Market Highlights: Hamburger Demand Helps Lean Beef Price Up

April 21, 2015 06:32 PM
 
Market Highlights: Hamburger Demand Helps Lean Beef Price Up

Hamburger demand has kept lean beef prices up, it has also kept cull cow and bull prices on the increase.
By: Andrew P. Griffith, University of Tennessee​

FED CATTLE: Fed cattle traded $2 to $3 lower on a live basis compared to a week ago. Prices on a live basis were$160 to $162 while dressed prices were around $260. The 5-area weighted average prices thru Thursday were $162.71 live, down $0.42 from last week and $255.96 dressed, down $8.05 from a week ago. A year ago prices were $147.08 live and $234.55 dressed.

Weakness is beginning to show up in the fed cattle market in both the cash market and the futures market. The April, June and August Live Cattle contracts all closed limit down on Friday as the cash market tumbled. The cash market continues to trade with a strong positive basis, but it appears the packers may be gaining leverage on cattle feeders.

The leverage transfer from feedlots to packers is likely due to the large number of cattle that will soon be market ready.

Slaughter is expected to pick up the next several weeks due to a seasonal increase in cattle coming off feed. This will continue to depress live cattle prices which will also result in lower feeder cattle prices in the near term. 

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BEEF CUTOUT: At midday Friday, the Choice cutout was $257.69 down $2.69 from Thursday and up $0.53 from last Friday. The Select cutout was $251.45 up $0.48 from Thursday and up $0.40 from last Friday. The Choice Select spread was $6.25 compared to $6.11 a week ago.

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Choice middle meats are beginning to dominate the beef cutout price and are expected to continue providing the bulk of the support through the summer grilling season. Choice grade rib and loin primal values have increased 21 to 22 percent since the first week of February while Choice grade chuck and round primal values have lost 3 to 4 percent during the same time period.

This is a seasonal shift from winter Crock Pot cooking to summer grilling. However, there was much speculation with regards to what consumers would be purchasing with beef prices remaining at record levels. Most of the thoughts revolve around consumers trading down to ground beef products or moving to competing meat products, both of which are viable options.

It is important to remember that most of the beef imported into the United States is lean manufacturing beef which goes into ground beef products. The desire for hamburgers is one reason lean beef prices have remained strong relative to previous years.

TENNESSEE AUCTIONS: On Tennessee auctions this week compared to a week ago steers and bulls under 500 pounds were $6 to $9 lower with those over 500 pounds $1 to $4 lower. Heifers were $4 to $9 lower. Slaughter cows were $1 higher while bulls were steady to $5 higher. Average receipts per sale were 771 head on 8 sales compared to 744 head on 9 sales last week and 592 head on 12 sales last year.

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OUTLOOK:
 There is never complete certainty in cattle markets, but it would seem the spring price for lightweight calves has reached its apex and has begun its slow decline through the summer and fall. There continues to be a number of stocker producers who would like to secure a few more calves to finish out their grass cattle purchases, and more than likely they will have the opportunity to do that on a little lower market. However, stocker producers whose primary feed source is grass will be competing with those who take to the sideline during grass fever months.

There are several stocker producers who take a break from purchasing calves from February through April, because they do not want to compete for cattle when prices are at their peak. However, those same producers generally jump back in the market in May to secure summer inventory.

Many times, producers purchasing cattle in May will be using mechanically harvested feedstuffs which will allow them to hit a similar market as those who purchased calves to go on grass. Thus, the fewer dollars spent on calf purchase are put into the cost of feed. This brief illustration demonstrates producers matching their resources to the production style that will maximize returns. Just because your neighbor does it does not mean it is the best option for you.

Similarly, just because you do something does not mean your neighbor is doing it wrong because they do it a different way. For cow-calf producers who had intentions of marketing calves this spring but have yet to do so, market calves in the near future or grow the calves through the summer.

The market may be reaching a point where it is more advantageous to vaccinate, wean, precondition, and introduce calves to a feed bunk for a few months which allows the calf to gain additional weight and reduces risk to the buyer which generally results in stronger prices. Yearling cattle prices are expected to strengthen through the summer before peaking sometime between late July and early September.

TECHNICALLY SPEAKING: Based on Thursday’s closing prices, April live cattle closed at $160.80. Support is at $159.94, then $158.17. Resistance is at $161.72, then $163.49. The RSI is 56.11. June live cattle closed at $152.00. Support is at $151.03, then $149.35. Resistance is at $152.70 then $154.38. The RSI is 57.23. August live cattle closed at $149.68. Support is at $149.00, then $147.98. Resistance is at $150.10, then $150.28. The RSI is 58.81. April feeders closed at $215.80. Support is at $214.81, then $213.03. Resistance is at $216.58 then $218.36. The RSI is 54.60. May feeders closed at $213.00. Support is at $211.72, then $209.27. Resistance is at $214.17 then $216.62. The RSI is 52.23. August feeders closed at $214.68. Support is at $214.23, then $212.75. Resistance is at $215.20 then $215.60. The RSI is 52.73. Friday’s closing prices were as follows: Live/fed cattle – April $157.80 -3.00; June $149.00 -3.00; August $146.68 -3.00; Feeder cattle - April $213.00 -2.80; May $208.53 -4.48; August $210.20 -4.48; September $209.08 -4.45. May corn closed at $3.80 up $0.04 from Thursday.

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