FED CATTLE: Fed cattle traded $2 lower compared to last week on a live basis. Prices on a live basis were primarily $118 to $120 while dressed prices were mostly $189 to $191.  The 5-area weighted average prices thru Thursday were $118.89 live, down $2.47 compared to last week and $190.41 dressed, down $1.70 from a week ago. A year ago, prices were $95.92 live and $154.50 dressed.

Slaughter levels have increased year over year, beef demand is strong, and packers have more cattle available to them than they want to process. This means the packer maintains leverage over cattle feeders despite the market moving into a period of stronger beef demand or at least strong anticipated demand. This time of year, fewer cattle are typically coming off feed and carcass weights are at their lowest point for the year. Carcass weights have declined the past few months, but carcass weights are 20 to 30 pounds heavier than the five year average and heavier than last year. Slaughter levels are manageable, but they are expected to increase given the quantity of cattle on feed. There will be lower prices to come in the finished cattle market.

BEEF CUTOUT: At midday Friday, the Choice cutout was $296.37 up $2.61 from Thursday and up $13.05 from a week ago. The Select cutout was $283.67 up $3.88 from Thursday and up $11.26 from last week. The Choice Select spread was $12.70 compared to $10.91 a week ago.

In six weeks, the Choice boxed beef cutout value has increased over $66 per hundred-weight which is an average weekly increase of about $11. Said another way, Choice boxed beef prices have increased nearly 29 percent in a month and a half. Is this demand driven or supply control? The beef production update provided last week would say the price increase is demand driven, but at what point do consumers shift to other meats. One would have to presume higher beef prices will push other meat prices higher as well as providing support for plant based protein alternatives. A cattle producer would generally praise higher beef prices, but the higher beef prices have yet to trickle down to cattle producers at any stage of production. Part of the surge in prices is greater demand from restaurants and food service as the economy begins to reopen while another part of the surge is grocery stores making purchases for the Memorial weekend holiday starting in four weeks. Prices should begin to soften for beef, but that should not greatly influence cattle prices in the near term.

OUTLOOK: Based on Tennessee weekly auction market data, steer prices were $4 to $8 lower compared to last week while heifer prices were $3 to $8 lower compared to a week ago. Slaughter cow prices were steady to $4 lower while bull prices were steady to $2 lower compared to the previous week. Calf and feeder cattle markets contained considerable optimism until two weeks ago and that optimism has been completely removed with two consecutive weeks of sharply lower cattle prices at auction markets across the nation. The primary driver of lower feeder cattle prices is the increase in corn and other feedstuff prices. Fed cattle prices have softened, but they are not the leader in driving feeder cattle prices lower. Nor will they be the leader in a resurgence in feeder cattle prices. For feeder cattle prices to recapture a large majority of the price decline, corn prices will have to decline. 

The failure of the calf and feeder cattle market to demonstrate a clear sign of higher prices has resulted in more beef cows and heifers entering the slaughter mix. Based on weekly data and using year over year comparisons without the time period when COVID19 severely reduced slaughter levels, beef cow slaughter the first quarter of 2021 is 2.2 percent greater than it was in 2020. Similarly, heifer slaughter the first quarter of 2021 is nearly 0.8 percent greater than the same time period in 2021. However, slaughter does not provide a clear picture on what is currently happening. Based on the April 1 Cattle on Feed report, the quantity of heifers on feed as of April 1, 2021 was 6.5 percent greater than 2020 while the number of steers on feed was only 4.6 percent greater than a year ago. This is providing some indication that the industry is not growing the beef cattle herd. One reason for this is the relatively low calf and feeder cattle prices, but drought in the Western states is also a driving factor in that region.