By Dr. Andrew Griffith
FED CATTLE
Fed cattle traded $2 lower on a live basis compared to last week. Prices were mainly $197 to $198 on a live basis. Dressed trade was mainly $312 to $313.
The 5-area weighted average prices thru Thursday were $197.74 live, down $1.87 compared to last week and $312.77 dressed, down $2.51 from a week ago. A year ago, prices were $183.31 live and $290.40 dressed.
Cattle feeders are taking it on the chin from both sides. The feeder cattle futures contract prices have found a way to push higher most of the week while packers are unwilling to pay higher money. In fact, packers are offering less as wholesale beef prices also struggle to find firm footing. There is chatter concerning consumers, inflation, disposable income, and a host of other things to try to throw water on the cattle market. However, none of that changes the reduced quantity of cattle. The point in saying this is because every market has two sides and that is a supply side and a demand side. They both have to be considered when discussing market movements. The question at hand always concerns which one will have the bigger influence.
BEEF CUTOUT
At midday Friday, the Choice cutout was $311.82 up $0.64 from Thursday and down $0.05 from a week ago. The Select cutout was $304.08 down $0.07 from Thursday and down $2.02 from a week ago. The Choice Select spread was $9.76 compared to $7.79 a week ago.
The retail value of beef for January was $8.53 per pound, which is the highest price on record. The January price represents a $0.15 per pound increase from December and a $0.44 per pound increase from January 2024. August of 2024 was the previous high-water mark for the retail value of beef at a value of $8.52 per pound. As supplies of beef continue to tighten over the next year, it is likely there will be several more record setting months for the retail value of beef. It is difficult to predict how many may occur over the next several months, but it is likely the late summer months will certainly see even higher retail values for beef than what was experienced in January 2025. There continues to be concern among some in the cattle industry about consumer demand, but to say there has been data to support a demand hit would be too strong of a statement. Just because some consumers consume less beef does not mean demand is declining. The higher prices we see now are simply rationing the production the market has.
OUTLOOK
Trends were difficult to established based on Tennessee weekly auction average prices because of a light test last week. However, steer prices were higher this week compared to last week while heifer prices were also higher than the prior week. Slaughter cow prices were $5 to $7 higher compared to the previous week while slaughter bull prices were also $5 to $7 higher compared to last week’s prices. Due to weather conditions a week ago when very few cattle made their way to auction markets, it was nearly impossible to establish trends for any class of cattle. The one aspect of the market that does appear clear is the demand for lighter weight calves that are thin fleshed and ready to be put on grass. One can confidently say that grass fever has hit the market this week with warm weather in Tennessee. This was further supported by feeder cattle futures pushing higher this week. As of this writing, most feeder cattle contracts were trading $8 to $10 per hundredweight higher than the February 21st close. In other words, an 800 pound steer gained an expected $64 to $80 per head in one week. This gain is not realized unless a producer takes advantage of it either by physically selling cattle or by using a price risk management strategy to lock in all or part of the price increase. It is difficult to predict if feeder cattle prices will continue to increase given their current lofty levels. It would seem prudent in today’s environment to do something about managing price risk. Some producers may consider it a waste of money to spend money to guarantee a certain price, but those same producers have also experienced a huge decline in cattle value when cattle were standing on their farm. The one thing for certain is that grass cattle demand will remain strong through the month of March as grazing operations will be working quickly to secure this spring and summer’s grazing cattle. Those lightweight and thin fleshed calves will bring high prices, but that does not mean that is what sellers should be selling.
Source : osu.edu