Market Highlights: Weather Impacts Beef Market

Market Highlights: Weather Impacts Beef Market

The past week of poor weather has kept the beef market downs.
By: Andrew P. Griffith, University of Tennessee​

FED CATTLE: Fed cattle traded steady on a live basis and $2 to $4 lower on a dressed basis compared to a week ago. Prices were mainly $159 to $160 on a live basis while dressed trade was mainly $250 to $254. The 5-area weighted average prices thru Thursday were $159.43 live, down $0.08 from last week and $250.07 dressed, down $5.96 from a week ago. A year ago prices were $145.80 live with no dressed trade reported.

The fed cattle market is mixed this week with live prices finding a steady state while dressed prices continued their descent. Though cattle feeders are experiencing negative margins on a cash-to-cash basis, they may be rather pleased with price levels in the live cattle market and the ability to maintain current price levels as January and February are not known for strengthening prices.

It is expected that cattle feeders will be further pressured in coming weeks as beef demand is generally slack in the winter months. The price decline in live cattle has been beneficial to packers as margins are no longer in the red. How long positive margins last is yet to be determined since the cattle and beef markets will come under extreme pressure from competing meats such as pork and poultry.
BEEF CUTOUT: At midday Friday, the Choice cutout was $243.39 down $1.20 from Thursday and down $10.49 from last Friday. The Select cutout was $237.03 down $1.31 from Thursday and down $12.40 from last Friday. The Choice Select spread was $6.36 compared to $4.45 a week ago.

Beef cutout prices have softened the past few weeks, and the winter storm barreling through the Northeast portion of the country did not do the market any favors. The wintery precipitation resulted in beef movement slowing down as beef consumers stayed tucked away in their homes to avoid the snow, ice and cold which meant many restaurants were quiet.

Additionally, beef shipments were stalled as trucks could not safely navigate the roadways to get in and out of some of the largest beef consuming areas in the country.

Not only has winter weather impacted beef movement and prices but also the labor dispute at ports on the West Coast. The labor dispute, which has made head way at being resolved, has resulted in near-paralysis on the West Coast as cargo containers have stacked up. This dispute has disrupted beef exports from the standpoint that trade partners want a reliable source of beef and chilled and frozen beef can only stay in a cargo container for so long.

TENNESSEE AUCTIONS: On Tennessee auctions this week compared to a week ago steers and bulls were $5 to $12 lower. Heifers were $1 to $7 lower. Slaughter cows were $4 to $5 lower while slaughter bulls were $3 to $4 lower. Average receipts per sale were 378 head on 12 sales compared to 775 head on 12 sales last week and 650 head on 10 sales last year.

OUTLOOK: Cattle movement in Tennessee slowed tremendously this week compared to last week. Some of the slowdown could have been because of the weather, but much of it could have been in relation to the drop in prices that was witnessed last week.

The price of 550 pound steers and heifers declined $17 per hundredweight the past two weeks which is a decline of $94 per head while 750 pound steers have lost about $135 per head over the same time period. Though not immune to the price decline, yearling heifer prices have not been pressured as much as yearling steer prices with losses averaging $90 per head over the past two weeks.

Downward pressure on prices is likely to persist until pasture green up in March and April when grass based stocker producers begin searching for inventory to graze pastures. The CME Feeder Cattle Index as of January 28th was $213.92 per hundredweight compared to $244.82 per hundredweight on December 4th. Thus, the index has declined $30.92 in just under two months.

This type of price decline will likely undercut margins for stocker producers and backgrounders and could easily result in losses if cattle were not hedged at purchase. There does not appear to be many factors in the market that will try to push feeder cattle prices lower, but there are plenty of forces that will try to keep the price at its current level.

Producers need to be reminded that the price of a 550 pound steer is still $48.50 per hundredweight higher than the same week one year ago which is a nearly $267 more per head.

Slaughter cow prices have also witnessed a negative price movement the past few weeks, but prices are still about $11 per hundredweight higher than the same week last year. Producers should see large positive returns this year to the cattle operation, but producers who generally market in the second half of the year will have to be diligent in managing costs if they expect to return profits similar to late summer and fall of 2014.

TECHNICALLY SPEAKING: Based on Thursday’s closing prices, February live cattle closed at $153.52. Support is at $151.54, then $147.59. Resistance is at $155.49, then $159.44. The RSI is 38.14. April live cattle closed at $150.50. Support is at $148.42, then $144.17. Resistance is at $152.67, then $156.92. The RSI is 34.42. June live cattle closed at $143.43. Support is at $142.10, then $141.15. Resistance is at $145.50 then $145.78. The RSI is 31.93. March feeders closed at $203.57. Support is at $200.48, then $194.56. Resistance is at $206.41, then $212.33. The RSI is 36.94. April feeders closed at $204.20. Support is at $203.23, then $202.55. Resistance is at $204.23 then $205.45. The RSI is 36.43. May feeders closed at $204.70. Support is at $204.68, then $201.98. Resistance is at $205.90 then $205.93. The RSI is 35.95. Friday’s closing prices were as follows: Live/fed cattle –February $154.85 1.33; April $152.28 1.78; June $144.63 1.20; Feeder cattle - March $205.20 1.63; April $205.40 1.20; May $206.13 1.43; August $208.00 1.48. March corn closed at $3.70 down $0.02 from Thursday.

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