Cattle and beef prices continue to rise.
By: Andrew P. Griffith, University of Tennessee
FED CATTLE: Fed cattle traded steady on a live basis compared to a week ago. Prices were mainly $173 on a live basis while dressed trade was mainly $266 to $268. The 5-area weighted average prices thru Thursday were $171.96 live, up $2.96 from last week and $266.41 dressed, up $1.41 from a week ago. A year ago prices were $132.66 live and $209.49 dressed.
Fed cattle prices tried to push further ahead, but packers where having none of it. Record fed cattle prices have resulted in cattle feeders keeping cattle on feed to heavier weights because the profit margin is higher and the risk is lower than purchasing replacement feeder cattle. One reason cattle feeders can carry cattle to heavier weights is because there is no disincentive such as being docked for having too large of a carcass.
Packers have relaxed their stipulations on carcass weights due to short supply of cattle coming to market. Cattle feeders will continue to carry cattle to heavier weights as long as feed prices remain relatively inexpensive and feeder cattle prices remain at record levels compared to the price being received for fed cattle. Feedlots maintain leverage over the packer at this time.
BEEF CUTOUT: At midday Friday, the Choice cutout was $257.15 up $0.02 from Thursday and up $1.50 from last Friday. The Select cutout was $245.89 up $1.89 from Thursday and up $1.41 from last Friday. The Choice Select spread was $11.26 compared to $12.32 a week ago. The Choice and Select cutouts have been making a holiday charge the past five weeks as the Choice cutout has increased $10.11 over the five week period while the Select cutout price has increased $13.45 over the same time period.
The strong beef market can be mostly attributed to holiday buying of higher quality cuts such as the ribeye. However, traditional high valued cuts are not the only cuts driving the market as ground product demand remains strong.
Packers have been seeing red for a while now and continue to see it as fed cattle prices remain record high, but the steady increase in the cutout prices has reduced some of the losses to a more manageable magnitude. It will be difficult for packers to maintain such strong cutout prices through the end of the year, because retailers and restaurants will move away from beef items after the holiday season has passed. This means packers could continue losing large sums of money unless fed cattle prices take a dive in the near future which is not expected to happen.
TENNESSEE AUCTIONS: On Tennessee auctions this week compared to a week ago steers and bulls were $2 to $8 higher. Heifers were $4 to $7 higher. Slaughter cows were steady to $1 higher while bulls were $2 to $3 higher. Average receipts per sale were 804 head on 5 sales compared to 600 head on 11 sales last week and 380 head on 5 sales last year.
OUTLOOK: The holiday shortened week caused fewer cattle to move, but cattle that had wheels set beneath them continued to trade on a strong market. Many analysts believe the fall run of calves has about come to a close. However, there may be a few more calves out there that failed to make it to market due to a couple of weeks of inclement weather.
Many parts of the Southeast saw a couple of weather systems that dumped significant rainfall which often times causes problems for producers trying to get calves to market. Thus, it would not be surprising to see strong marketings the next couple of weeks before Christmas and the New Year holiday shut markets down until January.
Rainfall has been plentiful in the Southern Plains as well which should continue to support lightweight calf prices as wheat pasture is in great condition relative to many of the previous four or five years. Feeder cattle prices have remained strong as have all cattle prices. However, the feeding industry has overcapacity which has resulted in feedlot managers holding cattle longer and thus the cattle are being slaughtered at heavier weights.
This may sound somewhat negative to feeder cattle prices, but there are so few cattle ready to enter the feedlot relative to the availability of pen space that cattle feeders continue to demand more calves to be placed. Just as calf prices and feeder cattle prices have remained strong, so has slaughter cattle prices.
Increases in calf prices generally leads to heifer retention and keeping older cows an additional year or two. Sometimes the practice of keeping cows an additional year ends with the cow dying on the farm which can be an expensive risk. Thus, producers are encouraged to maintain their normal culling practices as it relates to the breeding herd.
Slaughter cow prices have remained contra-seasonally high which in today’s market means a 1200 pound market cow is worth nearly $1,300. The loss of one mature cow that was maintained instead of culled and sent to market could easily erase the profits of four or five other females in the herd.
TECHNICALLY SPEAKING: Based on Friday’s closing prices, December live cattle closed at $168.88. Support is at $168.41, then $167.61. Resistance is at $169.21 then $170.01. The RSI is 53.67. February live cattle closed at $169.23. Support is at $168.67, then $167.59. Resistance is at $169.74, then $170.82. The RSI is 51.94. April live cattle closed at $169.00. Support is at $168.30, then $168.25. Resistance is at $169.40, then $169.45. The RSI is 58.51. January feeders closed at $231.07. Support is at $230.14, then $228.32. Resistance is at $231.97 then $233.79. The RSI is 47.23. March feeders closed at $230.20. Support is at $229.12, then $227.39. Resistance is at $230.84, then $232.57. The RSI is 49.86. April feeders closed at $230.78. Support is at $230.25, then $229.95. Resistance is at $231.00 then $231.75. The RSI is 50.81. Friday’s closing prices were as follows: Live/fed cattle –December $168.88 -0.38; February $169.23 -0.45; April $169.00 0.70; Feeder cattle - January $231.08 0.58; March $230.20 0.85; April $230.78 0.83; May $230.85 0.90; December corn closed at $3.75 down $0.03 from Thursday.