Weekly Livestock Comments, April 1, 2013

FED CATTLE: Fed cattle sold mainly $2 to $3 higher on a live basis and $5 higher on a dressed basis compared to last week. Prices on a live basis were primarily $127 to $129 while dressed prices were $203 to $204. The 5-area weighted average prices thru Thursday were $127.76 live, up $2.99 from last week and $203.08 dressed, up $5.37 from a week ago. A year ago prices were $125.72 live and $201.88 dressed. The tide may have just turned for feedlot margins as the fed cattle market made its first big move of the spring. There are going to be plenty more obstacles for feedlots to overcome in the future weeks as they continue to deal with high feed costs and lower numbers of calves to enter the feedlot. However, feeders will take any positive price improvement in fed cattle they can get right now. Live cattle futures made tremendous positive price improvements as well as cash trade so the market seems to be working in harmony.

BEEF CUTOUT: At midday Friday, the Choice cutout was $188.90 down $0.17 from Thursday and down $3.27 from last Friday. The Select cutout was $188.82 down $0.02 from Thursday and down $4.22 from last Friday. The Choice Select spread was $0.08 compared to -$0.87 last week. Things are not looking so good for packer margins this week. The cutout had been trying to press ahead the past few weeks which helped improve packer margins for a short span, but prices headed south again this week and do not appear to be finding traction anywhere. Cold weather that persists across much of the nation may be as much to blame as supply and demand factors. A couple weeks of warm weather might provide the support that cutout prices really need to make a run at beating the $200 mark this spring. The $200 mark is the price level that seemed to be the resistance point last year, but the market may be poised to make a run at it as grilling season heats up. As far as packers are concerned, warm weather and grilling season cannot get here fast enough while feeders want to capitalize in the near term. The Choice Select spread is likely to start widening for the next few months as consumers look to purchase more Choice cuts and as the supply of Select meats increase due to calf fed animals hitting the market. TENNESSEE AUCTIONS: On Tennessee auctions this week, feeder steers and bulls were steady to $5 lower. Heifers were $1 to $3 lower. Slaughter cows were steady to $2 lower while bulls were mostly steady. Average receipts per sale were 462 head on 11 sales compared to 682 head on 11 sales last week and 583 head on 12 sales last year.

OUTLOOK: Questions abound concerning why lightweight cattle prices are so weak during the “grass fever” time of year. Grass has started to green but little growth has occurred. Cool season grasses normally take off as temperatures start to rise, but warm temperatures have failed to sustain themselves to promote forage growth. There are not many stocker producers who want to purchase high risk calves then have to feed them expensive hay or grain based feeds for two to three weeks before the grass can provide enough nutrients to meet the cattle’s needs. There is still a good chance that lightweight cattle prices will improve, but many stocker producers recognize the opportunity that 600 pound calves offer relative to higher priced lightweight cattle. The market may still turn around, and if it does not then holding on to lightweight cattle might not be a bad option as heavier cattle that can go straight to the feedlot may witness strong prices in July and August. The heifer market is also failing to find much footing. Interest in the heifer market will start to pick up later in the year if significant moisture falls across the nation the next couple of months. There are a lot of producers who are still trying to hold on to what they have as they continue to suffer from the extensive drought. However, consistent rainfall for a couple of months may alter producers’ plans. Slaughter cow prices lost a little more ground this week and this may be due to all the dairy cows that have been slaughtered the past few weeks as dairymen here and in Canada market a few head. It is unlikely cull prices will continue to decline as they normally peak the third week in May.

TECHNICALLY SPEAKING: Based on Thursday’s closing prices, April live cattle closed at $128.90. Support is at $128.18, then $127.08. Resistance is at $129.28, then $130.38. The RSI is 53.83. June closed at $124.38. Support is at $123.58, then $122.38. Resistance is at $124.78, then $125.98. The RSI is 54.19. August closed at $125.20. Support is at $124.25, then $124.03. Resistance is at $125.73, then $126.35. The RSI is 53.09. May feeders closed at $145.07. Support is at $144.91, then $144.66. Resistance is at $145.16, then $145.41. The RSI is 52.10. August feeders closed at $152.25. Support is at $152.08, then $149.25. Resistance is at $154.50, then $154.55. The RSI is 52.88. October feeders closed at $155.50. Support is at $155.20, then $152.50. Resistance is at $156.10, then $157.55. The RSI is 53.53. Friday’s closing prices were as follows: Live/fed cattle –April $128.90 +1.55; June $124.38 +1.40; August $125.20 +1.18; Feeder cattle – April $143.40 +3.00; May $145.08 +3.00; August $152.25 +3.00; October $155.50 +3.00; May corn closed at $6.95 down $0.40 from Thursday.

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