​Weekly Livestock Comments by Dr. Andrew P. Griffith                                         November 15, 2019


 
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FED CATTLE: Fed cattle traded steady to $1 higher compared to last week on a live basis. Prices on a live basis were mainly $115 while dressed prices were mostly $182.

The 5-area weighted average prices thru Thursday were $115.01 live, up $0.85 from last week and $182.03 dressed, up $0.92 from a week ago. A year ago, prices were $110.62 live and $175.62 dressed.

Live cattle prices are headed in a positive direction as far as cattle feeders are concerned. This positive price movement also makes other cattle producers happy as some of the value will work all the way back to cow-calf producers at some point. There is a good possibility that some portion of the finished cattle will trade as high as $120 before the end of the year if the current trend holds which will further support prices within the cattle complex. The support for finished cattle prices may be stemming from the thought that there are not as many cattle out in the country as was first thought. If this is truly the case then finished cattle prices will be well supported in the spring with a target price exceeding $130.

BEEF CUTOUT: At midday Friday, the Choice cutout was $241.58 up $0.52 from Thursday and up $2.33 from last Friday. The Select cutout was $215.07 down $0.77 from Thursday and up $1.56 from last Friday. The Choice Select spread was $26.51 compared to $25.74 a week ago.

The Choice Select spread has been abnormally wide the last few months. The spread is generally widest during summer grilling holidays and the winter holiday season. However, the spread was a little delayed in widening during the summer grilling season but then widened quickly in late June and has been above $22 since July. The widest Choice Select spread during the fourth quarter of 2018 was about $16. A wide spread gives some indication of supply and demand of Choice and Select beef. The percentage of carcasses grading Choice has been below year ago levels for about six months resulting in about 1.2 percent fewer carcasses grading Choice. The wide spread also provides cattle feeders an incentive to feed cattle longer with the hopes of producing more Choice carcasses. Dressed weights of finished cattle just began exceeding year ago levels in early October. There is no guaranteed correct answer for why all of this has come to fruition, but one reason may be biological factors from calves going through tough climatic conditions the past 12 to 14 months.

OUTLOOK: Based on Tennessee weekly auction market price averages, steer prices were $3 to $5 higher for calves weighing less than 500 pounds and steady to $3 lower for steers weighing 500 pounds or more compared to last week while heifer prices were steady to $3 lower compared to a week ago. Slaughter cow prices were mostly steady compared to the previous week while bull prices were steady to $1 higher compared to a week ago. Large runs of freshly weaned calves continue to cut a trail to local auction barns as producers market the spring calf crop. By this point in the game, most cow-calf producers who market freshly weaned calves in the fall have found out that prices are running about $10 per hundredweight lower than this time last year. Since the beginning of August, 500 to 600 pound steer prices in Tennessee have averaged $12.80 per hundredweight less than they did over the same time period in 2018. Thus, if one thought last year’s prices were bad then a more abrasive terminology is likely appropriate for the current year’s price. Despite the extremely low prices of 2019, there is one bright side to this information. Cattle prices are likely to be higher in 2020 than in 2019. Maybe this thought is not as positive as most would like to hear, because it will not take much effort to experience higher prices next year. The simple truth is that most producers would gladly accept 2018 prices again in 2020 compared to the rough year that has been navigated in 2019. For producers who have not marketed their spring born calf crop, continue holding those calves until the first of the year. There is a good chance the price increase from today until the middle of January will exceed any negative tax implications the situation may present. For stocker producers, continue buying cattle at low prices because the payout in four or five months looks advantageous. For those with nothing to market at this time, start making plans for next year.

ASK ANDREW, TN THINK TANK: I had a conversation this week with a gentleman who was writing an article about hay equipment and what equipment is appropriate for certain producers. This topic led to a discussion on producers identifying the actual business they are participating in. I think we as cattle producers do not always think about all of the businesses we may be part of when producing cattle. For instance, a cow-calf producer may breed cows, background calves until they are ready to enter the feedlot, and use hay they produced themselves to feed their cattle. In essence, this cattle producer is in three businesses, the cow-calf business, the backgrounding business, and the hay business. First, calves could be sold at weaning for a profit or loss. Second, the backgrounding phase could be profitable or result in a loss relative to selling the calves at weaning. Lastly, hay can be harvested and sold to another entity or it can be sold to the producer’s own cow-calf and backgrounding business. It is important for cattle producers to know which businesses are making money and which ones are losing money.

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 –December $119.10 +0.03; February $124.98 +0.05; April $126.08 -0.03; Feeder cattle –November $146.25 -0.38; January $144.28 +0.23; March $144.23 +0.15; April $145.45 +0.05; December corn closed at $3.71 down $0.05 from Thursday..



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