By Dr. Andrew P. Griffith
FED CATTLE: Fed cattle traded steady compared to last week on a live basis. Live prices were mainly $124 to $125 while dressed prices were mainly $204 to $205.
The 5-area weighted average prices thru Thursday were $124.73 live, up $0.30 from last week and $204.62 dressed, up $0.59 from a week ago. A year ago prices were $117.47 live and $187.62 dressed.
Live cattle futures are displaying reasons for optimism in the finished cattle market, but beef packers do not seem to be interested. The beef market is inching ever closer to grilling season and the unofficial start of summer that comes with Memorial Day weekend grilling. One might surmise that this should provide some support in the near term, but it may take the passing of Easter before interest in beef begins to soar. Market participants should also consider that feedlots will become more interested in filling pen space as favorable weather conditions become more evident and as wet pens dry. In some instances, it appears the market is priming the pump to make a run.
BEEF CUTOUT: At midday Friday, the Choice cutout was $228.73 down $0.10 from Thursday and up $2.00 from last Friday. The Select cutout was $221.78 up $1.83 from Thursday and up $2.04 from last Friday. The Choice Select spread was $6.95 compared to $6.99 a week ago.
The April World Agricultural Supply and Demand Estimates report was released this week with an expectation of domestic beef production reaching 27.28 billion pounds which is an increase of 410 million pounds from the 2018 production estimate and down slightly from last month’s forecast. The month-over-month decline is largely due to lighter carcass weights and weather induced cattle losses. On the pork side of meat production, pork production in 2019 is forecast to reach 27.33 billion pounds which is an increase of more than 1 billion pounds from the 2018 pork production estimate. Broiler production maintains a similar trend with the 2019 production forecast exceeding 43 billion pounds which is a 410 million pound increase over 2018 estimated production. As an end result, U.S. meat production is forecast to reach 104.24 billion pounds which is an increase of 1.82 billion pounds compared to 2018. The challenge for each of these meat industries it to move an increased tonnage of meat without allowing prices to decline.
OUTLOOK: Cattle markets sometimes take on the persona of an untrained dog whose attention goes something like: Bird! Squirrel! Rabbit! Biscuit! That seems to be where the cattle markets are today with China, snow storm, Mexico, rain, mole hills of meat, lighter carcasses, dairy cows, and the list could continue. These are all issues influencing the market, and the producer has to find a way to navigate the land mines of media and overreactions to market cattle at profitable levels. There is little that can be done for producers who will be marketing feeder cattle in the near term (next month or two), but producers who will be marketing from July through the end of the year have some tools and strategies to protect prices. Those tools may include feeder cattle futures, Livestock Risk Protection Insurance (LRP), and in some instances forward contracting. Considering feeder cattle futures, the August through November contract months are trading in the upper $150’s which equates to mid to upper $140’s on the Tennessee cash market for heavy feeders. In brevity, this means producers with 50,000 pounds of animal to market in the summer and fall should consider taking action on securing a price whether that be through putting in a price floor, locking in prices, or using an alternative strategy. Similarly, smaller producers should consider LRP insurance to set a price floor on as few as one animal and up to 1,000 animals in today’s market environment. The market is showing optimism for feeder cattle in August and the fall months. A producer can either sweat the market out by doing nothing, or the producer can take action and focus on growing cattle. Based on Tennessee weekly auction market price averages, steer prices were $2 to $4 higher than last week while heifer prices were $2 to $5 higher compared to a week ago. Similarly, slaughter cow and slaughter bull prices were $1 to $2 higher than last week.