Weekly Livestock Comments, March 22, 2013 – UT Institute of Agriculture

FED CATTLE: Fed cattle sold mainly $2 lower compared to last week. Prices on a live basis were primarily $124 to $125 while dressed prices were primarily $198. The 5-area weighted average prices thru Thursday were $124.77 live, down $1.74 from last week and $197.71 dressed, down $5.14 from a week ago. A year ago prices were $126.59 live and $203.14 dressed. Fed prices continued to weaken. The one boost in prices this spring was due to poor weather conditions that slowed cattle movement for a week or two. The positive strides have failed to carry over and the near term prices are not looking positive. Feedlot operators are still struggling as they continue to have a lot of red ink and price declines in fed cattle will not help. It would be expected that prices would pick up as we head towards grilling season, but the market currently looks dismal.

BEEF CUTOUT: At midday Friday, the Choice cutout was $192.17 down $0.81 from Thursday and down $3.75 from last Friday. The Select cutout was $193.04 down $0.20 from Thursday and down $1.16 from last Friday. The Choice Select spread was -$0.87 compared to $1.71 last week. Cutout prices continue to decline even when there is some positive information concerning beef markets. The Choice cutout has declined $5.55 the past two weeks and is now selling at a discount to the Select cutout. The negative Choice Select spread is not a misprint or a typo. Compared to Choice beef, lower quality Select boxed beef is selling for a higher price. A few weeks ago analyst were saying the spread had likely narrowed all it was going to and that Choice prices would start to pick up, widening the spread. Historical fundamentals of the market agree with analyst predictions. However, the fundamentals change as the market place changes, and it has changed. From the production side, cattle inventory is at its lowest point in over 60 years and feed prices have been pushing the same envelope. On the consumption side, retail beef prices have set record highs recently, but disposable income has failed to keep pace. Consumers prefer to eat higher quality beef (Choice) relative to lower quality beef (Select), but we may be witnessing consumers shifting to lower quality beef in order to continue consuming beef. TENNESSEE AUCTIONS: On Tennessee auctions this week, feeder steers and bulls were $3 to $10 lower with instances of $15 lower. Heifers were $6 to $10 lower. Slaughter cows were $1 to $2 lower while bulls were mostly steady. Average receipts per sale were 690 head on 12 sales compared to 682 head on 11 sales last week and 608 head on 12 sales last year.

OUTLOOK: Local markets are trending down with the rest of the cattle complex. Feedlots are reluctant to pay higher prices for feeder calves due to losses already incurred in the harsh feed cost environment and the expected losses that will occur with cattle currently on feed. Fed cattle prices are not doing much in a positive manner to encourage higher feeder cattle prices either. Uncertainty has cattle markets under its strong grip. Much of this uncertainty lies in the grain industry. We may see some positive movements once corn and soybeans are actually in the ground, but it may take solid yield information before the majority of the movement takes place. Many folks are a little gun shy currently, because at this time last year every indication was record corn yields. Then drought shot that duck out of the air. There is also uncertainty regarding consumer’s willingness to continue paying higher prices for beef which puts a scare into margin operators. One surprise this week was the slight decline in cull cow prices. It is doubtful the decline will be sustained as expectations are for slaughter cow prices to strengthen into May. It is likely prices for lightweight calves going to grass will still make some positive movements the next month or so, but yearling cattle will face strong opposition for another couple of months if not through the first part of the summer months. The March cattle on feed report for feedlots with a 1000 head or more capacity indicated cattle and calves on feed as of March 1, 2013 totaled 10.9 million head down 7% compared to a year ago and at the low end of pre-report estimates. February placements in feedlots totaled 1.48 million head, down 14% from a year ago while pre-report estimates estimated placements down only 9%. February marketing’s totaled 1.64 million, down 7% from 2012 and in line with pre-report estimates. Placements on feed by weight: under 700 lbs. down 15.0%; over 700 lbs. down 12.5%. It appears low cattle inventory is becoming more apparent with placements, marketings, and cattle on feed numbers all declining compared to a year ago. Movements in the marketplace are not expected to be drastic given the information was expected.

TECHNICALLY SPEAKING: Based on Thursday’s closing prices, April live cattle closed at $126.43. Support is at $125.97, then $125.04. Resistance is at $126.89, then $127.82. The RSI is 37.38. June closed at $122.00. Support is at $121.59, then $120.64. Resistance is at $122.54, then $123.49. The RSI is 35.83. August closed at $123.53. Support is at $123.25, then $121.85. Resistance is at $124.13, then $125.73. The RSI is 39.19. March feeders closed at $135.15. Support is at $135.15, then $135.10. Resistance is at $135.25, then $136.70. The RSI is 23.20. May feeders closed at $140.48. Support is at $140.40, then $139.85. Resistance is at $141.93, then $142.50. The RSI is 26.84. August feeders closed at $148.10. Support is at $147.55, then $147.15. Resistance is at $150.10, then $151.25. The RSI is 31.79. Friday’s closing prices were as follows: Live/fed cattle –April $126.20 -0.23; June $121.18 -0.83; August $122.85 -0.68; Feeder cattle – March $134.65 -0.50; April $138.05 -0.25; May $140.25 -0.23; August $147.95 -0.15; May corn closed at $7.26 down $0.07 from Thursday.