Weekly Livestock Comments for February 23, 2024

– Dr. Andrew Griffith, Assistant Professor, Livestock Marketing Specialist, Department of Agricultural and Resource Economics, University of Tennessee

Fed cattle traded $3 higher compared to last week on a live basis. Prices were largely $183 to $184 on a live basis and $292 to $293 on a dressed basis.

The 5-area weighted average prices thru Thursday were $181.05 live, up $0.75 compared to last week and $286.86 dressed, up $0.49. A year ago, prices were $163.65 live and $259.93 dressed.

Fed cattle trade was slow to develop this week. Packers continue to struggle with negative margins, which has them on the defensive when negotiating cattle prices. Packers want to trade cattle at a negative basis compared to the futures market while cattle feeders are simply attempting to trade finished cattle with an even basis compared to the futures market. It appears most of the trade will still come in with a negative basis this week, but market participants can rest assured that cattle feeders will be pushing for an even basis next week as live cattle futures roll from February to April. There is less than a $3 difference between February and April, but the inclination is the April contract increasing the next two months.

At midday Friday, the Choice cutout was $301.21 up $1.42 from Thursday and up $5.15 from a week ago. The Select cutout was $287.42 up $1.61 from Thursday and down $0.77 from last week. The Choice Select spread was $13.79 compared to $7.87 a week ago.

Most of the focus is on the traditional Choice beef market, because the majority of beef moving through the market fits the Choice category. However, it is beneficial to look at alternative markets to see what is happening with prices. For instance, the weighted average grass fed beef cutout price was $4.31 per pound in January with a range of prices from $3.15 to $5.45 per pound. This is a consistent price for most of 2023 and moving into 2024. From the wholesale perspective, whole boneless ribeye steaks traded for $38.18 per pound while the chuck roll traded at $15.95 per pound. Similarly, whole tenderloin traded at $60.07 per pound while 90 percent lean ground beef patties sold for $27.61 per pound. There is clearly a premium for grass fed beef. Another part of the market to consider is the grass fed beef – direct to consumer retail price. On a carcass basis, whole carcass sold for $8.39 per pound while the quarter carcass price was $9.75 per pound. This may not be a market for everyone, but there is some value to be added.

Based on weekly auction market averages, steer prices were $3 to $13 higher compared to last week while heifer prices were $5 to $15 higher compared to the previous week. Slaughter cow prices were $1 to $2 higher compared to the previous week’s weighted average price while bull prices were also $1 to $2 higher compared to the previous week. There is a clear trend of higher cattle prices as the industry knows the scarcity of animals coming down the pike or the lack of animals coming to market in future months. Using weekly auction average prices, 550 pound steers in Tennessee are worth about $1,550 per head. However, light 5 weight steers being sold in load lots are closer to $1,700 per head. Similarly, load lots of 6 weight steers brought $1,820 to $1,880 per head this week. On the heifer side, a load of 500 pound calves sold for $1,415 per head while a load of 600 pound heifers sold for $1,530 per head. Prices like these tend to pull cattle forward as many producers just cannot stand to hold on to cattle at such prices. The price data continues to support preconditioning calves for 45 to 60 days before marketing as premiums on 5 weight steers is about $100 per head compared to steers coming straight off the cow. When cattle prices increase, the premium for weaning and preconditioning calves should increase as the financial risk associated death loss increases. How much more upside there is in the market is an unknown, but it would appear prices are going to be favorable to cow-calf producers the next few years. The $40 to $50 per hundredweight heifer discount to steers for 500 pound animals remains rather large, and it should be wider as prices increase. However, the price difference between steers and heifers is expected to narrow when cattle producers begin attempting to expand the breeding herd. This stronger demand for breeding females will force feedlots to compete more aggressively for heifers, resulting in a narrowing of the price difference.

The February cattle on feed report for feedlots with a 1000 head or more capacity indicated cattle and calves on feed as of February 1, 2024 totaled 11.80 million head, up 0.3% compared to a year ago, with the pre-report estimate average expecting a 0.1% increase. January placements in feedlots totaled 1.79 million head, down 7.4% from a year ago with the pre-report estimate average expecting placements down 11.8%. January marketing’s totaled 1.84 million head down 0.1% from 2023 with pre-report estimates expecting no change in marketings. Placements on feed by weight: under 700 pounds down 7.3%, 700 to 899 pounds down 9.9%, 900 pounds and over up 6.1%.