FED CATTLE: Fed cattle traded $2 lower than last week on a live basis. Prices on a live basis were mainly $108 to $110 while dressed prices were mainly $171 to $174.
The 5-area weighted average prices thru Thursday were $109.52 live, down $1.59 from last week and $173.16 dressed, down $2.73 from a week ago. A year ago prices were $109.72 live and $175.26 dressed.
Weekly finished cattle prices have been below weekly 2017 price levels for 22 consecutive weeks with an average difference of $11.46 during that time period.
This week may or may not result in the 23rd consecutive week of year-over-year declines. However, the streak is likely to end before August if cattle feeders can keep prices over $107 next week or $105 the following week.
The finished cattle market has been amazingly flat since the beginning of July as cattle feeders did not succumb to leverage generally held by packers, but the last two weeks of trading would suggest that cattle feeders need to move cattle. Finished cattle prices continue to have downside price risk pressure, but cattle feeders will attempt to hold their ground.
BEEF CUTOUT: At midday Friday, the Choice cutout was $211.30 up $2.20 from Thursday and up $5.00 from last Friday. The Select cutout was $201.69 up $0.23 from Thursday and up $3.32 from last Friday. The Choice Select spread was $9.61 compared to $7.93 a week ago.
The last grilling holiday of summer is just a couple of weeks away which means retailers and restaurants are in the process of making their final meat purchases prior to the holiday weekend.
Consumers are not at any shortage of meat as beef and pork production year to date are both 3.2 percent greater than 2017 while broiler (chicken) production through 31 weeks of 2018 is 0.2 percent higher than 2017. It may seem chicken production is lagging compared to beef and pork, but production in 2018 is 8.1 percent higher than the five year average production.
Cattle producers hope retailers continue to promote beef items as they have most of the summer, because it may be the last little victory until end of the year holiday purchases provide support.
Packers on the other hand have little to complain about as margins in the beef packing industry remain strong. The concern for many diversified packers comes from the poultry sector where marketing production has become more challenging.
OUTLOOK: Based on Tennessee weekly auction market averages, steer prices this week were $2 to $3 lower than last week while heifer prices were $1 to $4 lower. Similarly, slaughter cow prices continued their methodical march lower with prices $1 lower compared to one week ago.
In the recent past, price movements in the cattle markets and most agricultural commodity markets for that matter have been attributed to weather events, trade issues, or some other news worthy disgruntlement. However, the softening that is taking place in today’s market seems to have more to do with the seasonal price patterns established through supply and demand factors.
This is not to say that prices are poor. On the contrary, prices of feeder cattle and slaughter cows are in decent shape. However, the price of feedlot ready cattle generally peak in the August time period and then begin to soften moving into fall. Thus, the softer prices on calves and feeder cattle this week may be a sign that the market is beginning its seasonal decline which is fully evident in the slaughter cow market. Calves and slaughter cows tend to take a larger hit in the fall than do feeder cattle.
There are sure to be producers who try to time the market during the fall months which may result in $10 to $15 more per head on a certain week, but the strategy of trying to time the market when prices are heading lower does little to improve profitability. There will be weeks moving through the fall marketing period where week-over-week prices are higher, but producers should be cognizant of the seasonal decline that looms over the market.
The one group of producers that may find good news in this outlook is stocker and backgrounding operations. Lower overall investment costs reduce financial risks while margins generally stay about the same. The market does appear to be favorable toward margin operators this fall and through the winter with favorable value of gains on the table.
ASK ANDREW, TN THINK TANK: Since the first of August, at least four different individuals have inquired about the Tennessee Beef Evaluation program. The Tennessee Beef Evaluation program is a retained ownership program in which producers can send cattle to a participating feedlot in Iowa where production, carcass, and financial data are collected. This program provides producers an opportunity to find out how their cattle perform in the feedlot and how they grade at harvest which essentially provides producers an opportunity to find out what is under their cattle’s hide. Loads of cattle are coordinated throughout the year, but it is necessary to fill a semi load of cattle (48,000-50,000) before a load is shipped. To participate in the program, cattle should be dehorned, castrated, bunk broke, and double vaccinated for respiratory diseases with a modified live vaccine. Producers are encouraged to send a minimum of five head with no maximum limit if desiring to participate. Feeding cattle is not without risks and producers should evaluate all alternatives prior to making the decision to retain ownership.
Please send questions and comments to firstname.lastname@example.org 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 $109.43 +1.10; October $110.88 +1.60; December $114.63 +1.43; Feeder cattle –August $150.95 +0.68; September $151.83 +1.70; October $151.85 +1.63; November $151.65 +1.30; September corn closed at $3.64 down $0.01 from Thursday.