Weekly Livestock Comments February 8, 2013

FED CATTLE: Fed cattle sold mainly steady on a live basis compared to last week. Live prices were primarily $125 with a few at $126. Dressed trade was limited at publishing with prices ranging from $200 to $201. The 5-area weighted average prices thru Thursday were $126.52 live up $1.56 from last week and $198.41 dressed up $0.78 from a week ago. A year ago prices were $123.25 live and $195.00 dressed. The tug-of-war continues between packers and feeders. Packers are poorly margined as the boxed beef prices continue to lose ground. Lower boxed beef prices mean packers must pay less for fed cattle to make a profit or more likely reduce losses, but packers must still fill orders. Neither the packer nor the feeder is currently in an ideal situation as losses continue to add up. Where losses end, nobody knows. Losses in the packer and feeder industry are not likely to end until after the 2013 corn crop comes to town and thus reduces feed cost. It is also going to require some strengthening in beef demand to push boxed beef prices to higher levels.

BEEF CUTOUT: At midday Friday, the Choice cutout was $182.27 down $1.19 from Thursday and down $1.72 from last Friday. The Select cutout was $180.07 down $1.06 from Thursday and up $0.51 from last Friday. The Choice Select spread was $2.19 compared to $4.43 last week. Boxed beef traded mixed since last Friday. The Choice and Select cutouts have been facing tremendous pushback from consumers as the packing industry has been unable to push higher prices on the consumer. It has been widely thought the low cattle inventory would support cutout prices due to lower beef supply. However, the industry has not realized a tremendous reduction in available beef as production of the week ending February 2nd was 6.5 percent higher than the same week last year which is largely due to heavier carcass weights. Seasonality is also against cutout values as January and February tend to have weaker boxed beef prices. This trend may persist for another week or so, but anticipate both the Choice and Select cutouts to come roaring back in March. The Choice Select spread continues to narrow, and it is expected to continue the same path for another few weeks. It would not be surprising to see the spread approach the $1 mark.

TENNESSEE AUCTIONS: On Tennessee auctions this week, feeder steers under 500 pounds where $7 to $14 higher while steers over 500 pounds were mostly steady. Bulls were steady to $3 higher. Heifers were $1 to $8 higher. Slaughter cows were $2 to $3 higher while bulls were $3 higher. Average receipts per sale were 590 head on 11 sales compared to 491 head on 11 sales last week and 627 head on 11 sales last year.

OUTLOOK: Lightweight calves continue their upward price march as folks are gearing up for grass fever season. Price movements in lightweight steers and heifers have been similar to a year ago, but heavier yearling cattle are not making such strides. That is not to say that yearling cattle prices are weak, but yearling cattle prices are more closely related to fed cattle price and feed price. Fed cattle have made some positive price movements and the corn price has relaxed a little, but neither has changed enough to send 7 and 8 weight cattle soaring yet. The lull in yearling cattle prices is to be expected this time of year as the lightweights always tend to garner the attention. Stocker producers see the opportunity to place relatively cheap gain on these lightweight animals that can then be marketed during the early summer months when 7 weight cattle prices are gaining steam. Tennessee producers may have the opportunity to add value to cattle with grass as many areas of cow country are still waiting on the arrival of significant rainfall. The lack of rainfall in the Southern Plains and other areas is not only a concern from a forage standpoint but also from a stock water standpoint. Many stock ponds are extremely low or completely dry. No forage is a problem in the cattle industry, but no stock water is even more of a concern to cattle producers. Cull cows are starting to make their annual march to higher prices. They have come out of the gate about even with last year, but they have the potential to outperform last year’s price. Price support will occur for lean cull cows because the demand for lean beef to be mixed with higher fat content beef and because of reduced cattle numbers. However, many cows that would be culled in an average year are likely to stay on the farm to put “one more” calf on the ground. It may not be the first thing to come to many producers’ minds, but the snow storm in the Northeast could slow beef movement. The highest concentration of beef consumers live to our north and winter storms can slow retail trade and restaurant business. This is not good news as the restaurant performance index (RPI) declined 0.2 percent in December to 99.7. This is the third consecutive month the RPI was below 100, which indicates contraction in the industry.

TECHNICALLY SPEAKING: Based on Thursday’s closing prices, February live cattle closed at $127.55. Support is at $127.10, then $126.33. Resistance is at $127.88, then $128.65. The RSI is 43.12. April closed at $131.52. Support is at $131.00, then $130.10. Resistance is at $131.90, then $132.80. The RSI is 39.35. June closed at $127.03. Support is at $126.70, then $125.30. Resistance is at $128.90, then $129.10. The RSI is 37.31. March feeders closed at $147.20. Support is at $146.70, then $145.75. Resistance is at $147.65, then $148.60. The RSI is 37.36. May feeders closed at $152.85. Support is at $152.20, then $151.13. Resistance is at $153.53, then $154.83. The RSI is 41.15. August feeders closed at $158.95. Support is at $156.60, then $156.33. Resistance is at $160.53, then $160.55. The RSI is 44.69. Friday’s closing prices were as follows: Live/fed cattle – February $126.45 -1.10; April $130.13 -1.40; June $125.70 -1.33; Feeder cattle – March $145.00 -2.20. April $148.20 -2.38; May $150.53 -2.33; August $156.70 -2.25; March corn closed at $7.09 down $0.02 from Thursday.