by Andrew Griffith, Livestock Marketing Specialist
February 19, 2021
FED CATTLE: Fed cattle traded steady compared to last week on a live basis. Prices on a live basis were primarily $113 to $115 while dressed prices were mainly $180 to $182.
The 5-area weighted average prices thru Thursday were $114.11 live, up $0.33 compared to last week and $180.71 dressed, up $0.64 from a week ago. A year ago, prices were $119.77 live and $190.10 dressed.
The finished cattle market witnessed little change compared to last week, which means they are likely about $100 to the good on cattle marketed this week and last week. The weather conditions many feedlot operators are navigating currently have a small impact on cattle soon to be marketed and a much larger impact on the rest of the animals. The cold temperatures are sure to reduce average daily gain and increase feed intake. Thus, the higher cost of feed and fewer pounds to sell will negatively influence profitability. This does not mean those cattle will lose money, but profits will be smaller. Looking ahead, cattle feeders will be looking to gain some leverage from this situation moving into the spring to push prices north of $120.
BEEF CUTOUT: At midday Friday, the Choice cutout was $239.21 up $0.36 from Thursday and up $6.06 from a week ago. The Select cutout was $227.45 down $0.02 from Thursday and up $7.35 from last week. The Choice Select spread was $11.75 compared to $13.05 a week ago.
The Choice and Select cutout prices are a good indication of what is happening with supply and demand of commodity beef across the nation. The Choice and Select cutout prices provide a representation for most beef prices. However, there is other beef that is traded that is not considered commodity beef. One such type of beef is grass fed beef. One can look at the National Monthly Grass Fed Beef Report to see the premiums paid for grass fed beef over commodity beef. As an example, the January 2021 premiums for grass fed beef over commodity beef per pound were: ribeye steak $13.58, chuck roast $5.63, filet mignon $15.01, sirloin steak $12.31, and rump roast $5.64. This is just a small selection of the cuts, but all of the grass fed beef cuts except for brisket traded at a premium to commodity beef. Looking at it on a dressed carcass basis, since July 2016 small and very small producer grass fed beef carcass prices have averaged a premium of 2.67 per pound over the 5-area weighted average dressed price with a range of $1.78 to $3.41 per pound.
OUTLOOK: Very few markets across Tennessee were able to hold their regular weekly auction this week due to snow and ice accumulation across two-thirds of the state. Thus, trends cannot be established. Even if markets were able to hold an auction, receipts were light due to extremely cold temperatures and producers just trying to keep cattle fed and watered instead of worrying about marketing cattle. With the anticipation of warmer temperatures and a more spring like pattern next week, many markets will be back in operation. However, receipts are expected to be light given that the moisture from melting ice and snow will keep many producers from getting trucks and trailers into pastures. In light of a slow cash market, a discussion of the futures market and feeder cattle index is warranted. The spring feeder cattle futures contract prices when graphed look a little like rolling hills. The spring contracts are not trading to mountain peaks and deep valleys. However, the deep freeze that has dominated much of the country this week and major cattle feeding regions for even longer may put pressure on feeder cattle prices as feedlots may choose to feed cattle a little longer given that weight gain has likely slowed the past couple of weeks. This means feeder cattle movement could be slowed slightly. The CME feeder cattle index value has essentially ranged from $133 to $136 since the beginning of 2021. This demonstrates that the market has seen little to no change in feeder cattle prices in the 12-state region in which this data is collected. There is optimism for feeder cattle to gain momentum, but much of this optimism is pushed towards the summer and fall feeder cattle market. Summer and fall feeder cattle contracts are trading at a clear $10 premium to spring contracts. Thus, the optimism is for five to six months in the future. Producers should keep an eye on the feeder cattle index and deferred futures and price cattle accordingly.
The February cattle on feed report for feedlots with a 1000 head or more capacity indicated cattle and calves on feed as of February 1, 2020 totaled 12.11 million head, up 1.5% compared to a year ago, with the pre-report estimate average expecting an increase of 0.9%. January placements in feedlots totaled 2.02 million head, up 3.2% from a year ago with the pre-report estimate average expecting placements down 0.1%. January marketing’s totaled 1.82 million head down 5.6% from 2019 with pre-report estimates expecting a 5.3% decrease in marketings. Placements on feed by weight: under 700 pounds up 0.6%, 700 to 899 pounds up 6.1%, 900 pounds and over no change.
ASK ANDREW, TN THINK TANK: No phone calls, emails, or letters with a question for this week’s Ask Andrew were received. Many producers have probably been fighting the ice, snow, and extremely cold temperatures and addressing the immediate challenges on the farm. Thus, this may be a good time to share some of the work we have been doing to support livestock production and marketing. Dr. Justin Rhinehart and I have been working on a couple of publications evaluating timed AI versus natural service breeding (Link) and reproduction’s impact on beef cattle herd profitability (Link). Both of these publications evaluate the impact reproductive management have on profitability. Key elements of timed AI versus natural service, include increasing the percentage of calves born in the first 30 days of the calving season and using superior genetics, which results in heavier weaning weights and a more uniform group of calves. The publication concerning reproduction’s impact on profitability details how calving distribution and weaning rate influence profitability.
Please send questions and comments to firstname.lastname@example.org 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 –February $115.93 +0.80; April $123.68 +0.75; June $120.53 +0.75; Feeder cattle –March $139.13 +0.93; April $142.68 +0.93; May $145.73 +1.10; August $153.90 +1.05; March corn closed at $5.43 down 8 cents from Thursday.