– Dr. Andrew Griffith, Assistant Professor, Department of Agricultural and Resource Economics, University of Tennessee
FED CATTLE: Fed cattle traded mostly steady compared to last week on a live basis. Prices on a live basis primarily ranged from $141 to $144 while dressed prices were mainly $230 to $234.
The 5-area weighted average prices thru Thursday were $143.43 live, up $0.12 compared to last week and $231.60 dressed, down $0.72 from a week ago. A year ago, prices were $118.35 live and $188.47 dressed.
There remains a clear difference in Northern cattle prices and Southern cattle prices. Despite this fact, the finished cattle market remains fairly strong regardless of the market. Packers are looking for cattle that will grade to meet grilling season demand, and a larger percentage of those cattle will come from cattle being fed in the North. Cattle feeders will be doing everything they can to keep prices at current levels, but seasonal tendencies will be working against the market as spring ends and summer begins. Cattle feeders in the South will experience their production advantage this summer as they feed cattle that can tolerate the heat, but that does not mean profit given extremely high feed prices.
BEEF CUTOUT: At midday Friday, the Choice cutout was $254.70 down $0.48 from Thursday and down $6.79 from a week ago. The Select cutout was $246.43 up $0.62 from Thursday and down $2.55 from last week. The Choice Select spread was $8.27 compared to $12.51 a week ago.
There is no doubt domestic beef demand and disappearance drive the wholesale beef market, but the international market is also a major contributor to the final price received. March beef export and import totals were released this week with beef exports exceeding year ago levels and totaling 303.7 million pounds. Total beef exports in March 2022 represent the largest quantity exported in March on record and represent the third largest quantity for any month on record. Strong exports during a time of elevated beef prices continues to demonstrate the strength that is present for U.S. beef on the international market. On the import side, U.S. customers continue to import large quantities of beef totaling 353.8 mil-lion pounds in March. This is the largest quantity of beef imported in one month since June 2005. Imports from Brazil re-main strong and will continue in that direction as long as the value of the dollar and domestic beef prices remain elevated. The only thing that may hamper Brazilian beef imports is an increase in the tariff rate, but it may not be extremely impactful.
OUTLOOK: Based on Tennessee weekly auction market reports, steer prices this week were mostly steady compared to a week ago while heifer prices were steady to $1 higher compared to last week. Slaughter cow prices were steady to $1 higher while bull prices were steady to $2 higher compared to the previous week. Producers looking to market freshly weaned calves continue to have a favorable marketing window for those cattle, but the window is closing quickly as interest fades during the summer months. The feeder cattle market continues to muddle through volatility, uncertainty, basic market fundamentals, and expectations that may or may not come to fruition in the next six months. However, increased beef cow slaughter and heifer slaughter are certainly setting the market up for strong-er prices in years to come as the 2022 and 2023 calf crops are sure to be smaller than the 2021 calf crop. This simply means the market is expected to strengthen at least through 2024 given current information.
Evaluating current feeder cattle prices, the CME feeder cattle index is between $155 and $156, which is $4 to $5 lower than the May feeder cattle contract price. These prices represent an 800 pound steer in the 12-state region west of the Mississippi River. In the next three weeks, May feeder cattle futures and the CME feeder cattle index must converge, and it is uncertain how that will occur. Based on Tennessee prices, load lots of 800 pound steers brought $151 to $153 this week, which does not place them too far behind the index. As producers prepare for summer marketing of feeder cattle, seasonal tendencies would indicate prices increasing as do deferred feeder cattle futures for August and later. The question is if cash prices will increase $20 over the next three to four months or if they will stagnate. Regardless, producers can use the next few weeks to manage price risk and the most pressing production risk.