FED CATTLE: Fed cattle trade was not well established at press. Prices on a live basis appeared to be heading toward $111 or a little higher while prices on a dressed basis looked to be $172 or higher. The 5-area weighted average prices thru Thursday were $110.23 live, up $1.34 from last week and $170.31 dressed, up $0.35 from a week ago. A year ago prices were $116.66 live and $183.36 dressed.
Cattle feeders and packers were slow to make any deals this week. Live cattle future prices jumped to higher values on both Monday and Friday with steady prices the other three trading days. The stronger futures trade had cattle feeders holding on for higher prices. On the other hand, packers were hoping for some negative price movement to support lower prices.
Traders appear to be bullish for live cattle heading into 2017 as open interest has escalated rather quickly the past few weeks. All of the current signs appear to result in positive profit margins for cattle feeders. It may be difficult for the cash market to continue pushing higher, but current levels will result in black ink for the cattle feeding industry.
BEEF CUTOUT: At midday Friday, the Choice cutout was $194.77 up $1.31 from Thursday and up $4.52 from last Friday. The Select cutout was $180.70 up $2.16 from Thursday and up $8.85 from last Friday. The Choice Select spread was $14.07 compared to $18.40 a week ago.
There is significant seasonal strength in the Choice cutout this week as the Choice cutout continued its upward trajectory. Similarly, the Select cutout found support and actually outpaced Choice meat since last Friday. The fast escalation in Select grade meat prices reduced the Choice Select spread by more than $4 which may be the first sign of the seasonal shift from middle meats to end meats. This shift will continue the next 10 to 15 weeks as retailers feature more roast cuts. Wholesale beef prices may have taken a leap this week, but the retail price of beef is continuing to slowly decline.
The all-fresh retail price of beef for November was $5.54 per pound which is nine cents lower than October and $0.45 lower than November 2015. Similarly, the retail value of pork declined eight cents from October to November to $3.62 per pound which is $0.29 lower than November one year ago. The retail broiler composite for November was $1.89 per pound. There was no change in the retail broiler composite price from October to November and only a seven cent decline from one year ago.
OUTLOOK: In many years, calf and feeder cattle trade begins to slow the last few weeks of December. Most producers finish marketing calves by late November, or they make the decision to hold animals until the first of the year. However, not every year is the same.
Based on Tennessee weekly auction data, December has witnessed its fair share of cattle marketings. This is a good sign for stocker producers who are just now beginning to feel better about moisture conditions in the Southeast.
Not only has some normalcy been reestablished with moisture, but cattle price volatility in the country seems to be lower. This week’s calf prices are not making anyone rich, but they are at a manageable level from the cow-calf producer standpoint. Similarly, stocker producers can afford to take the risk on purchasing calves at their current value.
There appears to be opportunity in the stocker business at this point if fairly inexpensive feed resources are available. Based on Tennessee weekly auction data for the week ending December 16th, 471 pound steers were valued at $610 per head while 532 pound and 573 pound steers were valued at $660 and $688 per head respectively. Assuming a stockering or backgrounding phase where 200 to 300 pounds is added and feeder cattle are marketed in the March through May time period, the value of gain ranges from $1.04 per pound to $1.27 per pound.
The market is currently offering substantial value for putting weight on cattle. The struggle in Tennessee and many parts of the Southeast will be availability of inexpensive feed resources. However, commercially blended feeds and byproduct feeds should be readily available and fairly inexpensive provided the strong grain and oilseed harvest in 2016.
Not only has calf and feeder cattle price volatility decreased but also the decline in slaughter cow prices. There has been considerable stabilization in most markets the past couple of weeks, and this stability is likely to persist as the markets operate around the Christmas and New Year holidays.
ASK ANDREW, TN THINK TANK: A question was received this week concerning where additional feeder cattle market resources can be obtained. There seem to be more resources for grain and oilseed producers than livestock producers. One of the best known resources for the cattle industry is Cattle Fax. Cattle Fax is a paid subscription, but it does address most aspects of the cattle industry from cow-calf producers to the packer. A free resource comes from the University of Missouri where they produce cattle comments similar to this article. Another resource is the Livestock Marketing Information Center website. There are certainly other resources available, but it may take some searching to find the one that fits best.
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 –December $112.33 +1.60; February $115.35 +2.08; April $113.60 +1.25; Feeder cattle –January $129.90 +2.20; March $126.30 +1.55; April $125.60 +1.38; May $124.15 +1.10; March corn closed at $3.56 down $0.01 from Thursday.