Weekly Livestock Comments

FED CATTLE: Fed cattle sold steady to $2 lower on a live basis compared to last week. Live prices were primarily $122 to $123 with a range of $120 to $124 while dressed prices were primarily $197 to $198 but ranging from $192 to $200. The 5-area weighted average prices thru Thursday were $122.53 live down $1.67 from last week and $197.93 dressed up $0.17 from a week ago. A year ago prices were $123.00 live with no dressed price quoted. Fed cattle prices continue struggling to make price improvements. Many folks thought supply of cattle was going to control the marketplace. It may very well be controlling the marketplace, but not how most people thought it would. The supply of feeder cattle is declining which reduces the supply of fed cattle which would logically result in an increase in the price for both feeder and fed cattle. However, the price of beef has increased and the market is feeling some pushback from consumers. This is further compounded by feed costs remaining high. The weakness in the fed market may last a few more weeks, but don’t count on it to persist indefinitely. The fed market is likely to gain traction in February.

BEEF CUTOUT: At midday Friday, the Choice cutout was $187.60 down $0.41 from Thursday and down $3.42 from last Friday. The Select cutout was $182.18 down $0.01 from Thursday and down $0.34 from last Friday. The Choice Select spread was $5.43 compared to $8.51 last week. The Choice Select spread has been narrowing for the past two months, and it usually continues this pattern through February. Last year, the spread narrowed until the end of March before Choice cuts started picking up as retailers and consumers started gearing up for the summer grilling months. Packers continue to try and push higher beef prices on consumers, but consumers are having no part or it. The stagnant economic conditions and high beef prices have many consumers substituting pork and poultry items for beef items. Consumers have spoken in a manner that hits the beef industry in the “piggy bank” by reducing the quantity of beef purchased. High fixed costs associated with packing facilities and the reduced supply of cattle is a major reason beef prices continue to escalate. Spreading fixed costs over fewer cattle increases cost per carcass and tightens margins which indicate that the packing house capacity is too high given current conditions.

TENNESSEE AUCTIONS: On Tennessee auctions this week, steers under 650 pounds steady to $5 higher with a few $10 higher while steers over 650 pounds were $3 to $5 lower. Feeder bulls were steady to $5 higher. Heifers were steady to $5 higher. Slaughter cows were called steady to $2 higher while bulls were $1 to $2 higher. Average receipts per sale were 499 head on 12 sales compared to 313 head on 12 sales last week and 742 head on 12 sales last year.

OUTLOOK: Most of the interest in Tennessee cattle was for lightweight grazing stock and for evermore valuable heifers. Some buyers appear to be getting a jump start on purchasing lightweight calves to put on grass in the spring. This is a little earlier than normal. These buyers are taking on a little more risk by purchasing this early, but if weather conditions turn out favorable then the reward may be great considering lightweight calf prices are likely to increase in late February and early March. There is also much interest in purchasing heifers. Many of these heifer calves are still under 600 pounds and can be marketed one of two ways, either through a feeder system or to enter the breeding herd. There is still quite a bit of risk with early purchases to put on grass, but the reward potential with heifers may be greater than that of the lightweight steers since there are more marketing options. The market for slaughter cows and bulls remains strong relative to previous years. It is still being driven by lean beef demand. Yearling cattle are usually a very consistently priced class of cattle throughout the year, but they are feeling tremendous amounts of pressure from the inability of packers to increase the cutout price resulting in lower fed cattle prices which are unable to support price increases in feeder cattle. 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, 2013 totaled 11.2 million head down 6% compared to a year ago which is slightly fewer cattle on feed than pre-report estimates indicated. December placements in feedlots totaled 1.66 million head, down 1% from a year ago while pre-report estimates expected cattle placements to be up about 4.1%. December marketing’s totaled 1.75 million, down 2% from 2011 while pre-report estimates had marketings down 6.8%. Placements on feed by weight: under 600 lbs. down 10.0%; 600 to 799 lbs. up 6.6%; over 800 lbs. down 0.8%. Fewer lightweight calves are entering the feedlot which may be an indicator that stocker producers are grabbing them up to put on grass. It is also indicative of the high feed costs feedlots are facing and therefore they do not want to carry a calf for 600 pounds or more of gain. On the other hand, supply is low and feedlots are looking for heavier cattle and thus the increase in placements of those over 600 pounds. The report is even more bullish than the already bullish pre-report estimates. This is favorable news for the cattle industry.

TECHNICALLY SPEAKING: Based on Thursday’s closing prices, February live cattle closed at $125.88. Support is at $125.69, then $125.19. Resistance is at $126.19, then $126.69. The RSI is 29.38. April closed at $130.35. Support is at $130.10, then $129.45. Resistance is at $130.75, then $131.40. The RSI is 28.06. June closed at $126.80. Support is at $126.68, then $125.65. Resistance is at $128.50, then $129.30. The RSI is 29.94. January feeders closed at $144.60. Support is at $144.20, then $143.90. Resistance is at $146.80, then $147.08. The RSI is 31.91. March feeders closed at $147.95. Support is at $147.77, then $147.47. Resistance is at $148.07, then $148.37. The RSI is 37.56. May feeders closed at $154.25. Support is at $153.78, then $153.13. Resistance is at $155.10, then $155.15. The RSI is 46.77. Friday’s closing prices were as follows: Live/fed cattle – February $126.30 +0.43; April $130.75 +0.40; June $126.53 -0.28; Feeder cattle – January $144.70 +0.10; March $147.95 +0.00. April $151.15 -0.03; May $154.33 +0.08; March corn closed at $7.21 down $0.04 from Thursday.

Source: Dr. Andrew P. Griffith