by Andrew Griffith, Livestock Marketing Specialist
March 24, 2023
FED CATTLE
Fed cattle traded steady compared to last week on a live basis. Prices on a live basis were mainly $163 to $166 while dressed prices were mainly $264 to $266.
The 5-area weighted average prices thru Thursday were $164.39 live, up $0.28 compared to last week and $265.07 dressed, up $1.26 from a week ago. A year ago, prices were $138.96 live and $221.45 dressed.
It appears prices in the Northern part of cattle feeding country are pushing slightly higher while prices in the Southern part of cattle feeding country did well to stay steady with much of the Southern trade down $1. There have certainly been challenges this winter in the North and the South with precipitation and some tough weather conditions. These challenges will disappear for the most part and provide cattle feeders the opportunity to push cattle weights higher with improving feeding conditions. There may be some concern with the direction of feed prices if China continues purchasing corn. This may result in cattle feeders desiring heavier placement weights, which will certainly mean heavier finished weights.
BEEF CUTOUT
At midday Friday, the Choice cutout was $280.84 down $1.94 from Thursday and down $3.54 from a week ago. The Select cutout was $270.07 up $1.18 from Thursday and down $3.10 from last week. The Choice Select spread was $10.77 compared to $11.21 a week ago.
Protein prices and meat protein particularly remain elevated relative to historical prices. The all fresh retail beef price in February was nearly $7.23 per pound, which is a slight increase from January but six cents lower than February of the previous year. This compares to a price of $6.30 per pound in February 2021 and $5.94 per pound in 2020. Thus, the all fresh retail beef price was 22 percent higher in February 2023 than it was in February 2020. The pork retail price increased 23 percent during this same three-year period while the broiler retail price increased 39 percent. A consumer favorite right now is eggs. The price of a dozen eggs was 191 percent higher than February 2020 while the price of a gallon of milk was 30 percent higher over the same time period. These prices demonstrate some of the pressure placed on consumers for staple proteins. How consumers shift expenditures of disposable income will determine demand for each of the items. The financial woes of a couple of banks may just be the tip of the iceberg.
OUTLOOK
Based on Tennessee weekly auction price averages, steer prices were steady this week compared to last week while heifer prices were steady to $4 lower compared to the previous week. Slaughter cow prices were steady to $2 higher than last week while slaughter bull prices were $2 to $3 higher compared to a week ago. Calf prices slowed their spring run this week, but it is not an indication of anything negative in the market. There are two factors to consider during the recent run in calf prices. The first is stronger feeder cattle futures in deferred contracts. For instance, the August feeder cattle contract is about $12 per hundredweight higher than the start of the year. The contract is about $5 per hundredweight off its high, but it continues to offer producers the opportunity to hedge a profit on lightweight calves purchased in today’s cash market. This runs slightly counter to nearby feeder cattle futures. The March contract is only $4 to $5 per hundredweight higher than where it started the year. The March feeder contract and the CME feeder cattle index are attempting to converge, and the fact that futures had to decline in recent weeks demonstrates traders had more optimism for feeder cattle than feedlot operators were willing to pay. The second factor to consider with the increasing lightweight calf prices is the seasonal tendency for this weight class. Stocker producers have been looking for lightweight calves to place on grass this spring and summer, because the value of gain is fairly high for these cattle. The seasonal tendency of these lightweight calf prices would suggest calf prices will remain strong through April and maybe into early May. The ability of prices to move higher will likely hinge on deferred feeder cattle futures. The market remains fluid, and there will be plenty of opportunity to market. However, some optimism has disappeared the past couple of weeks.
ASK ANDREW, TN THINK TANK
A question was asked this week concerning beef supply and demand in 2023, which is an appropriate question given the reduced cattle inventory. It seems certain domestic supply of beef will decline in 2023 relative to 2022, because there should be fewer animals making their way through the fed cattle system and a reduction in non-fed slaughter. However, feedlots will likely attempt to support domestic supply by feeding cattle longer and harvesting cattle at heavier weights. It is unlikely heavier weights will make up for the reduced slaughter, which means the market is likely to see an increase in the quantity of beef imported. The demand side is a little less certain. Consumers have been resilient with beef demand through this period of inflation and higher interest rates. How much longer they can remain resilient may the biggest question for the industry to answer. With supplies expected to decline, there is a good chance beef prices will push higher, but it is unknown if it will be high enough to temper beef demand.
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 –April $163.00 +0.85; June $156.60 +0.80; August $156.43 +0.73; Feeder cattle –March $189.65 +0.63; April $194.80 -0.20; May $197.55 -1.05; August $214.13 -0.50; May corn closed at $6.43 up 12 cents from Thursday.