Livestock Comments: $7 gap between cash and futures price
FED CATTLE:
Fed cattle traded steady to slightly softer compared to last week on a
live basis. Prices on a live basis were primarily $108 to $110 while
dressed prices were mainly $172 to $174. The 5-area weighted average
prices thru Thursday were $109.23 live, down $0.29 compared to last week
and $172.59 dressed, down $0.47 from a week ago. A year ago, prices
were $124.28 live and $198.86 dressed.
Packers did not throw any
bones to cattle feeders this week as finished cattle prices did well to
hold their ground from last week. Packers have been able to capitalize
on higher beef prices, and they are not being forced to pass any of
those margin gains down the line. The interesting part of this
equation is that February live cattle futures are trading over $116
which means the $7 gap between today’s cash price and the futures price
has to be closed at some point. It can either happen by cash prices
increasing, futures prices decreasing, or a mixture of both. The April
live cattle contract is over $122 which provides a lot of optimism for
cattle feeders moving forward. One would have to imagine cattle feeders
are laying off some risk at this level.
BEEF CUTOUT: At
midday Friday, the Choice cutout was $223.05 up $1.85 from Thursday and
up $9.43 from a week ago. The Select cutout was $213.52 up $3.24 from
Thursday and up $10.37 from last week. The Choice Select spread was
$9.53 compared to $10.47 a week ago.
Boxed beef prices are off to
a rapid start to begin the new year. The Choice and Select boxes
started the year off a little slow, but the Choice price has advanced
$14 per hundredweight while the Select price has increased $16 per
hundredweight since the end of 2020. The driver behind higher prices
does not appear to be supply driven, because beef production the first
couple weeks of the year was greater than the same weeks one year ago.
The thought then goes to demand driving the price. Looking at monthly
beef trade data, beef and veal exports in November were 13.2 percent
higher than the previous year and totaled 277 million pounds. Monthly
data is not available for December, but the weekly beef muscle cut
export data shows an increase of 23.3 percent for December and this has
likely carried over to 2021. It appears the appetite for beef is strong,
and that same strength is likely found domestically as well.
Additionally, there have been news reports that China may become a
bigger player in U.S. markets now that the new presidential
administration has taken office.
OUTLOOK: Steer and heifer
prices were unevenly steady compared to last week based on daily
Tennessee market reports. Similarly, slaughter cow prices were steady
while slaughter bull prices were steady to $2 lower compared to a week
ago. Feeder cattle receipts were fairly strong across the markets that
were reported this week. Strong marketing by cattle producers was likely
due to the drier conditions that persisted this week, which allowed
trucks and trailers to get into pastures. Another reason many producers
are moving cattle in the near term is to make room for the next calf
crop that is already hitting the ground or that will be hitting the
ground the next two to three months. Demand for calves to put on grass
has not taken off yet, but that is because spring green up is still
eight to ten weeks away. However, demand for light-weight cattle will
begin to pick up in the coming weeks as several buyers will be trying to
buy some cattle before the grass cattle run reaches warp speed. This
expected increase in demand will slowly begin to support calf prices,
which should be beneficial to producers who are in a situation where
they have to sell calves in the near term. Feeder cattle futures are
also providing some price risk management opportunities for buyers of
those cattle. For example, the August feeder cattle contract price has
shown a $5 per hundredweight increase this week and has exceeded the
contract high. This does not mean producers should lock in the price and
forget about it, but producers should be considering their alternatives
to secure a price in some form or fashion. The stronger futures market
may or may not hold, but it should support cash prices of calves and
feeder cattle in the near term. Switching to the slaughter cow market.
Slaughter cow prices should begin to gain some steam in February and
March. This may be an appropriate time to market animals that are in a
body condition score of five or higher.
The January cattle on
feed report for feedlots with a 1000 head or more capacity indicated
cattle and calves on feed as of January 1, 2020 totaled 11.97 million
head, no change compared to a year ago, with the pre-report estimate
average expecting a decline of 0.5%. December placements in feedlots
totaled 1.84 million head, up 0.7% from a year ago with the pre-report
estimate average expecting placements down 2.9%. December marketing’s
totaled 1.85 million head up 1.0% from 2019 with pre-report estimates
expecting a 0.6% increase in marketings. Placements on feed by weight:
under 700 pounds down 2.7%, 700 to 899 pounds up 4.8%, 900 pounds and
over up 2.5%.
NBW Reports
Cattle Inventory By State: This Year vs. Last Year
Cattle Inventory Highlights
Cattle Inventory: Ranking Of States With The Most Cattle
Cattle on Feed
Cattle Slaughter By State
Cold Storage
Corn Balance Sheet
Estimated Weekly Meat Production
Export Sales Highlights
Farms and Land in Farms Highlights
Livestock Comments
Livestock Slaughter
Livestock, Dairy & Poultry Outlook
Milk Production By State
National Drought Monitor
National Feeder Cattle Report
National Grain Report
Natural Gas Weekly Update
Number Of Farms By State
Quarterly Hogs & Pigs
Price Projections For Steers, Hogs, Milk
Protein Production Estimates
Ranking Of States With The Largest Farms
Ranking Of States With The Most Farms
Ranking Of States With The Most Land In Farms
Red Meat By Production By State
Soybean Balance Sheet
Today's Weather
United States Ag Production Report
USDA Grain Stocks Report
USDA Prospective Plantings Report
WASDE: Feed Grain Outlook
WASDE: Livestock, Dairy & Poultry Outlook
WASDE: Oilseed Outlook
WASDE: Wheat Outlook