Market Highlights: Cattle Prices Slide

June 30, 2015 10:14 AM
 
Market Highlights: Cattle Prices Slide

Cattle prices fall while beef prices teeter-totter.​
By: Andrew P. Griffith, University of Tennessee

FED CATTLE: Fed cattle traded $2 lower on a live basis compared to a week ago. Live prices were mainly $148 while dressed trade was mainly $238 to $240. The 5-area weighted average prices thru Thursday were $148.68 live, down $2.61 from last week and $238.01 dressed, down $2.19 from a week ago. A year ago prices were $151.35 live and $242.36 dressed.

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Based on weekly weighted average fed cattle prices, this is the first week since September 2013 where the fed cattle market experienced a year over year price decline.

The last time year ago prices were higher than the same week prices in the current period was just prior to sequestration which occurred in October of 2013. Since that time, the fed cattle market made a steady march up the price chart all the way through the end of 2014. Since the end of 2014, live cattle prices actually have a steady to downward price trend through the first six months of 2015.

The downward price trend has become more prevalent in the past three months. Live cattle prices have declined more than $13 the past seven weeks and nearly $19 since the first week of April. Since April, a 1,380 pound steer has lost $260 worth of revenue due to output price alone which wipes out profits.
 
BEEF CUTOUT: At midday Friday, the Choice cutout was $254.53 down $0.63 from Thursday and up $3.69 from last Friday. The Select cutout was $249.68 down $0.45 from Thursday and up $3.89 from last Friday. The Choice Select spread was $4.85 compared to $5.05 a week ago.

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As Independence Day quickly approaches, beef is likely experiencing its last shot of support until Labor Day purchases. Most grocers and restaurants have already finished their purchases for the holiday, but they may have to restock some of the inventory following the long holiday weekend.

Meat proteins have met significant resistance in 2015 relative to 2014. The strength of the dollar relative to other currencies has put a damper on some export markets while the value of the dollar in conjunction with record U.S. beef prices has slowed other export markets.

Commercial beef production through May was down 4.7 percent compared to the same time period one year ago. Alternatively, commercial pork production has increased 5.6 percent while chicken production has increased 3.8 percent the first five months of 2015 compared to the same time period a year earlier.

Increased production of competing meats will result in lower prices relative to beef. One thing that could support beef would be if the broiler industry is hit by highly pathogenic avian influenza this fall during migration.

OUTLOOK: Feeder cattle prices were steady to firm this week across weekly auction markets while calf prices softened. How long feeder cattle prices will maintain current price levels is a major unknown especially with the limit lower move Thursday on feeder cattle futures.

Fed cattle prices normally soften during the heat of summer but prices have declined more than many industry experts expected. The fed cattle price decline will undoubtedly put pressure on feeder cattle prices. Additionally, corn prices have started a quick ascent with more than a 40 cent per bushel price increase on the December contract in the past two weeks which will put downward pressure on calf and feeder cattle prices.

It sounds like the odds are stacked against cash feeder cattle prices with the decline in feeder cattle futures, the decline in fed cattle prices, and the rising corn prices. However, the cash price for feeder cattle has not been as responsive the past six to twelve months to price movements related to the futures market.

If feeder cattle futures continue to decline then it is almost certain cash feeder cattle prices will decline, but cash prices are not likely to be as volatile as futures market prices. It is important to remember that feeder cattle prices generally reach their yearly apex between the end of July and the first couple of weeks of September. Thus, seasonality is on the side of feeder cattle producers the next few months.

Producers planning to market calves in the fall may want to consider some type of price protection such as Livestock Risk Protection Insurance, futures hedge or forward pricing, because there have been some signals for the fall market to be soft relative to today’s market price. This does not mean the bottom will fall out of prices this fall, it just means that producers should be prepared to see slightly softer prices than current prices and much lower prices than year ago prices.

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ASK ANDREW, TN THINK TANK: Several producers have asked questions regarding THE Beef Cattle fIRM which is a record keeping software for cow-calf producers developed at the University of Tennessee Institute of Agriculture. The software is a tool to maintain individual cow, bull, and calf performance, sale information, and inventory records. The program is primarily a production record keeping system that allows several different reports to be compiled with the click of a button. However, if additional analysis is desired, users of the program can import and export data in a spreadsheet. For more information concerning the program, producers can visit THE Beef Cattle fIRM page on our site where they will find functions of the program, computer system requirements, and cost of the program. Additionally, the website contains videos of producers who have been successful in using the software program and how they use it to keep records for their operations.

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 –June $148.40 -0.10; August $148.53 -0.05; October $151.00 -0.10; Feeder cattle - August $217.25 -1.80; September $215.90 -1.38; October $214.60 -1.10; November $213.50 -0.65; July corn closed at $3.85 up $0.09 from Thursday.

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