Weekly Livestock Comments March 8, 2013

FED CATTLE: Fed cattle sold mainly steady compared to last week. Prices on a live basis were primarily $127 to $128 while dressed prices ranged from $203 to $204. The 5-area weighted average prices thru Thursday were $127.72 live, down $0.12 from last week and $203.26 dressed, down $0.04 from a week ago. A year ago prices were $126.77 live and $201.82 dressed. The jump in fed cattle prices last week helped improve feedlot operators’ margins. Those margins were not hindered or helped much as prices were steady this week, but it is not likely the feedlot is complaining too much. It could have been suspected that fed cattle prices might be given a boost since beef cutout prices strengthened considerably within the last week, but they were likely trying to play catch up. The one bad set of information is that live cattle futures have felt some pressure and left many folks in the industry apprehensive to make a move either way.

BEEF CUTOUT: At midday Friday, the Choice cutout was $197.72 up $0.82 from Thursday and up $10.23 from last Friday. The Select cutout was $195.10 up $0.01 from Thursday and up $9.85 from last Friday. The Choice Select spread was $2.62 compared to $2.24 last week. The cutout has been well behind year ago prices the past few weeks as primal cuts still lag year ago levels. However, tremendous strides have been made the past two weeks. The improvement in the cutout price has helped improve packer margins even though they are paying higher prices for fed cattle. We sometimes discuss one or two primal cuts driving the cutout and really making head way. However, most cuts have been contributing significantly to beef price improvements the past couple of weeks with the chuck and the round showing their late winter strength. The industry is currently sitting in the position where it will soon be in transition mode from end meats to middle meats as we approach warmer weather and grilling season. In the near future, the consumer will reveal their willingness to pay for the higher end cuts of beef, or whether or not they will consume lower valued beef or start purchasing more competing meats. This will give an idea where the cutout may drive fed cattle and feeder cattle prices. TENNESSEE AUCTIONS: On Tennessee auctions this week, feeder steers under 500 pounds were $3 to $6 higher with those over 500 pounds steady to $3 higher. Feeder bulls were unevenly steady while heifers were steady to $4 higher. Slaughter cows were $1 to $3 higher while bulls were steady. Average receipts per sale were 446 head on 12 sales compared to 432 head on 12 sales last week and 683 head on 12 sales last year.

OUTLOOK: The “grass fever” gates may have finally opened for the lightweight calves to be let in the field. Market prices on calves this week resulted in almost a complete reversal compared to last week’s Tennessee market report. Tennessee has had sufficient quantities of moisture this winter with prospects of spring like weather for the next several days resulting in buyers looking more favorably on purchasing calves. The Plains states have also received precipitation and are expecting more which plays into the strengthening of local market prices. It is likely the calf market will continue to strengthen the next few weeks and then find a soft spot as we head into April and May. The feeder market is simply trying to hang on right now. If the animals are ready to enter the feedlot or have prospects of entering the feedlot within the next 3 or 4 months then there has been very little price movement. A primary reason for the stagnant price is that animals currently entering the feedlot are still facing a high cost of gain relative to expectations of animals entering the feedlot in the fall of the year. The higher cost of gain continues to squeeze the margin for feeders resulting in a lower bid price for feeder cattle. However, yearling cattle prices should start to gain some traction in May and hold through the summer. It would not be surprising to see yearling prices hold strong a little longer than normal since the supply of cattle is low relative to previous years. The slaughter cow market continues to strengthen as is the seasonal tendency. Cull cow prices generally peak in mid to late May, and have been exceptionally strong since the lean finely textured beef debacle a year ago. Cull cow prices are expected to continue their upward price movement for a couple more months so if they can be held at a minimum cost then it may be beneficial to hold them on grass for a while.

TECHNICALLY SPEAKING: Based on Thursday’s closing prices, April live cattle closed at $128.30. Support is at $128.00, then $127.15. Resistance is at $128.85, then $129.70. The RSI is 36.63. June closed at $124.45. Support is at $123.88, then $122.88. Resistance is at $124.88, then $125.88. The RSI is 39.97. August closed at $125.25. Support is at $124.80, then $123.30. Resistance is at $125.75, then $126.35. The RSI is 38.86. March feeders closed at $140.48. Support is at $140.13, then $139.43. Resistance is at $141.00, then $141.78. The RSI is 33.60. May feeders closed at $144.93. Support is at $144.25, then $143.45. Resistance is at $147.40, then $147.90. The RSI is 31.73. August feeders closed at $151.85. Support is at $151.45, then $150.30. Resistance is at $154.50, then $154.58. The RSI is 32.53. Friday’s closing prices were as follows: Live/fed cattle –April $127.55 -0.75; June $123.38 -1.08; August $124.28 -0.98; Feeder cattle – March $138.98 -1.50; April $141.35 -1.28; May $143.85 -1.08; August $150.55 -1.30; March corn closed at $7.25 up $0.14 from Thursday.

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