Weekly Livestock Comments, March 1, 2013

FED CATTLE: Fed cattle sold mainly $5 higher on a live basis and about $8 higher on a dressed basis compared to last week. Prices in the South were primarily $127 to $129 while prices in the North ranged from $201 to $205 with most trade occurring at $203. The 5-area weighted average prices thru Thursday were $127.84 live, up $5.08 from last week and $203.30 dressed, up $7.72 from a week ago. A year ago prices were $128.92 live and $205.02 dressed. Live cattle futures markets climbed the ladder this week with cash trade following their lead. The majority of the price strengthening in live cattle was due to the Choice and Select cutout values making positive gains. The increase in the cutout value price allows for more margin room among the industry players. Normally, we could expect the increase in prices to be sustained for a little while. However, with the potential furlough of meat inspectors on the horizon, another negative dynamic is introduced to the market that was not expected by most folks in the industry.

BEEF CUTOUT: At midday Friday, the Choice cutout was $187.49 up $1.33 from Thursday and up $4.75 from last Friday. The Select cutout was $185.25 down $0.51 from Thursday and up $4.72 from last Friday. The Choice Select spread was $2.24 compared to $2.21 last week. It appears the beef market may have started making its turn around as both the Choice and Select cutouts experienced significant strengthening this week. The general trend is for boxed beef to start coming out of its winter lull in March as consumers start transitioning from lower valued beef cuts to higher valued cuts. Consumers drive the beef market. Therefore, what the consumer is willing to pay based on the particular cuts and the quality of the beef is the driver for the rest of the industry. This was evident from the jump in live cattle prices. Consumers will unlikely be willing to purchase the same quantity of the same cuts of beef this year as last year at higher prices. However, consumers may be willing to purchase fewer higher valued cuts and increase consumption of lower valued cuts to meet the desired beef consumption level. Consumers will still want to throw steaks on the grill this summer, but they may decrease the number of times the grill is used for steaks and increase its use for hamburgers. TENNESSEE AUCTIONS: On Tennessee auctions this week, feeder steers under 500 pounds were $7 to $8 lower with those over 500 pounds $1 to $2 lower. Feeder bulls were steady to $1 higher while heifers were steady to $2 lower. Slaughter cows were steady to $1 higher while bulls were $1 to $4 higher. Average receipts per sale were 502 head on 12 sales compared to 608 head on 12 sales last week and 850 head on 12 sales last year.

OUTLOOK: Local market prices continue to trend downward which seems very much backwards compared to what normally happens to prices this time of year. Stocker calf prices are normally on the rise as we head into March due to the prospects of good grass also known as “grass fever”, and the little fact of fewer calves are traditionally marketed in the spring compared to the fall. However, our local prices are greatly influenced by what is occurring west of here in Plains states. Significant weather moved through much of cattle country this past week which slowed cattle movement from all aspects of the industry from stocker cattle to feeder cattle to finished cattle. This slowdown in cattle movement did not leave Tennessee producers unscathed as many Southeastern cattle are moved west during the spring to be grown before entering the feedlot. Additionally, most of the Plains states are still suffering from the tremendous drought. Many of the areas received either rain or snow this past week, but it was not drought busting precipitation. With that being said, it is difficult to move cattle west when there are harsh weather conditions and when ranchers still feel it is too risky to take on cattle until significant amounts of precipitation are received to promote forage growth and refill stock ponds. Prices will eventually have to stop declining, and that occurrence is likely to happen sooner rather than later. Expect stocker cattle prices to increase by mid to late March while animals ready to enter the feedlot will probably not see much of a price increase until late April and into May. The reduced supply of feeder cattle will kick in soon which should send feeder cattle prices skyrocketing.

TECHNICALLY SPEAKING: Based on Thursday’s closing prices, April live cattle closed at $129.85. Support is at $129.62, then $129.07. Resistance is at $130.17, then $130.72. The RSI is 44.13. June closed at $124.95. Support is at $124.75, then $123.70. Resistance is at $126.25, then $126.305. The RSI is 39.62. August closed at $125.75. Support is at $125.50, then $124.75. Resistance is at $126.60, then $127.05. The RSI is 39.33. March feeders closed at $142.00. Support is at $141.78, then $141.21. Resistance is at $142.36, then $142.93. The RSI is 36.33. May feeders closed at $148.05. Support is at $147.55, then $147.40. Resistance is at $149.13, then $149.85. The RSI is 38.80. August feeders closed at $154.88. Support is at $154.40, then $154.13. Resistance is at $156.43, then $157.00. The RSI is 40.44. Friday’s closing prices were as follows: Live/fed cattle –April $129.95 +0.10; June $125.10 +0.15; August $125.73 -0.03; Feeder cattle – March $141.55 -0.45; April $144.15 -0.78; May $147.40 -0.65; August $154.35 -0.53; March corn closed at $7.24 up $0.05 from Thursday.

Source: Dr. Andrew P. Griffith, Universit of Tennessee Institute of Agriculture