– Dr. Andrew Griffith, Assistant Professor, Department of Agricultural and Resource Economics, University of Tennessee
FED CATTLE: Fed cattle traded steady compared to last week. Prices on a live basis were mainly $124 while dressed prices were mostly $198 to $199.
The 5-area weighted average prices thru Thursday were $124.00 live, even com-pared to last week and $199.07 dressed, up $0.43 from a week ago. A year ago, prices were $125.00 live and $197.00 dressed.
Following the strong run in finished cattle prices in December and a strong start to January, fed cattle prices have stagnated the past couple of weeks. Despite the appearance that prices have stalled, this should still be considered positive for cattle feeders. January and February are not known as strong beef demand months nor are they known for having the best finished cattle prices. The upside to current prices is that beef and cattle demand are strong in the spring which should bode well for the price of finished cattle moving into the spring. There remains potential for the cash market to trade over $130 at some point, but cattle feeders are more concerned with maintaining strong prices over a longer period.
BEEF CUTOUT: At midday Friday, the Choice cutout was $213.99 up $1.09 from Thursday and up $3.61 from last week. The Select cutout was $206.84 up $1.98 from Thursday and up $6.61 from a week ago. The Choice Select spread was $0.54 compared to $3.54 two weeks ago.
The phase one trade agreement between the United States and China was completed this week, but it did not appear to positively influence agricultural markets. There is significant verbiage about China increasing their agricultural expenditures over the next couple of years, but none of the language is specific to what commodities will see increasing purchases. It is not likely that beef will be the big winner in the trade agreement with China as it relates to direct shipments of beef to China. The United States ships very little beef to mainland China, and it is unlikely this agreement will change that. It is most likely that pork will witness the largest in-crease in purchases from China given their depleted pork supplies from African Swine Fever while the purchase of soybeans will also be on the top of the list. Despite the expectation that direct beef trade will not escalate quickly, moving more pork should support domestic meat protein prices and thus beef prices. What may be the most beneficial to U.S. beef exports is the depletion of the Australian cattle herd.
OUTLOOK: Based on Tennessee weekly auction market price averages, steer prices were steady to $5 higher than last week while heifer prices were $2 to $5 higher compared to a week ago. Slaughter cow and slaughter bull prices were mainly $1 to $3 lower compared to the previous week. The positive price movement for calves and feeder cattle is just as expected moving from December into January. Demand for lightweight cattle is leading the market as calf prices are pushing higher. The mild temperatures that have been experienced in the Southeast United States may have calf prices escalating more quickly than is typical because some stocker operations may have more grass available this time of year than they normally would. The warmer than average temperatures and adequate moisture has definitely supported winter annual forage production, and producers who graze these species are definitely looking for animals to graze and manage the growth. With strong demand for lightweight calves in the market, it is important to note the increasingly strong demand for low risk cattle in today’s market. Based on weekly auction market price averages, 525-pound value added steers brought $12 more per hundredweight than nonvalue-added steers. This equates to the value-added steers bringing about $60 more per head which more than pays for the vaccines and extra labor. This does not include the additional weight a producer may have achieved from a preconditioning pro-gram. Shifting to the slaughter cow market. Slaughter cow and bull prices softened this week which is an unexpected move. However, there is little to fear at this time since February is generally the month when slaughter cow prices begin to quickly escalate. Slaughter cow prices are sitting on a price of $50 per hundredweight and there is a good chance they will jump over $60 in the next few months with the biggest part of that increase coming in the next six to eight weeks.