Livestock Comments: Dr. Andrew Griffith

The calf and feeder cattle market has softened the past couple of weeks as tremendous uncertainty has entered the marketplace...


Livestock Comments

FED CATTLE: Fed cattle traded $3 to $4 lower on a live basis compared to last week. Prices were mainly $202 to $203 on a live basis. Dressed trade was mainly $320 to $322.  The 5-area weighted average prices thru Thursday were $202.84 live, down $4.27 compared to last week and $320.62 dressed, down $6.57 from a week ago. A year ago, prices were $180.30 live and $286.37 dressed.

Packers are working to push finished cattle prices lower due to negative margins being experienced at the packing level. Packers are slowing slaughter rates with the hope of managing beef supply and pushing beef prices higher. Simultaneously, packers are attempting to reduce what they pay for finished cattle, which would strengthen margins on both ends. Cattle feeders continue to maintain leverage in respect to the quantity of cattle coming down the pike. Cattle availability will tighten sooner rather than later, which will mean packers will not have to manage beef supply. This will essentially take that tool out of their bag for a time period as they continue to manage margins.

BEEF CUTOUT: At midday Friday, the Choice cutout was $315.14 down $2.26 from Thursday and down $7.12 from a week ago. The Select cutout was $308.55 down $1.29 from Thursday and down $7.70 from a week ago. The Choice Select spread was $6.59 compared to $7.73 a week ago.

As previously mentioned, packers are attempting to manipulate wholesale beef prices by managing slaughter rates and total beef supply. Packers have not been able to turn beef prices from their price descent, but maybe their efforts are slowing the price decline during a period of slow beef movement. It is difficult to know for sure if these short-term efforts really influence the market. They can certainly tighten the short-run production of beef, which can generate some competition, but the true impact on prices may not be as great as they would hope or for as long as they would hope. Packer margins may come under more pressure during the Lenten season, which starts March 5th and ends on Easter (April 20th). This is an annual time period of slower beef movement as those primarily in the Catholic faith reduce beef consumption. There will be large hopes of the market strengthening in late April and heading to the summer grilling season. This will once again provide insight to consumer demand for beef.

OUTLOOK: Based on Tennessee weekly auction average prices, steer prices were $3 to $6 lower this week compared to last week while heifer prices were $5 to $7 lower than the prior week. Slaughter cow prices were $1 to $3 higher compared to the previous week while slaughter bull prices were steady compared to last week’s prices. The calf and feeder cattle market has softened the past couple of weeks as tremendous uncertainty has entered the marketplace. Some of this uncertainty stems from policy measures that may influence trade in the way of tariffs and certain labor challenges that may surface in packing facilities with deportations. At the same time, packers are pushing back on cattle feeders as their margins have evaporated and look more like the Nile River when Moses was leading the Israelites out of Egypt. This will likely result in pushback from cattle feeders, which may lead to lower prices for feeder cattle in the coming weeks and months. Feeder cattle futures are reflecting these concerns. Many of the feeder cattle contracts are $7 to $10 lower than their contract high two weeks ago. This week’s price action as it relates to feeder cattle futures has been more of a see-saw type movement with no clearly defined direction. Following the technical analysis for futures moving through the next several weeks, it is not a favorable picture for prices pushing higher. Despite the technical outlook being negative price movement, fundamentals can outcompete the technical perspective. This same comment holds when the technical outlook is favorable for a price increase. Readers should be reminded the market is moving towards the spring green up when lightweight calf prices generally rally. This rally usually begins in February and carries through most of April and sometimes early portions of May. It is not known if calf prices will inflate this spring relative to how they began the year, but the spring green up should provide support for lighter weight calf prices in the coming weeks.