FED CATTLE: Fed cattle trade was not well established at press. Asking prices on a live basis were mainly $115 to $117 while bid prices were mainly $110 to $111.
The 5-area weighted average prices thru Thursday were $114.25 live, up $4.43 from last week and $180.90 dressed, up $3.27 from a week ago. A year ago prices were $135.14 live and $219.34 dressed.
The 5-area price with cattle traded thru Thursday can be misleading when the number of cattle traded is not included. In this week’s case, only 455 head were marketed on a live basis thru Thursday and 813 head on a dressed basis.
The spread between asking prices and bids was $5 to $7 which resulted in a standstill through much of the week. Trade was also slow to develop on Friday as cattle feeders and packers were both firmly holding their ground.
Packers have leverage on cattle feeders due to several market ready cattle being available, but cattle feeders being current with marketing and stronger live futures provide them short term wiggle room. The next several weeks may be similar to this week with late week trade.
BEEF CUTOUT: At midday Friday, the Choice cutout was $226.59 up $0.18 from Thursday and down $1.43 from last Friday. The Select cutout was $204.61 up $1.20 from Thursday and down $0.48 from last Friday. The Choice Select spread was $21.98 compared to $22.93 a week ago.
Middle meats remain a top selection for Father’s Day as many families treat their father to a nice steak item. This demand has contributed to strength in the rib and loin primal. However, the market tends to transition to more ground and processed beef items moving deeper into the summer.
Moving towards Independence Day, consumers begin leaning toward grilling hamburgers and all beef hotdogs. Ground beef and processed beef items such as hotdogs result in a significant pull on 90 percent lean beef and 50 percent lean trimmings.
Fresh 90 percent lean beef originates from slaughter cows, and the price has been inching its way higher since the beginning of the year. With current prices near $222 per hundredweight, a price peak just under $230 is not out of the question by the end of August.
Fresh 50 percent lean trimmings originate from finished cattle and are trading at their steadiest state in several years with this week’s price near $73 per hundredweight which is in line with the five year average price. The price of fresh 50’s is expected to remain steady in the near term.
OUTLOOK: August is now the nearby contract for feeder cattle which means it is leading the way for calves and feeder cattle trading at local sale barns. Prices at local auction markets this week were unevenly steady compared to a week ago for steers and heifers. Using the weekly weighted average prices for Tennessee, some weight classes witnessed higher prices while the weight classes on either side of them may have resulted in lower prices or steady prices compared to the previous week’s weighted average price.
The unevenness in local prices could be the result of gyrations in the futures market or quality differences in cattle from one week to the next. USDA Market News reports are useful when trying to get a general idea of what cattle are worth. However, simply sorting cattle into weight classes by frame and muscling do not always tell the full story.
Similarly, the reports provide a method of comment such as thin, fleshy, full, value added, etc. which improves the value of the information. However, nearly every spectrum that is used to describe cattle is continuous and not discrete.
Thus, a group of hardened calves that need a few groceries but that would not qualify as thin will generally bring a higher price than the same weight calves that just came off the cow and are carrying good flesh yet they both may fit in the same description on a report. This means quality differences from one week to the next can greatly influence the price and that comparing the same weight class from one week to the next is not always as straight forward as it seems.
Futures contracts on the other hand have a consistent description and thus represent the same type and quality of cattle at all times. The August contract has gained about $10 per hundredweight since the middle of May which was near the contract low.
Alternatively, the August contract remains about $12 lower than the contract high established in November of 2017. Hindsight shows hedging opportunities, but the recent surge in prices may be enough to result in positive margins.
ASK ANDREW, TN THINK TANK: A question came in this week regarding pasture rental rates and rental rates for grazing cover crops. USDA-NASS publishes county rental rate estimates every other year which can be found online. For Tennessee, rental rates are more easily accessed in a University of Tennessee publication. As it relates to rental agreements for cover crops, the key to developing this rate is to know what it costs to put in the cover crop and factor in an acceptable return. A person could also base cover crop lease rates on gain if calves are grazing or they could use a dollar per head per day for calves or cows. The key to using a per head per day rate is maintaining an acceptable stocking rate to achieve good utilization but also to maintain the integrity of the cover crop.
Please send questions and comments to email@example.com 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 $110.03 +1.65; August $105.78 +1.63; October $108.20 +1.05; Feeder cattle –August $147.28 +1.20; September $148.43 +0.88; October $148.35 +0.30; November $148.50 +0.28; July corn closed at $3.78 up $0.02 from Thursday.