Weekly Livestock Comments, May 31, 2013
FED CATTLE: Fed cattle sold mainly steady to firm compared to last week on a live basis. Prices on a live basis were primarily $124 to $125 while dressed prices were primarily $199 to $200 on limited trade. The 5-area weighted average prices thru Thursday were $124.81 live, up $0.36 from last week and $199.06 dressed, down $0.79 from a week ago. A year ago prices were $121.90 live and $194.78 dressed. Fed cattle prices remain relatively flat again this week. However, prices are expected to erode as fed cattle supplies continue to seasonally increase. The seasonal increase in fed cattle supply has resulted in most of the leverage being shifted to the packer, but feeders are holding out for every dollar they can from the packer. Red ink will only become increasingly evident on the feeders bottom line as the price of fed cattle continues to decline.
BEEF CUTOUT: At midday Friday, the Choice cutout was $207.31 down $1.24 from Thursday and down $2.62 from last Friday. The Select cutout was $187.51 down $1.58 from Thursday and down $3.60 from last Friday. The Choice Select spread was $19.80 compared to $18.82 last week. The post Memorial Day lull is evident in the cutout price this week. The decline in both the Choice and Select cutout price was expected as cutout prices have had a tendency to decline after the big kickoff to summer grilling over the Memorial Day weekend. Consumers are not going to stop grilling by any means, but they do slow down when compared to the unofficial start to summer. There are a number of other holidays and calendar events that generally help spur beef movement such as Father’s Day, Independence Day, and Labor Day, and it is expected that beef prices will be supported by consumers grilling on these days. It is doubtful that the marketplace will see Choice beef challenge the record closing price of $211.37 in the near future, but the likelihood of prices remaining above the $200 mark through the majority of the summer would not be unimaginable. The Choice Select spread continues to widen this week as Select beef fell another dollar behind. The demand for Choice beef remains strong while the quantity of Select beef is seasonally on the increase which contributes to the widening spread. TENNESSEE AUCTIONS: On Tennessee auctions this week, feeder classes had a limited test but were considered steady. Slaughter cows and bulls were steady to firm. Average receipts per sale were 390 head on 9 sales compared to 698 head on 10 sales last week and 568 head on 11 sales last year.
OUTLOOK: The only class of cattle with enough volume to evaluate a trend this week across the state was slaughter cattle and this is the time period when cull cows seasonally reach their peak price. Cull cow prices have been fairly flat trading between $73 and $78 per hundredweight since the end of March. Marketing of cull cows generally increase towards the end of summer and into the fall. However, not much is likely to change prices over the next few weeks as the movement of cull cows to market may not see the same seasonal increase that is common in most years due to the low inventory and recent rainfall in cattle producing states. Feeder calf movement has all but come to a complete halt as other farm chores have become a priority. It is expected that heavier feeder cattle prices will gain momentum in July and August and remain strong longer into the fall when compared to historical fall prices. This will largely be due to cheaper feed prices and reduced feeder cattle supply. Much of Tennessee has had favorable weather to cure hay the past ten days or so. Therefore, many cattle producers have put off marketing cattle in favor of rolling hay for winter forage needs. For producers who utilize hay, now would be an ideal time to start calculating winter forage needs and comparing those needs to current hay inventory. Many producers will cut hay a second time later this year which will have major implications on hay availability. However, it never hurts to do some early “back of the feed sack” calculations to determine if other alternatives need to be considered before grass goes dormant. Alternatives to consider may include purchasing hay, finding additional hay fields or pastures to rent, planting summer annuals to harvest for hay, and/or culling cattle among other alternatives. Each alternative includes advantages and disadvantages and can have a major impact on the profitability of the operation.
TECHNICALLY SPEAKING: Based on Thursday’s closing prices, June closed at $120.35. Support is at $119.80, then $118.30. Resistance is at $121.30, then $122.80. The RSI is 46.99. August closed at $119.05. Support is at $118.55, then $117.10. Resistance is at $120.00, then $121.45. The RSI is 42.54. October closed at $123.08. Support is at $122.95, then $122.80. Resistance is at $124.25, then $124.30. The RSI is 44.63. August feeders closed at $144.18. Support is at $144.15, then $144.10. Resistance is at $144.20, then $144.25. The RSI is 42.82. October feeders closed at $148.00. Support is at $147.85, then $146.83. Resistance is at $149.10, then $149.30. The RSI is 42.43. January feeders closed at $149.40. Support is at $148.80, then $148.28. Resistance is at $150.25, then $150.35. The RSI is 44.10. Friday’s closing prices were as follows: Live/fed cattle – June $121.30 +0.95; August $120.45 +1.40; October $123.75 +0.68; Feeder cattle – August $144.33 +0.15; October $148.13 +0.13; November $149.73 +0.38; January $149.50 +0.10; July corn closed at $6.62 up $0.08 from Thursday.
