Weekly Livestock Comments for February 7, 2020
By : Dr. Andrew Griffith, Assistant Professor, Department of Agricultural and Resource Economics, University of Tennessee
FED CATTLE: Fed cattle traded $1 lower compared to last week. Prices on a live basis were mainly $121 to $122 while dressed prices were mostly $193.
The 5-area weighted average prices thru Thursday were $120.83 live, down $1.24 compared to last week and $192.91 dressed, down $1.56 from a week ago. A year ago, prices were $124.02 live and $198.52 dressed.
Fed cattle trade was slow to develop this week as cattle feeders continue to be pressured by packers to accept lower prices. This is not unprecedented given the current supply of cattle on feed and the seasonal slowdown in beef movement. February is a tough month to push beef given the weather conditions and consumers eating habits. Thus, strong slaughter levels and soft demand have packers unwilling to bid up to secure cattle. This market pattern may persist a few more weeks. Despite a softer live cattle futures market than just a few weeks ago, the expectation remains for finished cattle to reach as high as $130 in the spring months. This seems like a tough feat at this time, but it is possible.
BEEF CUTOUT: At midday Friday, the Choice cutout was $210.61 down $0.32 from Thursday and down $2.73 from last week. The Select cutout was $204.85 down $1.11 from Thursday and down $6.05 from a week ago. The Choice Select spread was $5.76 compared to $2.44 a week ago.
Beef exports in 2019 totaled 3.02 billion pounds which is a 4.4 percent decline from 2018, but it is still the second largest quantity exported in a single year. Japan remains the top destination for U.S. beef with 2019 exports totaling 796.7 million pounds. This total represents a 10.0 percent decline compared to the previous year, but that decline was largely related to the higher tariff rate U.S. beef exporters faced compared to the tariff rate other exporters faced. The tide should turn back in the favor of U.S. beef exports going to Japan now that the U.S. is on a level playing field as it relates to tariffs. South Korea was the second largest destination for beef totaling 683.3 billion pounds which was an increase of 7.1 percent compared to the previous year. The South Korean market has grown tremendously the past two years following the signing of a trade agreement that reduced tariff rates. Mexico, Canada, and Hong Kong round out the top five destinations for U.S. beef exports and all were lower than the previous year. New trade agreements should spur exports in 2020.