Market Highlights: Cow-calf Producers Have Marketing Options to Consider

Market Highlights: Cow-calf Producers Have Marketing Options to Consider

FED CATTLE: Fed cattle traded $3 lower compared to last week on a live basis. Prices on a live basis were primarily $106 to $107 while prices on a dressed basis were mainly $168 to $170.

The 5-area weighted average prices thru Thursday were $106.78 live, down $2.94 from last week and $169.74 dressed, down $5.53 from a week ago. A year ago prices were $114.81 live and $180.38 dressed.

Finished cattle prices have declined more than 26 percent since their apex of $144.60 in May which has resulted in fed cattle revenues declining about $500 per head over the same time period. Comparing this to 2016, fed cattle prices peaked just above $139 in the middle of March and declined nearly 18 percent by the last week of August. However, 2016 prices continued to decline into the middle of October resulting in a 30 percent decline from the apex in March to the bottom in October.

For prices to reach a 30 percent decline in 2017, fed cattle would have to trade below $102 which is in the realm of possibility. The continued price decline has started to place pressure on feedlots from a profitability standpoint which will show up in the feeder cattle market.

BEEF CUTOUT: At midday Friday, the Choice cutout was $191.52 down $0.23 from Thursday and down $3.54 from last Friday. The Select cutout was $189.45 up $0.79 from Thursday and down $3.05 from last Friday. The Choice Select spread was $2.07 compared to $2.56 a week ago.

Beef prices continued their decline this week which is echoed by the sentiment in the monthly Foods Demand Survey conducted by agricultural economists at Oklahoma State University. Consumer willingness to pay for steak and hamburger declined 6.4 and 4.3 percent, respectively, from July to August. What may be more worrisome is that willingness to pay for steak and hamburger has declined 18.3 and 11.0 percent respectively over the past year.

While beef items struggled moving from July to August, the survey found consumers increased their willingness to pay for chicken breast, chicken wing, and pork chop in the last month. However, all meat items evaluated in the August 2017 survey show a decline in willingness to pay ranging from 6 percent to 30 percent when compared to August 2016. The reduced willingness to pay for beef items does not bode well for the last grilling holiday of summer. There has been little sign of support from Labor Day beef purchases. Maybe restocking the meat counter after the holiday will provide a boost.

OUTLOOK: The slaughter cow market was very strong through the spring and early summer months. The longevity of the strong market provided producers a longer period to market cows than has been typical in previous years. However, late summer is proving to be less supportive of the slaughter cow market, and the fall months will likely result in even larger price declines. The slaughter cow market price tends to wane during the fall and this is largely due to the increased supply of cows for slaughter as many cow-calf producers market cows at time of calf weaning in October or November. One consideration for producers this time of year is to early wean calves and market cows before they lose too much body condition and before slaughter cow prices hit rock bottom.

Some similar thoughts can be geared toward the calf crop that many producers will be weaning in the next few months. Lightweight calf prices will seasonally be on the decline through November as many of those calves will be headed to grass either locally or in the Southern Plains. Weaning the spring calf crop early can allow a producer to capitalize on higher prices, but it will also result in marketing a lighter calf. Thus, producers with spring calving herds should be considering several options. The first is sticking to the status quo of selling calves straight off the cow in October or November. The second alternative is to early wean and market calves at lighter weights. A third option is to early wean calves and then put them through a preconditioning and backgrounding phase to guard against marketing cattle during seasonally low prices. A fourth option would be to wean calves at the normal time and then precondition and background calves until prices rebound from the seasonal valley. There are more alternatives, but the correct decision depends on the resources a producer has available. Now is the time to put pencil to paper to determine the best route.

The August cattle on feed report for feedlots with a 1000 head or more capacity indicated cattle and calves on feed as of August 1, 2017 totaled 10.60 million head, up 4.3% compared to a year ago, with the pre-report estimate average expecting an increase of 4.9%. July placements in feedlots totaled 1.62 million head, up 2.7% from a year ago with the pre-report estimate average expecting placements up 6.2%. July marketing’s totaled 1.78 million head up 4.1% from 2016 with pre-report estimates expecting marketings up 4.5%. Placements on feed by weight: under 800 pounds up 3.5%, 800 to 999 pounds up 3.7%, and 1,000 pounds and over down 11.8%.

ASK ANDREW, TN THINK TANK: One good thing about surrounding oneself with people is there is always someone to bounce ideas off. The key to this strategy is not only surrounding oneself with “good” people, but knowing which of those people can provide good insight on the subject and project at hand. It is not uncommon for me to utilize University of Tennessee Extension personnel. In the past year, I have utilized state specialists such as Gary Bates, Justin Rhinehart, Neil Rhodes, and most recently Wesley Wright. Not only have I utilized people in Knoxville, but I also take advantage of the knowledge, experience, and expertise of several county Extension personnel. University of Tennessee Extension employees have been extremely valuable to me. However, I also recognize the value one can gain by inquiring of fellow producers, because several producers have shared valuable information with me along my path. The final thought is to ask questions, listen to wisdom, and know that there is nothing wrong with questioning wisdom.

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 $106.93 +0.10; December $109.93 +0.13; February $112.38 +0.30; Feeder cattle –September $142.93 +0.75; October $142.95 +0.55; November $143.15 +0.68; January $140.43 +0.68; September corn closed at $3.39 down $0.03 from Thursday.

 

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