Weekly Livestock Comments Jan 18, 2013
Weekly Livestock Comments
By Dr. Andrew P. Griffith
January 18, 2013
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FED CATTLE: Fed cattle sold mainly $3 lower in the South and $7 to $8 lower in the North compared to last week. Live prices were $122 to $123 while dressed prices were primarily $195 to $197. The 5-area weighted average prices thru Thursday were $124.20 live down $2.16 from last week and $197.76 dressed down $6.34 from a week ago. A year ago prices were $125.67 live and $202.70 dressed. Fed cattle took a nose dive on both the futures market and the cash market. This is largely due to the announcement by Cargill closing a processing facility with the capacity to process 4,650 animals a day. The dive in prices did help to achieve some convergence in the cash and futures market though, which is an indicator of markets working efficiently. Boxed beef prices have been stale and corn prices have been increasing. These two factors are putting major pressure on packers and feeders. There does not appear to be any relief in sight for either party in the coming weeks as the boxed beef market witnessed some deterioration this week. It may be a few weeks before the fed market gains much strength.
BEEF CUTOUT: At midday Friday, the Choice cutout was $191.02 down $1.18 from Thursday and down $3.20 from last Friday. The Select cutout was $182.52 down $1.04 from Thursday and down $1.29 from last Friday. The Choice Select spread was $8.51 compared to $10.41 last week. The Choice Select spread has narrowed by $13.18 over the past 7 weeks. Consumer preference and seasonality of consumer preference are the driving factor. Packers continue trying to pass along higher prices to the consumer, but to little or no avail. It is a general tendency for consumers to purchase lower valued cuts and beef products during the winter months. The trend is likely to persist until summer grilling season gives the market a boost when consumers tend to purchase choice quality grilling cuts. However, higher retail beef prices may result in consumers continuing to purchase not only lower valued cuts but also less beef. The Livestock Marketing Information Center (LMIC) is forecasting pork production to be greater than beef production in 2013 and that could result in folks substituting more pork for beef this year. The Choice Select spread is likely to continue narrowing which will continue to put downward pressure on feeder cattle prices and fed cattle prices.
TENNESSEE AUCTIONS: On Tennessee auctions this week, feeder steers and feeder bulls were $3 to $10 lower with lightweight calves $15 lower. Heifers were $3 to $6 lower with lightweights $10 lower. Slaughter cows and bulls were called steady. Average receipts per sale were 417 head on 12 sales compared to 873 head on 12 sales last week and 700 head on 11 sales last year.
OUTLOOK: Tennessee trends appear bleak given the way weekly market prices appeared to plummet this week. The losses this week negate the gains from last week relative to the last sale week in 2012. A number of factors contributed to this week’s price decline. There have been very few happenings favorable to the cattle market this week and more happenings that have been detrimental to cattle prices. Starting close to home, the 3 to 5 days of rain across the state this week made for a quagmire in most producers pastures and dry lots which resulted in fewer animals going to market. This is never more evident in average receipts this week declining more than 52% compared to last week. Being fare though, the first full marketing week in January is generally the largest cattle receipt week of the year due to the holiday shortened sale weeks and some producers holding cattle due to tax reasons. Another unfavorable happening was the idling of a Cargill processing facility in Plainview, TX. This pushed both feeder cattle and live cattle futures downward which in turn resulted in lower cash cattle prices. It is likely some of the futures price decline was a knee-jerk reaction and will recover a little over a few trading days. However, that does not mean we will see prices escalate to their prior highs. The cash markets for feeder calves and cattle tend to strengthen in February and March as we head into “grass fever” days. This normal strengthening is likely to occur this year as it does most years, but it looks less favorable that we will witness year-over-year gains in cattle prices this spring. We do have a reduced supply of feeder animals which supports the price but the feedlot is still struggling with the high feed cost established due to last year’s drought.
TECHNICALLY SPEAKING: Based on Thursday’s closing prices, February live cattle closed at $126.60. Support is at $125.08, then $121.61. Resistance is at $128.56, then $132.03. The RSI is 27.17. April closed at $130.88. Support is at $129.38, then $126.08. Resistance is at $132.68, then $135.98. The RSI is 26.28. June closed at $126.73. Support is at $125.30, then $125.29. Resistance is at $128.50, then $129.30. The RSI is 26.30. January feeders closed at $144.40. Support is at $143.52, then $140.99. Resistance is at $146.04, then $148.57. The RSI is 28.31. March feeders closed at $145.85. Support is at $144.68, then $141.81. Resistance is at $147.56, then $150.43. The RSI is 27.10. May feeders closed at $150.35. Support is at $150.33, then $149.45. Resistance is at $152.45, then $152.95. The RSI is 26.86. Friday’s closing prices were as follows: Live/fed cattle – February $124.95 -1.65; April $129.83 -1.05; June $126.25 -0.48; Feeder cattle – January $143.90 -0.50; March $146.35 +0.50. April $148.85 +0.63; May $151.13 +0.78; March corn closed at $7.28 up $0.03 from Thursday.
