Market Highlights: Caution Ahead for Beef Producers Following Planting Report

April 5, 2016 09:28 AM

By: Andrew P. Griffith, University of Tennessee

FED CATTLE: Fed cattle trade was $3 lower than a week ago on a live basis. Live prices were mainly $133 while dressed trade was mainly $214 to $215. The 5-area weighted average prices thru Thursday were $133.12 live, down $2.89 from last week and $214.84 dressed, down $2.86 from a week ago. A year ago prices were $166.67 live and $264.72 dressed.


Live cattle prices once again came under pressure this week. Cattle feeders had been steadily moving toward positive margins through February and the first half of March but the past two weeks have put them deeper in the red on closeouts. The additional losses just add insult to injury as cattle feeders have continued to suffer from the drastic price decline that began during the summer of 2015.

The future continues to look brighter for cattle feeders as feeder cattle prices have moderated and feed prices remain low. However, positive margins cannot get here soon enough for feedlot managers as the losses will have to be recouped one way or another. If the seasonal trend is intact then positive margins may be on their way in late spring.

BEEF CUTOUT: At midday Friday, the Choice cutout was $219.85 down $1.14 from Thursday and down $6.39 from last Friday. The Select cutout was $208.11 down $2.37 from Thursday and down $8.34 from last Friday. The Choice Select spread was $11.74 compared to $9.79 a week ago.


The wholesale beef price correction continued this week as both the Choice and Select box prices declined relative to one week ago. The unseasonable price climb during February and March has proved to be too much as packers have had to lower prices the past couple of weeks to continue moving beef products. What effect this price movement will have on the seasonal price increase that is generally experienced in late April and May is yet to be determined, but it does have the potential to put a damper on prices as the market heads to the summer grilling season.

One aspect that is in tune with the seasonal tendency is the widening of the Choice Select spread. Even though boxed beef prices have been on the decline the past couple of weeks, the Select cutout has been declining at a more rapid pace than the Choice cutout which has resulted in the Choice Select spread widening. This is indicative of the grilling season as consumers look for a higher quality grade cut to throw on the grill. The market may have to wait a couple of weeks before wholesale beef prices make a run.

OUTLOOK: Lightweight calf prices inched down this week as feeder cattle prices found a foothold. The decline in lightweight calf prices this week is most likely the beginning of the decline that will persist through the summer and fall of the year.

Most stocker producers have been hard at it trying to secure calves to place on lush green grass, but that demand is starting to wane as other farm work will soon take precedence over purchasing and treating calves. The seasonal tendency will result in these lightweight calf prices falling drastically the next seven or eight months with the biggest decline starting towards the end of May. Thus, producers looking to market lightweight calves have more than likely missed the spring price peak, but they could still capitalize on strong prices by marketing in the next couple of months. Marketing over the next couple of months may actually result in a more profitable decision for some producers if the gains from the added weight during the time period exceed the losses due to the anticipated price decline.

Alternatively, feeder cattle were supported this week as prices increased to a small degree. Feeder cattle futures received a strong boost on Thursday following USDA’s prospective plantings report for grains and oilseeds. The prospective plantings survey estimated corn acres at 93.6 million acres which is 5.6 million acres more than last year. The report was extremely bearish for corn which caused corn futures to plummet and in return resulted in feeder cattle prices strengthening on Thursday.

Producers are encouraged to be cautious following the report however. The survey for this report is conducted four to six weeks prior to the Corn Belt ever putting a planter in the field so several things can negatively impact actual plantings and thus commodity prices. Any negative news delivered concerning corn acreage or corn yield in the coming months will likely result in corn prices strengthening and feeder cattle prices coming under pressure. Producers should stay abreast of the situation as the growing season progresses in order to make informed cattle marketing decisions.


ASK ANDREW, TN THINK TANK: A question was raised this week concerning multiple producers grouping cattle to market truckloads of feeder cattle (48,000 to 50,000 lb.). The question was in relation to how the logistics should work. First, producers considering marketing feeder cattle together should have similar breeding/calving seasons, have similar breed of sires and genetics, use similar health programs, and have a formal agreement that they will market cattle together. The logistics can work a number of ways, but it is also encouraged that the cattle be commingled a few weeks prior to the scheduled date of delivery. Cattle can either be picked up on farm if one of the producers has a facility capable of loading a cattle hauler or the producers can work with a local sale barn or some other individual with appropriate facilities.

Please send questions and comments to 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 $132.98 0.05; June $123.58 -0.45; August $119.58 -0.60; Feeder cattle - April $156.20 -0.88; May $154.70 -0.55; August $155.00 -0.08; September $153.65 -0.05; May corn closed at $3.54 up $0.03 from Thursday.


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