Market Highlights: Expect Softer Calf Prices in November

FED CATTLE: Fed cattle trade was not well established at press but trade appeared to be steady compared to last week. Asking prices on a live basis were mainly $112 to $113 while dressed prices were mainly $176 to $177.

The 5-area weighted average prices thru Thursday were $109.82 live, down $1.23 from last week and $173.06 dressed, down $1.90 from last week. A year ago prices were $98.24 live and $154.02 dressed.

Fed cattle trade was slow to develop as packers and cattle feeders had difficulty agreeing to terms prior to the release of the cattle on feed report. There was some dressed trade in northern cattle feeding states that was steady with last week, but trade in the southern feeding states was at a standstill most of the week and most of Friday.

Cattle feeders continue to maintain hope they can push prices higher in coming weeks which will move margins to a more comfortable situation. Cattle feeders on a cash to cash basis have positive margins, but they would like to roll small positive margins into a bigger piece of the pie. Prices are expected to firm in coming weeks, but price firming is about all that can be expected.

BEEF CUTOUT: At midday Friday, the Choice cutout was $200.06 up $0.49 from Thursday and up $1.21 from last Friday. The Select cutout was $191.21 up $0.45 from Thursday and up $0.36 from last Friday. The Choice Select spread was $8.85 compared to $8.00 a week ago.

The analysis remains the same as little has changed in the meat market. The chuck primal is showing glimmers of hope, and it is providing support to beef cutout prices. It is still a little early for retailers and the food service industry to begin making major purchases for the holidays, but it will not be too much longer. The one flaw in assuming the holidays will help support beef prices is the expected flood of hams that will be competing for the holiday centerpiece.

Hog and pig inventory has continued to flourish setting up a few weeks in which the weekly expected hog slaughter will exceed 2.6 million head this fall. The domestic pork industry is primarily driven by the export market, but domestic consumption does play a role and increased supply could lower ham prices enough in coming weeks that some consumers choose ham over beef items this holiday season.

Beef production will continue to be higher than one year ago which will result in softer prices. However, strong international demand will continue to support beef exports.

OUTLOOK: Cow and calf prices remain unseasonably strong as the market moves through the second half of October. The strength in the market has largely been due to strong demand through the entire cattle complex. Feeder cattle futures have traded fairly steady the last four weeks which has continued to support calf prices.

Generally, feeder cattle futures soften through October and November which puts downward pressure on calf prices. The tendency of softer prices is not only a factor of feeder cattle futures moving lower but the increased supply of freshly weaned calves coming to town.

Though producers have slowly begun bringing calves to market in October, many producers continue to keep calves at home due to good forage availability made possible by summer rains. As the fall months progress and as winter nears, more calves will make their way to auction markets across the state. The one difference buyers can expect is for calves to be coming to market a little heavier than in previous years.

For cow-calf producers, the market continues to support putting weight on calves. If putting additional weight on calves is not an option then the current calf market is offering opportunities to market at profitable levels.

For stocker producers, prices this fall are much higher than one year ago. However, the market is offering profits through hedging opportunities which may be beneficial if one does not want to assume all of the price risk. There will continue to be high morbidity and mortality risks as temperatures fluctuate 30 to 40 degrees many days.

Moving forward, producers should expect slightly softer calf prices moving through November, but the risk of a major price collapse is small. Prices on slaughter cows remain relatively strong, but they are expected to soften moving through the next several weeks. Overall, prices are supportive of a profitable enterprise.

The October cattle on feed report for feedlots with a 1000 head or more capacity indicated cattle and calves on feed as of October 1, 2017 totaled 10.81 million head, up 5.4% compared to a year ago, with the pre-report estimate average expecting an increase of 4.7%. September placements in feedlots totaled 2.15 million head, up 13.5% from a year ago with the pre-report estimate average expecting placements up 7.5%. September marketing’s totaled 1.78 million head up 2.9% from 2016 with pre-report estimates expecting marketings up 2.6%. Placements on feed by weight: under 700 pounds up 15.5%, 700 to 799 pounds up 8.9%, 800 to 999 pounds up 15.9%,  and 1,000 pounds and over up 4.5%.

ASK ANDREW, TN THINK TANK: Due to an increase in forage economics programming, there has been an increase in questions surrounding grazing and hay. One of the most common topics is rotational grazing. There are several reasons to institute rotational grazing into cattle operations. The primary reasons are to increase pasture utilization and to keep grass in an active growing stage which results in greater forage production and higher quality forage. Increased utilization and increased forage production can decrease a cattle herd’s feed cost by reducing hay needs. Additionally, increased forage production may allow for an increased stocking capacity. The benefit of improved forage quality can also result in greater weaning weights and improved gains when growing calves. Thus, this can improve the revenue side of the balance sheet.

Please send questions and comments to agriff14@utk.edu 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 –October $111.68 +0.48; December $116.60 +0.45; February $121.28 +0.63; Feeder cattle –October $153.63 +0.48; November $153.08 +0.30; January $151.33 +0.13; March $148.45 +0.38; December corn closed at $3.45 down $0.05 from Thursday.