Weekly Livestock Comments Feb 15, 2013
FED CATTLE: Fed cattle sold mainly $2 lower on a live basis and $4 lower on a dressed basis compared to last week. Prices in the South were primarily $123 while prices in the North ranged from $194 to $197 with most trade occurring at $196. The 5-area weighted average prices thru Thursday were $122.79 live, down $3.73 from last week and $195.86 dressed, down $2.55 from a week ago. A year ago prices were $122.37 live and $195.84 dressed. Most of the talk related to fed cattle the past six months was in relation to the cost of feeding them to finished weights, and how feed cost was squeezing margins and resulting in losses by feedlots. More recently, the issue has been compounded by the ire of consumers and their pushback from high retail beef prices. Most of us in the industry thought the low supply of cattle and high feed costs due to drought would be the price drivers for cattle this year. That is not to say that they are not driving prices, because feed costs and cattle supply are definitely players. However, beef consumers are pressing their will on the industry for lower priced beef by substituting other protein sources for beef.
BEEF CUTOUT: At midday Friday, the Choice cutout was $182.83 down $0.70 from Thursday and up $0.56 from last Friday. The Select cutout was $180.71 up $1.11 from Thursday and up $0.64 from last Friday. The Choice Select spread was $2.11 compared to $2.19 last week. How much lower beef prices will go is anybody’s guess! The retail price of beef has caused consumers to think twice about beef purchases. Realizing January and February boxed beef prices usually do not break “boxed beef office” records, it would be expected they would start to show some promise of strengthening. However, prices sit low and tight which does not bode well for many parts of the cattle industry since it is highly consumer driven. What low boxed beef prices do promote is exports. Lower boxed beef prices make domestic beef appear more attractive for the export market as other nations can purchase U.S. beef for a lower price relative to when cutout prices are higher. Seasonality increases in beef consumption will begin playing a factor over the next month or so which will put a charge in cutout prices. The next question is how high can beef prices go before consumers again pushback. The 2012 year saw resistance at the $200 mark all year, and breaching that barrier may be tougher than most expect, even with low cattle inventory helping support the price.
TENNESSEE AUCTIONS: On Tennessee auctions this week, steer, bull, and heifer calves under 550 pounds where $8 to $15 lower while those over 550 pounds were $2 to $8 lower. Slaughter cows and bulls were steady. Average receipts per sale were 635 head on 12 sales compared to 700 head on 12 sales last week and 675 head on 12 sales last year.
OUTLOOK: Calves lost two weeks’ worth of upward price movement in one quick swoop. There are so many pressures on cattle markets such as feed costs, consumer demand for beef, and other drought related issues such as areas with little to now stock water that the lower supply of cattle cannot overcome the downward price spiral. Both live cattle and feeder cattle futures have been struggling with both April and August feeder cattle having traded as much as $11 lower than their contract highs achieved in December. Similarly, April live cattle are off $8 from their contract high while August live cattle have lost about $6 since their contract high in December. This week’s price decline on local markets probably has many cow-calf producers a little unnerved and probably has those who sold calves this week with a look of great disappointment relative to those who marketed calves last week. Cattle market indicators still point to increases in cattle prices, especially the second half of the year. As we roll into March, calf prices and cull cattle are likely to make some positive price movements. It is not likely they will outpace last year’s record prices the first half of the year, but be expecting the prices to strengthen. This may be the opportunity stocker producers have been looking for to purchase a few lightweight calves. With prices of calves declining as much as $15 from last week and the expectation of 7 and 8 weight cattle prices to be strong in July and August, a strong profit margin may be achievable. Regardless of a producer being a cow-calf or stocker operator, there will be opportunities this year to earn a high price. The key to making a profit with those cattle will lie in the ability of a producer to manage costs. Cost management is always important, but it may be even more important in years of elevated prices.
TECHNICALLY SPEAKING: Based on Thursday’s closing prices, February live cattle closed at $125.90. Support is at $124.80, then $123.15. Resistance is at $126.45, then $128.10. The RSI is 38.21. April closed at $129.77. Support is at $128.33, then $126.16. Resistance is at $130.51, then $132.68. The RSI is 34.26. June closed at $125.65. Support is at $124.40, then $123.50. Resistance is at $127.30, then $128.88. The RSI is 35.67. March feeders closed at $142.68. Support is at $140.53, then $137.28. Resistance is at $143.78, then $147.03. The RSI is 30.11. May feeders closed at $149.28. Support is at $147.65, then $146.20. Resistance is at $150.05, then $150.53. The RSI is 36.16. August feeders closed at $156.23. Support is at $154.60, then $152.80. Resistance is at $157.08, then $157.70. The RSI is 39.87. Friday’s closing prices were as follows: Live/fed cattle – February $126.50 +0.60; April $130.45 +0.68; June $126.28 +0.63; Feeder cattle – March $143.38 +0.70. April $146.63 +0.40; May $150.00 +0.73; August $156.90 +0.68; March corn closed at $6.99 up $0.04 from Thursday.
