Market Highlights: Cattle Prices on the Decline

All live and feeder cattle contracts post new highs, while lean hogs rally on higher cash markets.

FED CATTLE: Fed cattle trade was steady compared to last week. Prices on a live basis were mainly $110 to $111 while dressed prices were mainly $177 to $178.

The 5-area weighted average prices thru Thursday were $109.82 live, down $2.70 from last week and $177.63 dressed, down $2.72 from a week ago. A year ago prices were $136.26 live and $215.14 dressed.

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Cattle feeders are less than thrilled with packer bid prices on finished cattle which likely stems from the precipitous decline in prices. In three weeks, live cattle prices declined $14 to $15 per hundredweight which goes without mentioning that prices this week are $26 per hundredweight lower than the same week one year ago.

Adding insult to injury, basis for fed cattle was near $20 per hundredweight and now sits near $5 with nearly all of the narrowing resulting from lower cash prices.

The narrowing of the basis means that most hedging strategies did little to nothing to protect against the expected price decline. It may be several weeks before cattle feeders escape red closeouts.

BEEF CUTOUT: At midday Friday, the Choice cutout was $228.02 down $0.18 from Thursday and up $0.61 from last Friday. The Select cutout was $205.09 up $0.62 from Thursday and up $0.20 from last Friday. The Choice Select spread was $22.93 compared to $22.52 a week ago.

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Now that Memorial weekend has passed, many retailers will focus on Father’s Day grilling items. Father’s Day continues to be a key holiday for middle meat movement which generally helps the loin and rib primal to maintain value. A good portion of the support leading up to Father’s Day is restocking the meat counter following Memorial weekend.

Looking at individual wholesale cut prices, beef ribeye prices outperformed year ago prices every week through the middle of April. However, the last five weeks have seen year-over-year declines as this week’s price ($8-$9 per pound) is about $1.50 per pound lower than the same week one year ago.

Such a price difference may catch some by surprise, but ribeye prices were extremely strong in May and June of 2017. Loin strip prices on a weekly basis have been in line with year ago prices while considerable support has been provided by the chuck roll. Also notable, fresh 90 percent lean beef has traded in a $10 range in 2018 compared to a $30 range the same weeks last year.

OUTLOOK: It was once said that a person cannot lose something they never had. This is a true statement, but a person can miss out on opportunities and sometimes this means missing out on dollars when marketing cattle. An example of missing out on dollars that will hit home with many producers is making a decision to market calves next week instead of this week and then the price declines several dollars per hundredweight.

The alternative situation can be true where a person takes advantage of an opportunity not knowing what the future holds and the decision results in the most positive outcome possible. Most producers would either claim their superior marketing savvy or chalk it up as good luck to be so fortunate.

Regardless of which side of the coin one is on, perfectly deciphering the cattle market is difficult and some may say impossible. This is not to say that one cannot make a good living in the cattle business, because there have been many cattle producers who have developed systems that consistently result in positive return. However, producers who consistently generate positive returns still experience variability in their returns.

A lot of variability can exist in week to week changes in cattle prices. Based on Tennessee weekly auction average prices, steers were steady to $3 higher compared to a week ago while heifer prices were $3 to $5 higher than last week. Similarly, slaughter cow prices were steady while slaughter bull prices were $2 to $5 higher.

The higher cash prices at the local sale barn mimic the gains in feeder cattle futures contracts. It is unlikely the summer and fall cattle markets will experience the extreme volatility that has been a mainstay the past few years.

However, volatility is sure to exist as the market hears of trade wars and rumors of trade wars. The unsettled political climate will impact agricultural markets and the cattle and beef markets are not immune to the impacts as trade agreements are restructured.

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ASK ANDREW, TN THINK TANK: The topic of discussion this week has been grass fed beef as well as grass finished beef. The point of this discussion is not to debate a niche market and a commercial market. The point of the conversation is due to forages being a critical feedstuff in cattle production and even more so in states that are dominated by cow-calf production and stocker production. Nearly all cattle producers in states such as Tennessee depend heavily on cool season perennial forages for pasture and hay. However, many pastures have a mix of forages which may include tall fescue, crabgrass, Johnson grass, and dallisgrass. Mixed grass pastures are what help many producers graze from April through October or November, but this could also lead to overgrazing certain species at certain times of the year. It may be prudent for producers to consider what forages are needed to extend the grazing season and how they should be distributed across the farm as it will influence the bottom line.

Please send questions and comments to [email protected] or send a letter to Andrew P. Griffith, University of Tennessee, 314B Morgan Hall, 2621 Morgan Circle, Knoxville, TN 37996.

FRIDAY’S FUTURES MARKET CLOSING PRICES: Friday’s closing prices were as follows: Live/fed cattle –June $104.90 -0.15; August $103.63 -0.33; October $106.28 -0.78; Feeder cattle –August $146.33 -1.08; September $146.60 -0.70; October $146.43 -0.58; November $146.48 -0.75; July corn closed at $3.92 down $0.03 from Thursday.

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