairy cow liquidation. Milk prices have tumbled since the first of the year which has resulted in increased culling at dairies.
The April cattle on feed report for feedlots with a 1000 head or more capacity indicated cattle and calves on feed as of April 1, 2015 totaled 10.80 million head, no change from a year ago, while the pre-report estimate average was down 1.0%. March placements in feedlots totaled 1.81 million head, up 0.4% from a year ago with the pre-report estimate average expecting placements down 4.4%. March marketing’s totaled 1.63 million head down 1.7% from 2014 while the pre-report estimate expectation was down 1.9%. Placements on feed by weight: under 600 pounds down 14.1%, 600 to 799 pounds down 4.2%, and 800 pounds and over up 16.1%.
TECHNICALLY SPEAKING: Based on Thursday’s closing prices, April live cattle closed at $159.30. Support is at $157.37, then $154.47. Resistance is at $160.27, then $163.17. The RSI is 52.30. June live cattle closed at $149.02. Support is at $147.06, then $144.11. Resistance is at $150.01 then $152.96. The RSI is 49.45. August live cattle closed at $147.85. Support is at $145.50, then $144.85. Resistance is at $147.98, then $149.00. The RSI is 52.39. April feeders closed at $214.27. Support is at $212.93, then $210.88. Resistance is at $214.98 then $217.03. The RSI is 51.61. May feeders closed at $211.25. Support is at $208.45, then $204.25. Resistance is at $212.65 then $216.85. The RSI is 50.74. August feeders closed at $212.95. Support is at $212.20, then $208.45. Resistance is at $214.23 then $214.68. The RSI is 51.01. Friday’s closing prices were as follows: Live/fed cattle – April $161.18 1.88; June $151.20 2.18; August $149.73 1.88; Feeder cattle - April $214.85 0.58; May $214.08 2.83; August $215.68 2.73; September $214.70 2.73. May corn closed at $3.65 down $0.06 from Thursday.