by Andrew Griffith, Livestock Marketing Specialist
May 3, 2024
FED CATTLE
Fed cattle traded $2 higher compared to last week on a live basis. Prices were largely $186 to $187 on a live basis and $294 to $295 on a dressed basis.
The 5-area weighted average prices thru Thursday were $186.42 live, up $2.42 compared to last week and $294.63 dressed, up $0.18 from a week ago. A year ago, prices were $173.98 live and $280.95 dressed.
Packers paid slightly higher prices this week to put cattle on the rail. Cattle feeders are turning around and spending any profits on replacement cattle and feed. The price of finished cattle seasonally increases this time of year, but the seasonal tendency may not be fully in play since beef prices seem to be failing to make their seasonal price increase. To some degree, it appears cattle and beef prices have hit an invisible ceiling, which is somewhat humorous given some industry watchers saying fed cattle could push over the $200 level and much higher. There certainly is that potential and at some point, it will happen if Jesus Christ does not come back first. At this time, market participants should be cautiously optimistic.
BEEF CUTOUT
At midday Friday, the Choice cutout was $294.92 up $2.02 from Thursday and down $3.50 from a week ago. The Select cutout was $288.49 up $0.51 from Thursday and up $0.02 from last week. The Choice Select spread was $6.43 compared to $9.95 a week ago.
As the beef market heads into May, any indication of a stronger beef market is nonexistent at this point. This does not mean the consumer will not pull out their billfolds and begin paying for beef, but there is little information coming from the domestic consumer that says they want to pay higher and higher prices to eat beef. The daily Choice beef cutout value has not exceeded $300 since April 15th, and it has not consistently traded over $300 in a month. The trade data continues to show support for U.S. beef, but middle meats must find support on the domestic side for wholesale beef prices to push higher. This is important from the standpoint that cattle prices will find it difficult to advance if beef prices do not push higher. The consumer has the final say in beef and cattle prices, and their decisions will influence cattle herd expansion. One question that may arise the next couple of years from the international market side is if other countries will grab U.S. market share. It could happen, but no other country is producing the same quality of beef.
OUTLOOK
Based on weekly auction market averages, steer prices were $3 to $7 higher compared to last week while heifer prices were $1 to $3 higher compared to the previous week. Slaughter cow prices were steady compared to the previous week’s weighted average price while bull prices were $1 to $3 higher compared to the previous week. Whether good or bad, the futures market is the focus for most market participants, because of the volatility that has been present this week. The good is the cash price does not always react to daily volatility in the futures market, which means buyers and sellers experience a little more consistency at the local sale barn than what traders are experiencing on the board. The bad for buyers and sellers is that hedged positions do not always work out as originally planned. Another factor on the “bad” side is that volatility can lead to consternation in some market participants, which may spur poor decision making when the market is moving against a person. Though the word volatility tends to lend itself to being negative, another positive is volatility does offer opportunities from a trader’s perspective for speculators to jump in the market and make quick profits or losses. Similarly, it can offer hedgers an opportunity to hedge a price that may or may not be available in the future. Shifting back to the cash market, feeder cattle prices should be considered strong, but there are weight classes that appear more desirable than others. This is somewhat of a moving target in that some cattle appear to be under-valued relative to other cattle, which should offer a buying opportunity for some. On the feeder cattle front, several loads of steers and heifers were traded in Tennessee this week. Most of the 50,000-pound loads of steers weighed between 825 and 925 pounds and received prices ranging from $232 to $241 per hundredweight. This is a total value of $2,000 to $2,200 per head. Assuming the feedlot will grow these cattle to 1,400 to 1,500 pounds, it will take a price north of $185 per hundredweight to breakeven.
ASK ANDREW, TN THINK TANK
When will the bred female market gain some steam? The bred female market has found some support in certain regions, but moisture and forage availability continue to hamper widespread herd rebuilding decisions. It is difficult to convince cattle producers who have dealt with recent drought or several consecutive years of drought to retain or purchase breeding females in earnest. At the same time, cow-calf producers would like to see consistently strong calf prices for some time before they make a longer-term decision such as purchasing young breeding females. The timing of this market will hinge on all of these factors, but the expectation is for the bred female market to gain strength through the summer and fall if precipitation is adequate to produce forage and if calf prices remain strong. From the buyer standpoint, there will not be hordes of females to choose from this year as many females may their way to the feedlot the last six months of 2023. There should be more to choose from next year.
Please send questions and comments to agriff14@utk.edu.
FRIDAY’S FUTURES MARKET CLOSING PRICES
Friday’s closing prices were as follows: Live/fed cattle –June $176.68 -0.13; August $174.58 +0.63; October $178.05 +0.68; Feeder cattle –May $243.30 -0.30; August $254.75 -0.48; September $255.78 -0.20; October $256.13 +0.05; May corn closed at $4.47 down 5 cents from Thursday.