Livestock Comments: Dr. Andrew Griffith

Livestock Comments

FED CATTLE: Fed cattle traded steady to $1 lower compared to last week on a live basis. Prices were largely $182 to $183 on a live basis and $292 to $294 on a dressed basis.  The 5-area weighted average prices thru Thursday were $182.94 live, down $0.99 compared to last week and $293.74 dressed, up $0.10 from a week ago. A year ago, prices were $178.54 live and $287.68 dressed.

The cattle feeder clearly did not want to give up any price ground this week as cattle feeders and packers struggled to come to an agreement on price. It only makes good business sense for the packer to bid lower and the cattle feeder to ask higher, but at some point, transaction costs become weighty when time is wasted on making a deal. The hassle of going back and forth is one reason many in the industry have shifted to formula pricing. It removes a large portion of the weekly transaction costs, and it makes things a little more certain from the buyer and seller standpoint. This is not to detract from cash trade as it is very much needed, but weeks like this week certainly push people away from the spot market.

BEEF CUTOUT: At midday Friday, the Choice cutout was $295.93 up $0.13 from Thursday and down $4.51 from a week ago. The Select cutout was $291.07 up $1.80 from Thursday and down $5.21 from last week. The Choice Select spread was $4.85 compared to $4.16 a week ago.

Comments made last week were that consumer demand is where the concern is for the beef industry. Based on beef export data for February, international demand is not a concern. Beef exports in February were down one percent on a volume basis and up 10 percent on a value basis. When the quantity of product traded declines and the total value of that reduced quantity exceeds the previous quantities value then demand is improving. This type of action from the international standpoint would seem to translate to the international market wanting more U.S. beef products, but simply unable to purchase it due to supply issues. At the same time, it would be beneficial to know exactly what products are making their way to international destinations as many of these trading partners must be purchasing beef items they have not traditionally purchased to maintain such a strong volume. This will be an ever-evolving topic, but all indications are that international demand for U.S. beef remains strong. How domestic demand fairs may be another story.

OUTLOOK: Based on weekly auction market averages, steer prices were $1 to $6 higher compared to last week while heifer prices were steady to $5 higher compared to the previous week. Slaughter cow prices were steady to $2 lower compared to the previous week’s weighted average price while bull prices were $2 to $3 lower compared to the previous week. This week’s gains in calf prices offset the loss in calf prices from the previous week. This may not sound like much, but it was important to those who sold one week versus another. The people in this world tend to be fickle in at least one area of life. One of the common areas is when doing business. This is not meant to be a derogatory statement, but rather illuminating the fact that money or compensation does matter to folks. In this case, feeder cattle futures took a steep decline, which pushed the local cash price for calves and feeder cattle lower. The fickle part in this instance was not on the cattle producer but on the trader of the futures market. The futures trader is necessary to provide liquidity (i.e. enough trading) for hedgers to establish a position in the market. As cattle futures price increased, there were traders who decided they could make some money so they exited their position and took new positions in some instances. They may have made money coming and going or lost money in the same manner. Regardless, the decline in feeder cattle futures has temporarily dashed the hopes of many cattle producers who have failed to manage price risk. The generally results in cattle producers changing their minds on the route they planned, which brings the conversation back to being fickle. Again, it is not meant to be a negative statement as producers must change their plan of action if they failed to do any prior planning and price risk management. At the end of the day, the dollar is what has changed the mind of many producers. More opportunities will arise, but failure to act on those opportunities will likely result in further disappointment.

The April cattle on feed report for feedlots with a 1000 head or more capacity indicated cattle and calves on feed as of April 1, 2024 totaled 11.82 million head, up 1.5% compared to a year ago, with the pre-report estimate average expecting a 2.0% increase. March placements in feedlots totaled 1.75 million head, down 12.3% from a year ago with the pre-report estimate average expecting placements down 7.9%. March marketing’s totaled 1.71 million head down 13.7% from 2023 with pre-report estimates expecting marketings down 11.8%. Placements on feed by weight: under 700 pounds down 16.3%, 700 to 899 pounds down 12.4%, 900 pounds and over unchanged.