​Weekly Livestock Comments by Dr. Andrew P. Griffith                                         February14, 2020



FED CATTLE: Fed cattle traded $2 to $3 lower compared to last week. Prices on a live basis were mainly $118 to $119 while dressed prices were mostly $190.

The 5-area weighted average prices thru Thursday were $118.88 live, down $1.95 compared to last week and $190.26 dressed, down $2.65 from a week ago. A year ago, prices were $124.74 live and $199.20 dressed.

Softer prices in the finished cattle market are pulling prices of feeder cattle and calves down with it. The first thought is that cattle feeders are probably not happy that finished cattle prices are $6 to $7 per hundredweight lower than where they started the year which means $80 to $100 less of revenue on a 1,400 pound animal. On the opposite side, those same cattle feeders are paying $80 to $100 less for feeder cattle that are being placed in feedlots right now. Thus, most of the losses they are experiencing on the selling side is being recouped on the buying side. Most of the cattle coming off feed today are profitable, and with the dip in feeder cattle prices the past few weeks, current placements have a good chance of being profitable.

BEEF CUTOUT: At midday Friday, the Choice cutout was $207.85 up $1.40 from Thursday and down $2.76 from last week. The Select cutout was $205.77 up $1.98 from Thursday and up $0.92 from a week ago. The Choice Select spread was $2.08 compared to $5.76 a week ago.

Despite the struggle of cutout prices during a time when beef demand is slack, retail prices started off the year extremely strong. The retail price of Choice beef for January was nearly $6.06 per pound which is $0.20 per pound higher than it was in January of 2019. The all fresh retail beef price for January was nearly $5.94 per pound which is $0.24 higher than January of the previous year and higher than all but December of 2019. Comparing this to pork and chicken, the January retail pork price was $0.12 per pound higher than a year ago and the retail chicken price was $0.06 lower than January of 2019. Each of the three meats has a different story. Chicken prices are being driven lower because of increased poultry production and the need to clear product from the market. Higher pork prices are largely being driven by strong exports to China despite increased pork production compared to previous years. Beef prices are not as clear, but it would appear that exports are supporting this market given fairly stable to slightly higher production.

OUTLOOK: Based on Tennessee weekly auction market price averages, steer and heifer prices were unevenly steady compared to a week ago. Slaughter cow and bull prices were mostly steady compared to the previous week. This week’s price trends should be taken with a grain of salt, because there were only 4,000 head marketed through Tennessee reported auctions which is less than half of the previous week’s receipts. Lower than average receipts were most likely due to the consistent and abundant rainfall that not only hit Tennessee but a large portion of the Southeast and other states as it moved north out of Texas and through portions of the eastern and central United States. The mud has made it impossible to get trucks and trailers in and out of fields not to mention that it has resulted in poorer cattle performance the past couple of months. On top of tough weather conditions, feeder cattle futures have been languishing for three weeks towards the bottom of the trading range. It would appear at this time that there is nothing positive in the cash feeder cattle market or the finished cattle market, but this is typically a tough time of year. Optimism should come back to the market as spring rolls around and summer takes hold. The problem with this optimism is that it may only get producers back to where the market started the year in January. Considering some load lot prices in early January and comparing them to current load lot prices in Tennessee, the market is off $11 or $12 per hundredweight during that time period for cattle weighing 800 to 950 pounds. Instinct says these prices cannot stay this low, but gaining back everything that has already been lost will be a difficult task. It will be even tougher to exceed those levels. The recommendation for producers with cattle weighing less than 700 pounds is to hold onto those animals for a few more weeks to see if this market will turn around.

ASK ANDREW, TN THINK TANK: I have received several inquiries about the futures and options markets the past couple of weeks, and I am scheduled to do a couple of talks with large groups about the same topic before the end of February. This tells me that producers want to understand how the futures market and options market could potentially benefit them, and how they can use these markets to make decisions. This topic takes more time than a few lines in an article, but it is actually a very simple topic if a person does not try to over think the process. What I generally find out when someone asks about futures is that they think this means they physically have to sell their cattle to whomever they sold cattle to on the futures market and that is not the case. The process is much simpler. Cattle producers who use feeder cattle futures are simply trading paper in the futures market to protect the value of cattle at home that will be sold like they have always done it such as private treaty, through an auction barn, or a video sale. Futures simply protect cattle value without physical marketing ever changing.

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 –February $120.83 +1.38; April $120.33 +1.80; June $112.00 +1.38; Feeder cattle –March $138.53 +2.20; April $141.38 +2.43; May $143.20 +2.38; August $150.20 +2.15; March corn closed at $3.78 down 2 cents from Thursday.