by Andrew Griffith, Livestock Marketing Specialist
March 1, 2024
Fed cattle traded steady compared to last week on a live basis. Prices were largely $183 to $184 on a live basis and $290 to $291 on a dressed basis.
The 5-area weighted average prices thru Thursday were $183.31 live, up $2.26 compared to last week and $290.40 dressed, up $3.54. A year ago, prices were $164.84 live and $262.54 dressed.
There are many ways in which cattle are traded including negotiated trade, negotiated grid, forward contract, and formula, and all can be traded on a live or dressed basis. Since the beginning of the year, about 76 percent of cattle have been traded on a dressed basis. More specifically, about 60 percent of cattle have been traded using formula pricing on a dressed basis. Negotiated trade has made up more than 27 percent of cattle trade this year with live negotiated trade making up more than 12 percent of total cattle trade. Nearly 11 percent of trade has been negotiated grid, which hinges on the merit of the cattle. Forward contracting only makes up about 5 percent of total cattle traded for slaughter.
At midday Friday, the Choice cutout was $306.11 up $1.91 from Thursday and up $4.90 from a week ago. The Select cutout was $295.99 up $1.81 from Thursday and up $8.57 from last week. The Choice Select spread was $10.12 compared to $13.79 a week ago.
This is the first week in which Choice boxed beef prices traded over $300 each day since the first week of November. In fact, the Choice boxed beef price only exceeded the $300 price point seven days the first two months of the year with five of those days being the last five days of trade in February. Does this mean the market is turning the corner, or is there something else supporting the market? The answer may be a little bit of both. Beef buyers are gearing up for spring and summer grilling, but the thrust from the grilling season is still a few weeks down the road. The main driver is likely the reduction in cattle slaughter. Federally inspected cattle slaughter is down nearly 272,000 head the first eight weeks of the year compared to the same eight weeks one year ago. Most of the reduced slaughter stems from little to no slaughter on Saturday. Slaughter in and of itself does not bring the picture into complete focus, but noting federally inspected beef production is down 177 million pounds the first eight weeks of the year provides support for why beef prices are increasing.
Based on weekly auction market averages, steer prices were $2 to $3 lower compared to last week while heifer prices were steady compared to the previous week. Slaughter cow prices were $1 to $3 higher compared to the previous week’s weighted average price while bull prices were also $1 to $3 higher compared to the previous week. Price trends this week have some regional differences when looking from one market to the next. The most consistent trend is demand for grass cattle is heating up as the extremely lightweight calves are garnering more interest than heavier calves. This is not to say heavier weight calf prices are softening or on a slide, but the optimism of feeder cattle prices farther out is driving the lighter weights even higher. At the same time, grass cattle buyers are likely concerned it will be difficult to purchase their typical quantity of calves given the reduction in cattle inventory. Yet another factor in this game is the sheer quantity of capital it takes to purchase calves. Prices are much higher than one year ago, so some folks may be looking to purchase lighter cattle in order to stretch their dollars over more cattle than when purchasing heavier weight calves. These are all speculative statements, but they are certainly factors playing into a cattle buyer’s mind as they make purchase decisions. Another consideration is purchasing heifers or bull calves instead of steers, but this decision is less likely to narrow the price spread between different sexes of animals. There is a $9 to $10 per hundredweight price difference in the May versus the August feeder cattle contract, which simply means an 800 pound steer is worth about $80 per head than a steer in May. There are sure to be some producers purchasing cattle based on a speculative view that cattle markets are completely in a bull market and no bear can weigh them down. Though the fundamentals strongly support stronger cattle prices, cattle industry participants should not be betting on the come, but rather they should be managing their risk to ensure positive margins.
ASK ANDREW, TN THINK TANK
What is my time worth? This question plays into several aspects of farming and life. What does one hour of feeding cattle every day cost a person? The answer is the hourly wage when paying someone else plus the equipment cost. If the owner of the cattle is the one feeding the cattle then there are still equipment costs, but their own time is worth the next most valuable thing they could be doing. Another example is paying someone to do something they are specialized in versus the person doing it him or herself. It is commonly said that it is too expensive to pay someone to do some task. However, as a farmer, is pouring the concrete or running the electricity in a new shop worth the time to figure out and physically do or would it be more cost effective to pay someone else. From a cash flow perspective, it may be better to do some of this work in house, but when all the costs are factored into the equation, it may be more cost effective to hire the work done. Time is worth something, and each reader is spending their allotted quantity of time right now.
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FRIDAY’S FUTURES MARKET CLOSING PRICES
Friday’s closing prices were as follows: Live/fed cattle –April $188.45 +3.10; June $184.00 +2.78; August $182.70 +2.00; Feeder cattle –March $252.98 +3.98; April $258.00 +4.28; May $260.18 +4.05; August $269.65 +3.00; March corn closed at $4.12 down 4 cents from Thursday.