– Andrew P. Griffith, University of Tennessee
FED CATTLE: Fed cattle traded was not established at time of publication. Bids ranged from $122 to $124 on a live basis with dressed bids ranging from $196 to $200. Ask prices were $128 and higher. The 5-area weighted average prices thru Thursday were $121.71 live, down $6.17 from last week and $197.37 dressed, down $7.97 from a week ago. A year ago prices were $133.82 live and $214.47 dressed.
Fed cattle trade was a tug of war between packers and feedlot managers all week. The Fed Cattle Exchange held their weekly auction on Wednesday and all lots went unsold. The battle continued thru Friday with packers lowering bids to reflect lower boxed beef prices while cattle feeders held steady on asking prices due to stronger live cattle futures and tight fed cattle supplies. Packers who are short bought will have to secure inventory some way, but low box prices keep them hesitant. Finished cattle prices will finally lose some ground as the market moves to larger finished supplies, but cattle feeders appear to be in a position to continue taking advantage of strong prices and positive feeding margins in the near term.
BEEF CUTOUT: At midday Friday, the Choice cutout was $207.65 down $0.25 from Thursday and down $5.43 from last Friday. The Select cutout was $199.04 down $1.24 from Thursday and down $8.36 from last Friday. The Choice Select spread was $8.61 compared to $5.68 a week ago. Boxed beef prices struggled mightily for the second week in a row as prices continued their steep decline. Choice and Select cutout prices have declined more than $15 in three weeks with most of those declines coming the past two weeks. It may seem out of the ordinary for boxed beef prices to decline 7 percent from the middle of March through the first week of April, but what was even more unseasonal was the beef price escalation from the middle of February to the middle of March. Over a five week span, the Choice cutout price increased $35 which represents an 18.6 percent increase. Similarly, Select boxes saw prices increase $28 which is about a 15.2 percent increase in prices. Thus, the Choice beef price is still nearly $20 higher than it was two months ago while the Select price is still nearly $13 higher than two months ago. The question is if prices will continue to decline because packers are being squeezed from both sides. There is a possibility wholesale beef prices will continue declining but grilling season support is just around the corner.
OUTLOOK: Some of the wind was taken out of the sails of the calf market this week as most weight classes of steers traded steady to $4 lower while heifer prices were $1 to $4 lower compared to last week on Tennessee weekly auctions. The softer prices experienced this week could be a factor of weaker futures market prices, the beginning of the seasonal price decline for lightweight calves, or both. The key reason for the softer prices this week compared to last week is most likely because feeder cattle futures prices declined. However, producers looking to market lightweight calves this spring may want to heed this small price decline as a warning shot and consider moving calves in the near term. It is almost certain lightweight calf prices will begin their seasonal decline in April or May and continue to decline through the summer and fall months. Thus, it is important for producers to be decisive regarding their marketing plan because time is running short on taking advantage of seasonally strong lightweight calf prices.
Alternatively, producers considering preconditioning and backgrounding fall born calves may want to stick with the plan. Weaning fall born calves in May and backgrounding calves through late July or August is shaping up to be a favorable alternative as the value of gain appears to be in the $0.80 to $1.00 range. There are no guarantees of a profit from preconditioning and backgrounding, but the only major risk faced with home raised cattle is a price decline. The risk of death loss is generally small as are most of the other production risks associated with growing calves.
Producers are already busy spraying pastures and hay season is just around the corner. Now is the time to finalize spring and summer marketing plans for last year’s fall calf crop. Similarly, producers with spring calving herds should be thinking about their current calf crop marketing plan as well as the calf crop that will be starting with the turnout of bulls in the next several weeks. Calf marketing needs to be considered before cows are bred, because the sire will be 50 percent of the genetic makeup of the calf crop.