By Andrew P. Griffith
FED CATTLE: Fed cattle traded steady com-pared to last week on a live basis. Prices on a live basis were mainly $126 while prices on a dressed basis were mainly $200.
The 5-area weighted average prices thru Thursday were $125.91 live, up $2.86 from last week and $199.90 dressed, up $5.90 from a week ago. A year ago prices were $118.76 live and $189.78 dressed.
Cattle feeders were able to push live cattle prices higher two weeks ago, and they were able to maintain the gains this week. The price increase has been a factor of February live cattle futures gaining $10 since January 12th and strong beef demand. February live cattle futures are only about $3 higher than where they started the year while cash prices are only $5 higher than where they start-ed the year. The volatility in the futures market has influenced risk in relation to the day in which cash cattle are traded in a week. However, cattle feeders are more than happy to take advantage of the price run and an even basis. There is no reason at this time to expect a significant decline in finished cattle prices.
BEEF CUTOUT: At midday Friday, the Choice cutout was $209.48 down $0.12 from Thursday and up $2.72 from last Friday. The Select cutout was $204.04 down $0.50 from Thursday and up $3.65 from last Friday. The Choice Select spread was $5.44 compared to $5.92 a week ago.
January and February tend to be poor demand months for beef relative to other months of the year. However, packers have been able to push wholesale beef prices higher even with strong weekly beef production. Beef production the first four weeks of 2018 is 3.4 percent greater than the same weeks in 2017 while wholesale Choice boxed beef prices have been $6 to $17 higher than year ago prices. Will the market be able to sustain the strength in beef prices? All current information is very supportive of strong beef prices with continued strong exports, strong domestic consumption, and economic factors supporting increased disposable income for consumers. The winter doldrums could easily catch up to the market and depress prices for a short time, and it is a highly likely situation. However, the expectation is for such an event to be short lived given the positive sentiments towards the beef market. The one aspect that could put pressure on prices is the increased beef production that will result from increased feeder cattle placements from September through December.
OUTLOOK: The calf and feeder cattle markets are a tale of two stories. It is more about the story of the futures market and a story of the local cash market. The futures market is where much of the uncertainty and volatility has been present the past couple of weeks. Looking at March feeder cattle as an example, the futures market closed $2.48 lower on January 25th than on January 24th before it closed $2.80 higher the next day. The market had a $5.30 trading range over those three days but had only a $0.32 net increase from Wednesday’s close to Friday’s close. Similarly, March feeder cattle futures on January 31st declined $2.13 from the previous day be-fore increasing the daily limit of $4.50 the following day. Friday saw March feeder cattle futures increase $1.38. The local auction markets are a different story, but they should ease some of the angst for those looking to market cattle in the near term. There has been less volatility in cash mar-kets and a more steady hand as stocker operators and feedlot managers continue to be active participants in the calf and feeder cattle markets. Based on Tennessee weekly auction markets, steers and heifers were steady to $5 higher compared to last week with most of the interest in lighter weight cattle that will be ready for spring grass as soon as it appears. The feeder cattle market remains strong and should continue to remain strong in the coming months. The cattle on feed report released last week once again demonstrated large placements of lighter weight cattle. Placements of feeder cattle into feedlots the last four months of 2017 were 9.7 percent or 747,000 head higher than the same months in 2016. Placements of cattle weighing less than 700 pounds over this time period were up 11.9 percent or 430,000 head. The increase in placements for light weight cattle likely means there will not be as many coming off winter annuals in the March through May time period. The increased placements of lighter weight cattle will likely increase beef production slightly earlier than normal, but it should offer opportunities for feeder cattle being marketed in the springs months as there will not be as many available as once expected.