FED CATTLE: Fed cattle trade was not established at press. Asking prices on a live basis were mainly $114 while bid prices were mainly $108.
The 5-area weighted average prices thru Thursday were $174.79 dressed with no dressed trade occurring through Thursday. A year ago prices were $119.48 live and $190.08 dressed.
Cattle trade this week was a lot like trying to get a child to rip a band aid off his arm. Everyone knows the band aid has to come off but the child was going to delay the inevitable until he had an incentive.
In this case, packers and feedlot managers alike were acting as the child and hoping they could win the battle this week. It is difficult to say if the summer price low for fed cattle has already been established just below $107 per hundredweight, but the risk of going much lower than that is extremely low.
The best odds are for finished cattle to trade fairly flat the next several weeks though the term flat may actually look more like a saw blade. Some of the price pressure on live cattle should be alleviated moving into fall.
BEEF CUTOUT: At midday Friday, the Choice cutout was $204.72 down $1.86 from Thursday and down $3.41 from last Friday. The Select cutout was $199.08 down $0.41 from Thursday and down $2.48 from last Friday. The Choice Select spread was $8.12 compared to $9.05 a week ago.
The dog days of summer have been slowly creeping into the beef market and pressuring prices lower. The price pressure is evident in both the Choice and Select cutout as well as in the narrowing of the Choice Select spread.
Most of the change in the beef cutout price is determined by domestic demand and to a lesser extent beef exports. This time of year, domestic consumers are beginning to shy away from grilling middle meats strictly due to increasing air temperatures. At the same time, many consumers move towards hamburgers and hotdogs for grilling purposes.
From the export market side, beef exports continue to remain strong and support prices. Beef and veal exports in May totaled 272.8 million pounds. Japan remains the largest export market totaling 81.3 million pounds with South Korea being the number two export destination at 56.8 million pounds in May. Mexico and Canada remain large markets with exports reaching 36.6 and 29.1 million pounds respectively while Hong Kong and Taiwan continue to be strong destinations.
OUTLOOK: Tennessee livestock auction markets were back at full speed following a week of limited activity at weekly auction markets due to Independence Day falling in the middle of the week. Prices this week compared to two weeks ago on Tennessee weekly auction markets showed steers $2 to $4 higher while heifers were $5 to $7 higher. Alternatively, slaughter cow prices were $2 to $3 lower than two weeks ago while slaughter bull prices were $4 lower.
It is fairly easy to see that the cash market and the futures market are moving together given that August futures were approximately $4 higher this week compared to two weeks ago which falls in line with the gains in the cash feeder cattle market. This is of particular interest to fall calving herds and stocker producers as they prepare to market yearling cattle when prices are seasonally strongest.
The market has showed considerable strength from late spring through the early weeks of summer. The question now is if prices will continue to strengthen or if there is any reason for prices to be pressured. Feeder cattle prices certainly have enough juice in the tank to gain $3 to $5 more per hundredweight from mid-July through the middle of August.
Alternatively, there is enough political unrest across the nation and the world to disrupt such gains which then could actually lead to a softer market. If the current political rhetoric persists then very little change is expected, but an escalation of said rhetoric could be a market mover.
Stepping out on a limb to predict the next month and a half, which is not typical of an economist, the price of yearling feeder cattle has about a 20 percent chance of seeing greater than $3 gains in the cash market over the next 45 day, 60 percent probability of staying in a range of losing $3 to gaining $3, and a 20 percent chance of declining more than $3 per hundredweight. This price expectation now provides readers ammunition to use against the writer, but maybe he can take the heat if he is incorrect.
ASK ANDREW, TN THINK TANK: This week a question was received concerning the timing of marketing. In this particular instance the producer knows he plans to sell a truck load lot (50,000 pounds) and he knows which marketing agency is going to represent his cattle. Additionally, he knows he wants to move the cattle in August. The question is what part of August to market the cattle. Even with all of the known information, there are several things to consider. First, it is difficult to guess week to week price variation. One would not expect a large price change from one week to the next, but it can happen. When trying to make this decision, producers should first realize that prices can only do three things: increase, decrease, or stay the same. In relation to this question, two of those three things are in the producers favor. If feed or forage is abundant and relatively inexpensive the additional weight added over a couple of weeks should not greatly affect price and it should pay for itself. Even if prices slightly decline, the added weight may still pay for itself. Regardless, it is always a gamble.
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 –August $104.55 -0.48; October $107.38 -0.23; December $111.40 -0.18; Feeder cattle –August $150.73 -0.30; September $151.08 +0.10; October $151.35 +0.08; November $151.03 -0.05; July corn closed at $3.30 down $0.06 from Thursday.