Weekly Livestock Comments for May 10, 2019

May 16, 2019

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By Dr. Andrew Griffith
FED CATTLE: Fed cattle traded $2 to $3 lower on a live basis compared to last week. Live prices were mainly $120 to $121 while dressed prices were mainly $191 to $193.
The 5-area weighted average prices thru Thursday were $120.40 live, down $3.30 from last week and $192.42 dressed, down $6.54 from a week ago. A year ago prices were $121.21 live and $191.75 dressed.
If the past two weeks are any indication of what to expect from the finished cattle market moving through the next few months then it is clear that it is going to be a tough few months. A $6 loss in two weeks adds to about $84 per head on an animal finishing at 1,400 pounds. There is good reason cattle feeders have been willing sellers at lower prices. That reason is the June live cattle futures price which is trading at a $7 to $8 discount relative to this week’s cash price. Cattle feeders are likely wanting to push even more cattle out of pens to keep from being forced to market those cattle on an even lower market than this week. It will take a couple of months for the market to reach their summer lows so the next few weeks should be interesting.
BEEF CUTOUT: At midday Friday, the Choice cutout was $220.94 down $1.53 from Thursday and down $7.06 from last Friday. The Select cutout was $207.84 up $0.76 from Thursday and down $5.68 from last Friday. The Choice Select spread was $13.10 compared to $14.48 a week ago.
Per capita domestic meat consumption is only a portion of the meat demand equation. Thus, by itself it does not address any demand questions. However, per capita meat consumption does help one under-stand the direction of prices if demand does not change. Considering beef, pork, chicken, and turkey, domestic meat consumption is expected to exceed 217 pounds per person in 2019 which is relatively unchanged from the previous year. In the past 25 years, per capita meat consumption has ranged from 200 to 220 pounds per person. Though there has been little change in per capita meat consumption, there have been changes in the type of meat being consumed. Over the past 25 years, per capita beef consumption has declined about 10 pounds to 57 pounds per year while chick-en consumption has increased 15 to 20 pounds per person to approximately 93 pounds per person. Pork and turkey have seen little to no change in per capita consumption and are near 51 and 15 pounds respectively. Will the trend of consuming less red meat continue?
OUTLOOK: Based on Tennessee weekly auction market averages, steer and heifer prices were steady to $4 lower compared to last week. Similarly, slaughter cow prices were steady to $1 lower compared to a week ago while slaughter bull prices were $1 to $2 lower. The changes in the cash feeder cattle market the past three weeks have been small and probably of little concern to most purveyors while the changes in feeder cattle futures are sure to have brought a little more excitement into the cattle trading game. Looking back to November of 2018 and moving to today, the cash price of feeder cattle has traded in a narrow range as is evident by the CME feeder cattle index. Alternatively, feeder cattle futures contracts have spent the past three weeks on a downhill slide that appears to have stabilized at prices $14 to $17 per hundred-weight lower than the closing price the Thursday prior to Easter. This simply means that sellers and buyers of feeder cattle are now expecting much lower feeder cattle prices moving through the summer and fall than they were expecting just three weeks ago. The expectation of feeder cattle prices not making the run that was expected just a few weeks ago likely has stocker and back-grounding operations sweating a little as they may have paid strong prices for lightweight calves that may not realize the sale price that supported such a strong purchase price. At the end of the day, feeder cattle prices in the cash market moving through summer and fall are now on course to remain steady with the previous six months given the expectations of feeder cattle futures. Though the past three weeks of futures trading have not been advantageous for folks marketing feeder cattle, there is still time for the market to recover some of its losses. One can never predict prices with 100 percent certainty, but there may be an opportunity that summer and fall feeder cattle futures prices move back to the low $150s which will present a marketing opportunity.