Weekly Livestock Comments January 11, 2013
FED CATTLE: Fed cattle sold mainly $2 lower compared to last week. Live prices were $125 to $126 while dressed prices were primarily $203 to $204. The 5-area weighted average prices thru Thursday were $126.36 live up $0.05 from last week and $204.10 dressed with no reported trade from a week ago. A year ago prices were $123.66 live and $198.00 dressed. Cash trade picked up a little this week compared to the last few weeks. Cash trade is still well below February and April live cattle futures, but we should see some convergence in the next few weeks. Fed cattle prices are staying in check with the cutout currently. It will be difficult for fed cattle prices to build much steam in the long run without the beef cutout making positive strides. Packers are still moving animals along the chain, but negative margins make doing business difficult. Look for fed cattle to hold steady or make modest gains the next few weeks as the market is not likely to have any big changes.
BEEF CUTOUT: At midday Friday, the Choice cutout was $194.22 up $0.41 from Thursday and down $0.60 from last Friday. The Select cutout was $183.81 down $0.15 from Thursday and up $1.66 from last Friday. The Choice Select spread was $10.41 compared to $12.67 last week. We continue to see a narrowing of the Choice Select spread and the narrowing is likely to continue a little while longer. Seasonality is the key player in the spread tightening. Consumers have moved away from higher valued cuts such as the loin and rib cuts in favor of lower valued cuts such as the chuck and round. Consumers do not differentiate between Choice and Select cuts of chuck and round as much as they do for rib and loin cuts. Both Choice and Select cutouts have been contributing to the price convergence of the two quality grades, but there has been more strengthening in the Select cutout price than there has been weakening in the Choice cutout price. The quantity of beef demanded domestically could be softening as the retail price of beef continues to forge ahead which will have impacts on the cutout. Similarly, the softening in the export market as beef prices increase and the value of the dollar strengthens compared to other currencies will also affect cattle markets.
TENNESSEE AUCTIONS: On Tennessee auctions this week compared to the last sale week in 2012, feeder steers and feeder bulls were $3 to $7 higher. Heifers were $3 to $6 higher. Slaughter cows were $1 to $3 higher while Bulls were $3 to $4 higher. Average receipts per sale were 833 head on 12 sales compared to 586 head on 3 sales last week and 804 head on 12 sales last year.
OUTLOOK: There were no trends set last week to compare this week’s prices too. Therefore, they are compared to the last sale week in December and have shown considerable strengthening for all classes of cattle. As reported in Tennessee Market News in comparing the first week of 2013 to the first week of 2012, feeder steers and bulls are $5 to $10 higher and heifers are $4 to $12 higher this week than the same week a year ago. How much higher prices will go and how long they can be sustained is a difficult question. Calf prices tend to be strongest in the spring of the year due to a lower supply of feeder cattle entering the market compared to the fall of the year and “grass fever”. Most livestock producers will continue to face elevated feed costs the first half of the year which generally puts downward pressure on prices. On the other hand, feeders will be in fierce competition with each other throughout the year to secure adequate feeder cattle numbers which should support feeder cattle prices. Additionally, the feeder cattle supply will be further reduced by an increase in heifer retention. The price for a heifer is generally lower than the price of a same weight steer. The price differential between heifers and steers may narrow significantly this year due to the demand for heifers to be retained and the demand for additional animals in the feedlot. Cull cows continue to remain strong for this time of year. The demand for lean beef continues to be the leader in the marketplace. This market does not appear to be weakening anytime soon as we have witnessed elevated prices in the cull cow market since April 2012.
TECHNICALLY SPEAKING: Based on Thursday’s closing prices, February live cattle closed at $131.55. Support is at $131.33, then $130.78. Resistance is at $131.88, then $132.43. The RSI is 45.85. April closed at $135.07. Support is at $134.85, then $134.32. Resistance is at $135.37, then $135.90. The RSI is 43.40. June closed at $130.38. Support is at $130.25, then $130.05. Resistance is at $131.13, then $131.90. The RSI is 42.69. January feeders closed at $150.85. Support is at $150.56, then $149.71. Resistance is at $151.41, then $152.26. The RSI is 49.26. March feeders closed at $152.93. Support is at $152.82, then $152.52. Resistance is at $153.12, then $153.42. The RSI is 47.39. May feeders closed at $156.38. Support is at $156.35, then $154.65. Resistance is at $157.25, then $158.00. The RSI is 47.92. Friday’s closing prices were as follows: Live/fed cattle – February $130.60 -0.95; April $134.55 -0.53; June $129.70 -0.68; Feeder cattle – January $149.88 -0.98; March $151.45 -1.48. April $153.38 -1.38; May $155.15 -1.23; March corn closed at $7.09 up $0.10 from Thursday
