FED CATTLE: Fed cattle traded $2 lower compared to last week. Prices on a live basis were mainly $122 while dressed prices were mostly $194 to $195.
The 5-area weighted average prices thru Thursday were $122.07 live, down $2.21 compared to last week and $194.47 dressed, down $4.39 from a week ago. A year ago, prices were $123.12 live and $198.59 dressed.
The finished cattle market slipped a little this week, but the slip in the market will do very little to cut into cattle feeding margins that are very good right now. It should not be surprising for finished cattle prices to soften during January and February when beef supplies are plentiful and when beef demand is seasonally soft. However, the April live cattle contract is offering very little hope of a price resurgence heading into the summer grilling season. Thus, despite strong margins at the feedlot right now, many cattle feeders are already focused on the spring and summer marketing time frame. Many will have taken advantage of the previously strong futures contract price and hedged cattle, but those who did not will be looking to improve their situation.
BEEF CUTOUT: At midday Friday, the Choice cutout was $213.34 down $0.01 from Thursday and down $1.44 from last week. The Select cutout was $210.90 down $0.58 from Thursday and up $4.06 from a week ago. The Choice Select spread was $2.44 compared to $4.34 a week ago.
Commercial beef production in 2019 in the United States exceeded 27.1 billion pounds and was a full percent greater than 2018 beef production. Similarly, 2019 pork production was a little over 27.6 billion pounds which was a five percent increase in production compared to 2018. The pork industry shows no signs of slowing down production and may actually hit some time periods in 2020 when slaughter capacity is pushed beyond its limits. The same is not true for beef production. Beef production in 2020 could fall on either side of 2019 production and slaughter capacity does not appear to be an issue at this time. Given that red meat production is expected to remain elevated in 2020, it points to the importance of being able to export pork and beef. The relaxation of Chinese restrictions on U.S. beef and pork should improve the flow of meat to China while the tremendous reduction in cattle numbers in Australia should also benefit U.S. beef exports. The market is not expected to move quickly, but this should support prices despite strong beef and pork production in 2020.
OUTLOOK: Based on Tennessee weekly auction market price averages, steer prices were steady to $3 higher than last week while heifer prices were unevenly steady compared to a week ago. Slaughter cow prices were $2 to $4 higher than last week while slaughter bull prices were $4 to $5 higher compared to the previous week. These trends may be meaningful to some and not as meaningful to others, but they should be considered a win for all cattle producers given feeder cattle futures prices this week. The reason steady and higher price trends this week should be considered positive is because many feeder cattle futures contract prices declined $8 to $9 per hundredweight since the close on Wednesday January 22nd. On top of that, many of the feeder cattle contracts are as much as $10 to $13 lower than their contract high which was hit in the middle of January. It is good that the cash market has had a muted response to all of the white noise that is occurring in the broader electronic markets, because it could have really crashed the local cash market. The news of coronavirus, impeachment hearings, and every other rabbit that the market chases is why commodity markets and equity markets have struggled this week. Producers in the cattle industry like to complain about how many these global happenings should not influence the markets, and many of these complaints have valid arguments. However, complaining and providing arguments generally do very little to reverse the course of the market. Thus, producers have to be constantly cognizant of situations and events that could throw the market into disarray and at the same time manage their market risk by taking advantage of the opportunities offered throughout the year. This is easier said than done, but grabbing a profitable marketing price anywhere along the way will help to insure another year of operating a cattle operation. The market should provide another chance for this year.
ASK ANDREW, TN THINK TANK: In a recent educational program where I was talking about marketing, the topic of bull selection and EPDs was discussed. I am nowhere near the ultimate authority on discussing bull selection or EPDs, but I do know that producers need to make their sire selection based on what their intended market is. This brings me to a fairly common question when people want validation that they purchased a bull for a good price. It is fairly common for producers to ask me if they got a good deal when purchasing a bull or replacement heifers. I understand when people want to be validated, and I have no problem with that. However, a person can only be validated in making a good purchase decision if that purchase helps them achieve the goal they have set. In the case of genetics, cattle producers should purchase bulls that will help them achieve their profit goals and their production goals. If the bull does not help an operation meet its goals then there is no price in which that bull was a good value for that operation. It is a good thing for seedstock producers that everyone is a little different.
Source : tennessee.edu