– Dr. Andrew Griffith, Assistant Professor, Department of Agricultural and Resource Economics, University of Tennessee
FED CATTLE
Fed cattle traded $3 to $4 higher compared to last week on a live basis. Prices on a live basis were mainly $170 to $174 while dressed prices were mainly $275 to $279.
The 5-area weighted average prices thru Wednesday were $172.33 live, up $3.69 compared to last week and $278.10 dressed, up $7.74 from a week ago. A year ago, prices were $138.72 live and $222.28 dressed.
There remains a large discrepancy between cattle prices in the North and the South, but the five-area weight average price this week appears to be one for the record books. The previous record high price for the five-area weighted average steer price was $171.38 set in November 2014, but the market surpassed that price by nearly $1 this week. The $170 price mark was the price point that had been discussed previously in this article, and the market finally achieved what had been discussed several months ago. Can the market maintain this price level or even move higher? The simple answer is yes, but there will likely be some degree of resistance moving forward, because being in unchartered territory brings hesitancy in most cases.
BEEF CUTOUT
At midday Thursday, the Choice cutout was $289.76 up $1.14 from Thursday and up $8.11 from a week ago. The Select cutout was $277.39 down $0.77 from Thursday and up $7.32 from last week. The Choice Select spread was $12.37 compared to $11.81 a week ago.
Is this the beginning of the spring run in prices for wholesale beef? With Easter being celebrated Sunday and the grilling season on the horizon, this very well could be the start or a wholesale beef price run. There remain questions as to the consumer’s willingness to continue paying high prices for beef and if those consumers are willing to pay more than they are currently paying. As has been mentioned before, there is no reason to doubt the consumer’s willingness to continue purchasing beef until the consumer demonstrates some sort of pushback on the market. It is similar to economists using certain metrics to determine if the economy is in a recession or not. Does it matter what the metrics say or does watching consumer actions matter more? Wholesale beef prices could push over $300 per hundredweight again. It is likely there will be some resistance at that price point, but it is one that has been exceeded in a previous period. The consumer will let the market know if that is a sustainable price or not.
OUTLOOK
Based on Tennessee weekly auction price averages, steer prices were steady to $1 higher this week compared to last week while heifer prices were mainly steady compared to the previous week. Slaughter cow prices were steady to $2 higher than last week while slaughter bull prices were steady to $3 higher compared to a week ago. The calf market remains hot as grass cattle buyers continue to suck up lightweight calves like an industrial grade Shark Ninja vacuum sucks up lint from a hardwood floor. The grass has been green for more than a month, but many producers have started spreading fertilizer and realizing forage growth and production. This really gets buyers moving as they have more certainty they will not need hay resources to carry calves. From a seasonal standpoint, lightweight calf prices tend to soften after April, but it is highly unlikely lightweight calf prices will soften this summer and may even be higher during the fall of 2023 than the current time period. Similarly, feeder cattle prices have gained some momentum as feedlots continue to compete for cattle. The CME feeder cattle index has gained about $10 per hundredweight since the last day of February and the futures market is predicting further gains. The futures market may be a bigger story than the strength in local cash markets. The April Feeder cattle contract has traded between $193 and $200 since the beginning of March. It appears to have a direction towards higher prices, but recent volatility in the futures market makes it tough to say prices are definitely going to increase to predicted levels. It seems certain cattle prices are destined to continue increasing given supply and demand fundamentals, but meeting the current expectations of the futures market are not as certain. This is especially true looking into the summer and fall months that are trading between $222 and $228 per hundredweight.