FED CATTLE: Fed cattle trade was not established at press. Asking prices on a live basis were mainly $126 to $127 while bid prices were mostly $122.
The 5-area weighted average prices thru Thursday were $124.00 live, down $0.85 from last week and $198.64 dressed, up $1.60 from a week ago. A year ago, prices were $121.94 live and $195.00 dressed.
Cash cattle trade was at a standstill most of the week. Packers have watched their margins tighten the past few weeks as boxed beef prices have declined and finished cattle prices escalated. This is a tough pill to swallow for an industry who had extremely strong margins following the Tyson fire in August and a period of short bought beef buyers a couple of months later. The simple of the situation is that packers are not hurting for money, but margins are not as strong as what they were. Everyone prefers more to less when it comes to margins and packers are attempting to drawl cattle prices lower to support their margins. They may have a little success in the short-run but time is not on their side as grilling season will fast approach.
BEEF CUTOUT: At midday Friday, the Choice cutout was $210.38 up $0.42 from Thursday and up $1.29 from last week. The Select cutout was $206.84 up $0.16 from Thursday and up $1.35 from a week ago. The Choice Select spread was $3.54compared to $3.60 two weeks ago.
November beef import and export quantities for November were released earlier this week. Beef and veal exports for November totaled 244.56 million pounds on a carcass weight basis. This is a decline of about 4 million pounds compared to October and 21.4 million pounds less than November 2018. On the import side, the United States imported 242.07 million pounds of beef in November which is 1.2 million more pounds than October and nearly 25 million more pounds than November 2018. These value changes seem like a lot of moving and shaking, but this market is just beginning to be moved. As of January 1, the tariff rate on U.S. beef exported to Japan declined from 38.5 percent to 26.6 percent with the enactment of the most recent trade agreement. This reduction in the tariff rate makes the U.S. more competitive with Australia as both countries will face the same declining tariff rate over the next several years. Another factor that should support exports of U.S. beef to Japan is the fires in Australia. Beef production there has been terribly disrupted and U.S. beef can fill the void.
OUTLOOK: There are no price trends to report this week since no sales were reported in Tennessee last week. However, there are trends compared to the last week reported in December. Steer prices starting off 2020 were $4 to $6 higher than three weeks ago while heifer prices were $2 to $4 higher compared to the last report of 2019. Similarly, slaughter cow prices are $2 to $3 higher this week compared to three weeks ago while slaughter bull prices are $1 higher. Calf and feeder cattle markets have responded as expected with strong gains to start the year and the trend should continue moving through the next few months. This does not mean there will not be some up and down trading from week to week, but the bigger picture is for prices to continue pushing higher. Using this week’s 525 pound average steer price of $142 per hundredweight as a reference point, there is optimism of 525 pound steers reaching $160 come late March or early April. This is going to be a tall mountain to climb the next 10 to 12 weeks, but there is good chance the market has enough steam building to pull the hill. The greater optimism in this calf and feeder cattle market is the expectation that the summer and fall months of 2020 should be strong than those of 2019. These statements are not being shared to bring joy or happiness to cattle producers. These statements are being shared so cattle producers will begin looking at marketing opportunities and what the market is offering today. The futures market has strength right now, but there is no way to predict if something may shock the market and send it spiraling to the valley floor. For producers with cows that need to be marketed as slaughter cows, the advice is to keep holding them for now. The market should receive a strong boost in February or early March before starting a slower grind higher. Late February or March may be a good time to offload those cows that need to exit the breeding herd.
ASK ANDREW, TN THINK TANK: A question was asked this week concerning the price disparity between livestock auction markets in Tennessee and Kentucky. In this instance, the price being reported at the Kentucky sale barns are several dollars per hundredweight higher than the nearby markets in Tennessee. I do not have a good answer for this question since supply and demand are what drive prices. If there is such a big price discrepancy between markets and all other factors are the same then why are the cattle buyers not going to the sales where prices are lower? If one were to look at the weekly summaries of reported auctions for Tennessee and Kentucky one can see there is difference in price. One can also see that the Kentucky report is capturing three times the number of cattle that are being captured in the Tennessee report. This would make me think something is different between the two states. Maybe Kentucky auction markets are selling more small groups (10 to 20 head) as compared to running single animals. Maybe Tennessee producers are marketing most of the high-quality cattle in the country instead of through a livestock auction. No matter the reason, if a person thinks taking their animals to a different auction will result in larger profits then that is what they should do.
Source : tennessee.edu