Weekly Livestock Comments, April 5, 2013
FED CATTLE: Fed cattle sold mainly steady to $1 higher compared to last week. Prices on a live basis were primarily $128 to $129 while dressed prices were $203 to $204. The 5-area weighted average prices thru Thursday were $128.29 live, up $0.53 from last week and $204.47 dressed, up $1.09 from a week ago. A year ago prices were $121.91 live and $193.39 dressed. Very little change in the fed market this week as the futures market took a turn for the worst mid-week and continues to struggle at the end of the week. It is not a bad situation as the live price is $6 higher than it was a year ago this week. Lower corn prices are certainly not hurting feeders as they have declined more than a dollar the past week. The market may catch another gust of wind in its sails and find some more traction if the cutout value finds some significant traction, but we may have to wait a few days to find out.
BEEF CUTOUT: At midday Friday, the Choice cutout was $191.69 down $0.03 from Thursday and up $2.79 from last Friday. The Select cutout was $188.29 up $0.04 from Thursday and down $0.53 from last Friday. The Choice Select spread was $3.40 compared to $0.08 last week. Choice meats appear to be building up steam to make a strong spring showing. Warmer weather will usher in spring and summer grilling of beef items. However, it will also usher in the grilling of poultry and pork items as well. The Choice Select spread is expected to continue to widen as we approach warmer weather. Grilling enthusiasts like to throw Choice steaks on the grill as opposed to Select steaks meaning consumers are willing to pay for quality. The good news is that Japan has been accepting beef from cattle up to 30 months of age which should continue to support beef prices. The bad news is that Russia will only accept beef and pork that is certified to be free of ractopamine residues, a beta agonist used in pork, beef, and turkey production. Similarly, China has demanded that U.S. pork be certified to be free of ractopamine residues. The problem pork presents is due to the possibility of pork prices being depressed and making pork more attractive than beef items due to the lower price of pork. The slowdown in beef trade speaks for itself in that less beef being consumed will lower its value. TENNESSEE AUCTIONS: On Tennessee auctions this week, feeder steers under 400 pounds were $10 to $14 higher while steers over 400 pounds were $5 to $9 higher. Bulls under 500 pounds were $13 to $15 higher with those over 500 pounds $6 to $11 higher. Heifers were $6 to $10 higher. Slaughter cows were steady while bulls were $1 to $2 lower. Average receipts per sale were 598 head on 12 sales compared to 417 head on 12 sales last week and 542 head on 12 sales last year.
OUTLOOK: This may mark the beginning of the turnaround in cattle markets this spring as the majority of losses the past couple of weeks were recaptured this week. A number of factors have contributed to this positive movement in prices. The leading component is likely the corn market. The March corn stocks report showed 400 million more bushels of corn left on the books that analyst did not anticipate. Additionally, expectations for new crop corn are high even though farmers have had a difficult time getting the planter in the field. Both corn related factors have depressed corn prices which typically help support cattle prices. Though farmers would like to get in the field to start planting, it is doubtful many folks are complaining. It is unlikely any complaints will be heard since moisture is what is keeping them out of the field, and last year the skies never opened. If farmers are unable to start planting soon, new crop corn prices could turn the other direction which would send cattle prices plummeting. The rain that is keeping corn growers out of the field in the Mid-West is a welcome sign of hopeful new beginnings in the Great Plains and the Southeast as the moisture should promote forage growth as temperatures warm. Most areas are thankful for the moisture, but some may still be unable to utilize the forage produced due to lack of runoff to fill ponds. The third factor is that we are approaching a seasonal increase in beef demand. As beef demand improves so do cattle prices. Calf prices are likely to see a little more improvement the next couple of weeks, but it is not likely to be sustained at that high of a level as stocker producers fill up pastures. Tremendous jumps in feeder cattle prices are not likely to occur for another month or two, but should be reaching their annual high in July and August. Cull cow prices continue to struggle as the pressure from dairy cow slaughter continues.
TECHNICALLY SPEAKING: Based on Thursday’s closing prices, April live cattle closed at $127.25. Support is at $126.88, then $125.82. Resistance is at $127.93, then $128.98. The RSI is 45.70. June closed at $122.35. Support is at $121.92, then $120.77. Resistance is at $123.07, then $124.22. The RSI is 44.04. August closed at $123.20. Support is at $122.90, then $122.55. Resistance is at $124.05, then $125.25. The RSI is 42.64. May feeders closed at $145.95. Support is at $145.93, then $154.91. Resistance is at $145.96, then $145.98. The RSI is 53.34. August feeders closed at $152.83. Support is at $152.80, then $152.08. Resistance is at $154.28, then $154.40. The RSI is 53.25. October feeders closed at $155.63. Support is at $155.40, then $155.20. Resistance is at $156.30, then $156.65. The RSI is 52.34. Friday’s closing prices were as follows: Live/fed cattle –April $126.03 -1.23; June $121.50 -0.85; August $122.25 -0.95; Feeder cattle – April $142.58 -1.33; May $144.30 -1.65; August $151.20 -1.63; October $154.00 -1.63; May corn closed at $6.29 down $0.01 from Thursday.
