Weekly Livestock Comments, April 26, 2013
FED CATTLE: Fed cattle on a live basis sold mainly $2 higher compared to last week. Prices on a live basis were primarily $127 to $129 while dressed prices were $202 to $203. The 5-area weighted average prices thru Thursday were $127.43 live, up $2.20 from last week and $202.60 dressed, up $2.60 from a week ago. A year ago prices were $119.79 live and $193.69 dressed. The cash market and futures both surged ahead this week during a time period when the basis tends to be the strongest. The strong basis will likely pull cattle forward as feeders attempt to capitalize on strong prices. How long this price improvement can sustain itself will be the daunting question as fed cattle supplies are expected to increase the next few months resulting in suppressed fed cattle prices. The basis will slowly start eroding resulting in increased cash price risk relative to futures price risk.
BEEF CUTOUT: At midday Friday, the Choice cutout was $191.81 up $0.27 from Thursday and up $1.53 from last Friday. The Select cutout was $184.46 down $0.04 from Thursday and down $0.86 from last Friday. The Choice Select spread was $7.35 compared to $4.96 last week. The Choice cutout price made a meager improvement compared to last week. However, it was not the jump most in the industry are searching for. Ribeye prices are doing very little to support the cutout as they are 2.4 percent lower than the same time last year and are 17 percent lower than the 2012 summer high. As the weather warms, ribeye prices should make a run for the 2012 summer high. Another faltering item is lean trimmings. Lean trimmings tend to be in high demand year round, but the price has been slack the last couple of weeks. Loin prices have found some traction as they have improved 29 percent since early March and are 10 percent higher than the same week last year. Chuck prices continue to support the cutout as prices remain flat but above year ago prices. Fifty percent lean trimmings may be the biggest story of the year thus far as prices have increased by 52 percent since the middle of February. Prices are nearing the level they held in the first quarter of 2012 before the lean finely textured beef debacle. It is likely the higher valued cuts will start to gain some steam as the weather warms. TENNESSEE AUCTIONS: On Tennessee auctions this week, feeder steers and bulls were unevenly steady. Heifers were $1 to $3 higher. Slaughter cows were steady to $2 higher with bulls $1 to $3 higher. Average receipts per sale were 575 head on 12 sales compared to 592 head on 12 sales last week and 608 head on 12 sales last year.
OUTLOOK: Prices from weekly auction sales did not provide a lot of encouragement this week. However, they did not add to the discouragement from cattle prices either. Calf prices and feeder cattle prices this spring have been considered to be underperforming compared to historical cattle prices in the spring of the year by most producers and industry analysts. Cattle producers have yet to witness the spring run up in prices for cattle to be placed on grass, and the market may be past the point where there will be a large increase in prices. That is not to say that prices will not improve a few dollars the next couple of weeks as there is still potential for stocker producers to carry lighter weight cattle on grass and supplemental feed over the summer months and turn a profit. May feeder cattle futures have declined as much as 13 percent since January, but they have made more than a $3 per hundredweight improvement this week. Though the improvement in May feeder cattle futures prices did not seem to carry over into local cash price improvements this week, the more interesting futures contract is for August feeder cattle. August feeder cattle futures traded at $164.00 per hundredweight on January 7. The contract traded as low as $144.75 on April 22 which is nearly a 12 percent decline in price from January. However, Friday’s closing price was $152.15 per hundredweight which is only a 7 percent decline from the contract high. The modest improvement in futures prices compared to the slow to improve cash price could provide stocker producers the opportunity to buy cattle low and set a floor using a put option for August feeder cattle, but leaving the top side open. Cull cows finally found some footing this week. The cull market may have a few more northward strides as the market is usually strongest from mid-May to early June.
TECHNICALLY SPEAKING: Based on Thursday’s closing prices, April live cattle closed at $127.60. Support is at $126.92, then $125.82. Resistance is at $128.02, then $129.12. The RSI is 53.91. June closed at $122.90. Support is at $122.03, then $120.65. Resistance is at $123.40, then $124.78. The RSI is 54.47. August closed at $123.73. Support is at $122.55, then $122.40. Resistance is at $125.00, then $125.08. The RSI is 54.95. May feeders closed at $142.20. Support is at $141.00, then $139.20. Resistance is at $142.80, then $144.60. The RSI is 49.03. August feeders closed at $152.15. Support is at $150.25, then $148.13. Resistance is at $152.83, then $153.50. The RSI is 57.77. October feeders closed at $155.65. Support is at $154.40, then $152.13. Resistance is at $156.30, then $156.65. The RSI is 58.25. Friday’s closing prices were as follows: Live/fed cattle –April $127.85 +0.25; June $122.60 -0.30; August $123.28 -0.45; Feeder cattle – May $141.80 -0.40; August $151.18 -0.98; October $154.65 -1.00; November $155.20 -1.00; May corn closed at $6.44 down $0.01 from Thursday.
