By Andrew Griffith
FED CATTLE
Fed cattle traded $1 higher compared to last week on a live basis. Prices on a live basis primarily ranged from $142 to $144 while dressed prices were mainly $226 to $227.
The 5-area weighted average prices thru Thursday were $143.40 live, up $1.15 compared to last week and $227.02 dressed, up $0.92 from a week ago. A year ago, prices were $114.12 live and $181.69 dressed.
Live cattle futures rebounded on Friday after a tough Thursday following the news out of Eastern Europe and Asia. Despite the unrest in global economies, basic supply and demand will continue to push cattle prices to appropriate levels. Packers need cattle to fill line space to meet beef contracts, and cattle feeders need to move fed cattle and refill pens with feeder cattle. It is certainly amazing how basic economics wins when given time to react. Finished cattle prices should continue to be supported as the market moves toward spring. The market may be pressured slightly with the increase in cattle on feed, but the quantity of cattle on feed will eventually decline year-over-year which bodes well for strong prices in the fourth quarter.
BEEF CUTOUT
At midday Friday, the Choice cutout was $259.77 up $0.53 from Thursday and down $7.43 from a week ago. The Select cutout was $255.73 up $1.18 from Thursday and down $8.54 from last week. The Choice Select spread was $4.04 compared to $2.93 a week ago.
Most of the time, the focus is on the composite boxed beef price, because beef items are what make up the largest part of the value of cattle. However, packers not only depend on strong beef prices to support margins, but they also rely on hide and offal values, since they contribute to the total value of the animal. Weekly steer hide and offal values have been very steady to start the year with the price hovering near $14 per hundredweight. That price equates to nearly $200 per head of value, which is approximately $50 more per head than the same time last year and $50 more per head when compared to the five-year average. Hide and offal prices rode the struggle bus from 2016 when cattle prices began to decline through early 2021 before a fire was lit and world economies began to rebound from the pandemic. The drop credit, as it is also known, is an important determinant of cattle value as the price dropped below $7 for a short period in 2020. This means the value of the hide and offal has doubled since its bottom in 2020.
OUTLOOK
Based on Tennessee weekly auction market reports, steer prices this week were steady to $3 lower compared to a week ago while heifer prices were also steady to $3 lower compared to last week. Slaughter cow prices were steady to $1 lower while bull prices were mostly steady compared to the previous week. Cattle prices were soft to start the week, but the “Russian invasion of Ukraine,” “Ukraine Crisis,” or whatever the correct title is for the situation has sent cattle markets as well as other markets back to hyper-volatility. Wheat futures prices increased the limit on Thursday before losing half of those gains on Friday. Corn and soybean prices reacted positively to the news to start Thursday before softening to close the day. Corn and soybean markets simply fell apart on Friday. Alternatively, oil prices shot higher, which further increased input prices. A common saying when someone has to admit a mistake or suffer the consequences of a mistake is that person had to “eat crow.” It certainly feels like cattle producers and farmers in general are eating “black swan.” Every time the cattle market begins to make a push to stronger prices, something unexpected happens that directly impacts cattle prices. It started with the Tyson slaughter facility fire in August 2019 that was soon followed by the coronavirus pandemic. Just as pandemic restrictions are being eased, markets are once again hit by social and political conflict in Europe and Asia. This conflict halfway around the world is not expected to overpower the fundamentals that are driving cattle prices higher, but the conflict will certainly increase volatility, which means prices will likely decline in the near term to unexpected levels. However, prices will most likely recover and challenge futures contract highs as the initial shock works its way through the market. This will certainly work against those planning to market cattle the next couple of weeks.
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, 2022 totaled 12.20 million head, up 0.8% compared to a year ago, with the pre-report estimate average expecting an increase of 0.9%. January placements in feedlots totaled 2.00 million head, down 1.2% from a year ago with the pre-report estimate average expecting placements down 0.8%. January marketing’s totaled 1.77 million head down 3.1% from 2020 with pre-report estimates expecting a 2.9% decrease in marketings. Placements on feed by weight: under 700 pounds up 1.8%, 700 to 899 pounds down 4.0%, 900 pounds and over unchanged.
Source : osu.edu