Livestock Comments: Dr. Andrew Griffith

Fed cattle traded $2 higher compared to last week on a live basis


Livestock Comments

FED CATTLE: Fed cattle traded $2 higher compared to last week on a live basis. Prices were largely $189 to $191 on a live basis and $301 to $303 on a dressed basis.  The 5-area weighted average prices thru Thursday were $189.52 live, up $1.70 compared to last week and $301.99 dressed, up $3.58. A year ago, prices were $164.39 live and $265.07 dressed.

April live cattle futures have found no direction the past month other than marking time. At the same time, cash live cattle prices have been pushing to achieve the expectations of the futures market for April and have now eclipsed those expectations. Despite this occurrence, live cattle futures are pricing cattle lower through the summer and fall months. Does this mean finished cattle prices will begin to soften as the market moves into May and June? They certainly could, but a lot will hinge on the quantity of cattle being placed on feed the next few months. At some point, the well full of feeder cattle will run dry, which means fewer live cattle. What happens next will be a fun or not so fun ride.

BEEF CUTOUT: At midday Friday, the Choice cutout was $311.55 down $2.18 from Thursday and up $0.03 from a week ago. The Select cutout was $304.72 up $0.99 from Thursday and up $2.37 from last week. The Choice Select spread was $6.83 compared to $9.17 a week ago.   There is little to say about Choice boxed beef prices, because they are still resulting in losses from the packer standpoint. Choice beef prices have increased the past several weeks, and they may realize further gains following Easter and heading into the summer grilling season. However, there is one beef product price that is hotter than a $2 pistol. That beef product is fresh 90 percent lean beef. This beef product originates from slaughter cows and bulls and does not play into the calculation of cutout values. However, the price of 90 percent fresh lean beef is near $325 per hundredweight, which is nearly $70 per hundredweight higher than where it started the year. Part of the price increase is due to strong demand, but much of the increase in 90s is the reduced quantity coming to market. As long as cow slaughter remains relatively low, lean beef prices will remain elevated. On the other hand, fresh 50 percent lean beef prices are just a little over $100, which is about $30 lower than the same time last year. The price of 50s will increase as finished cattle slaughter slows.

OUTLOOK: Based on weekly auction market averages, steer prices were $4 to $10 higher for steers weighing less than 550 pounds and steady for those weighing 550 pounds or more compared to last week while heifer prices were steady to $7 higher for heifers weighing less than 500 pounds and $2 to $8 higher for those weighing 500 pounds or more compared to the previous week. Slaughter cow prices were $5 to $8 higher compared to the previous week’s weighted average price while bull prices were $3 to $4 higher compared to the previous week. Cattle prices have a little bit of the Wild West feel to them in the sense of anything goes. That statement could be taken several different ways, but it is meant from the standpoint of prices consistently strengthening and a feeling that they will continue to increase. In other words, there is so much optimism that there is little to no thought about what could turn the apple cart upside down. In the same way, everyone that moved west had dreams of great things to come that little attention was paid to the challenges in the future. This is not supposed to be rain on a parade, but producers should be cautious in their decision making as ever-increasing prices will not last forever. Rather, this is a time to take advantage of strong cull cow prices and calf prices and set some of the profits back for a cloudy or rainy day. At the same time, some of those profits should be reinvested in the herd to either reduce the average age of the breeding herd or to make other improvements on the farm. It is difficult to fathom 500 pound steers at $300 per hundredweight as a weekly auction average price in Tennessee, but the price has already eclipsed this level, which means the top end steers in said weight class are exceeding $1,600 in value. This value is great for the seller, and should mean large profits for the seller. However, this makes the margin business more capital intensive than it was. Additionally, an increase in the use of capital results in an increased interest expense for stocker producers, backgrounders and feedlots.

The March cattle on feed report for feedlots with a 1000 head or more capacity indicated cattle and calves on feed as of March 1, 2024 totaled 11.84 million head, up 1.3% compared to a year ago, with the pre-report estimate average expecting a 0.8% increase. February placements in feedlots totaled 1.89 million head, up 10.0% from a year ago with the pre-report estimate average expecting placements up 6.3%. February marketing’s totaled 1.79 million head up 3.4% from 2023 with pre-report estimates expecting marketings up 3.9%. Placements on feed by weight: under 700 pounds up 5.3%, 700 to 899 pounds up 12.6%, 900 pounds and over up 11.1%.