​Weekly Livestock Comments by Dr. Andrew P. Griffith                                         March 27, 2020


 
 

 

FED CATTLE: Fed cattle traded $10 higher than last week on a live basis. Prices on a live basis were mainly $119 to $120 while dressed prices were mostly $189 to $190.

The 5-area weighted average prices thru Thursday were $119.44 live, up $9.64 compared to last week and $189.31 dressed, up $16.20 from a week ago. A year ago, prices were $126.34 live and $205.60 dressed.

What a difference a week makes! In one week, cattle feeders garnered $130 to $140 more dollars per head and there is no way to explain it. Many cattle producers were asking why finished cattle prices were declining the past several weeks and the simple answer was coronavirus. Should finished cattle prices have actually declined? The answer is probably not. However, there is more certainty now that consumers are going to keep eating beef whether at home or away from home which provides cattle feeders a little leverage. Will cattle prices escalate again next week? There is no way to know for certain, but there is a good chance they have another $5 or $8 in them moving into late April and early May.

BEEF CUTOUT: At midday Friday, the Choice cutout was $252.11 down $1.46 from Thursday and down $1.96 from last week. The Select cutout was $240.38 down $0.56 from Thursday and up $1.23 from a week ago. The Choice Select spread was $10.50 compared to $13.69 a week ago.

Boxed beef prices continue to roar as consumer demand for meat remains strong. There is no doubt that many readers of this column have seen the sparsely stocked or even empty meat counters at their local grocery stores. This lack of available product does not point to a shortage of meat, reduced supply, or to strong demand for meat, but rather the change in consumption patterns as the nation maneuvers its way through unchartered waters. As an industry, this situation provides the beef community an opportunity to encourage more at home consumption of beef products. There are certainly consumers in this nation that do not purchase certain beef products, because they feel as if they do not know how to prepare the cut of beef properly. Thus, now is the time to educate those consumers on how to prepare those cuts at home which may lead to those consumers purchasing those cuts again and preparing them at home even after the nation has moved past the current situation. This is just one example of the potential positives that could come from our dilemma.

OUTLOOK: Based on Tennessee weekly auction market price averages, slaughter cow and bull prices were $4 to $6 higher compared to a week ago. Due to limited marketings of feeder cattle, it is difficult to develop trends for these class of animals, but there was definitely a stronger undertone to most classes of feeder cattle this week. Much of this stronger undertone is likely associated with the strong week that feeder cattle futures experienced and the strong week for live cattle sales. Despite the stronger prices this week, the volatility in the futures market will keep many cattle producers on the sidelines as it should. In a market that is not influenced by outside market forces, it is difficult to accurately predict what is going to happen which makes decision making difficult. Decision making is made even more difficult when extreme volatility is introduced to the market from outside forces. Market volatility is not a big issue for producers who do not have anything that needs to be immediately marketed, because they are only experiencing a loss in value of a commodity. Alternatively, those who must market cattle in the near term may actually experience that loss in value. As an example, a person with a load of feeder cattle two weeks ago may have been offered $10 to $15 per hundredweight less for those animals than they may have been offered this week. That equates to a $5,000 to $7,500 difference in value over a two week period on a 50,000 pound load. The situation cattle producers are traversing right now is the exact reason price risk management should be included in a producer’s business plan. Some may think this is an isolated event and discount the use of price risk management. However, if producers recall, one year ago the futures market was pricing August feeder cattle near $155 and when August arrived the same contract was trading in the $135 to $140 price range. This demonstrates the importance of managing price risk.

ASK ANDREW, TN THINK TANK: As government leadership and the health care community continues to stress the importance of social distancing, self-isolation, and quarantine, it is good time to recognize how blessed we are in rural America. Many of us in rural areas and especially those of us who live on a farm are naturals at social distancing. We spend a lot of our days working on the farm and the only time we cross paths with others is when we meet them on the road or when we make a trip to the farm supply store. Another blessing in this is that we in the farming world actually have more area than our house to self-isolate. If you have a few acres then it is very easy to get out of the house and head to the back 40 or simply go piddle in the shop. City dwellers do not have these readily available alternatives. Another blessing is that many farmers can at least keep working. Commodity prices are not as strong as most would prefer, but the hope that they will improve over the next several months is a far cry better than those who are no longer earning a paycheck because of the current situation.

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 – April $100.95 -4.50; June $89.43 -4.13; August $90.45 4.03; Feeder cattle – April $120.60 -4.50; May $120.93 -4.50; August $127.10 -4.50; September $127.58 -4.50; May corn closed at $3.46 down 3 cents from Thursday.


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