​Weekly Livestock Comments by Dr. Andrew P. Griffith                                                August 18, 2017

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FED CATTLE: Fed cattle traded $5 lower compared to last week on a live basis. Prices on a live basis were primarily $109 to $110 while prices on a dressed basis were mainly $173 to $175.

The 5-area weighted average prices thru Thursday were $109.72 live, down $5.45 from last week and $175.26 dressed, down $8.63 from a week ago. A year ago prices were $117.54 live and $186.06 dressed.

After weeks of holding the line, finished cattle prices are being driven down by seasonal supply and demand factors. The price decline this week was larger than most analysts in the industry were expecting over a seven day period. Additionally, cattle feeders recognize prices are deteriorating to levels below a year ago which is cause for concern. There continues to be downside risk now that the market broke through the support level. The question now is if finished cattle prices will fall below the $1 level on a live basis which happened last year. Not to bring optimism to a dismal situation, but deferred futures are holding well above the $1 price point and fed cattle basis remains strongly positive which would support cash prices remaining above the $1 mark.

BEEF CUTOUT: At midday Friday, the Choice cutout was $195.06 down $0.57 from Thursday and down $4.71 from last Friday. The Select cutout was $192.50 down $1.70 from Thursday and down $3.85 from last Friday. The Choice Select spread was $2.56 compared to $3.42 a week ago.
The beef market appears to be in a free fall as the summer doldrums have taken a toll on consumers. Boxed beef prices are seasonally on the decline in late summer and into early fall as hotdogs and hamburgers are the focus for most grilling enthusiasts. The one glimmer of hope for meat packers this time of year is Labor Day weekend which is the unofficial end to the summer grilling season. How much hope the beef industry can put into the last summer holiday boosting beef prices is unknown, but the initial view is that the holiday will do little to spur positive sentiment. One struggle in the beef industry is increasing retail beef prices. The all fresh retail value of beef for July was $583.30 per hundredweight which is an increase of $3.80 from June and $5.80 higher than July 2016. The increase in retail value is due to strong wholesale prices earlier in the year which forced retailers to increase retail prices since the first of the year. Lower wholesale prices today will thus result in lower retail beef prices in coming months.

OUTLOOK: Based on Tennessee Weekly auction market average prices, steer prices were $2 to $6 lower than last week while heifer prices were $3 to $7 lower compared to a week ago. The downward price trajectory has resulted in lightweight calf prices falling below year ago prices while heavier calves and feeder cattle prices are close to year ago prices. The price decline may bring some angst to some producers with fears of cattle prices collapsing similar to the fall of 2016. The fear of such a price decline is understandable, but market conditions in 2017 are not the same as 2016. Calf and feeder cattle prices steadily increased the first six months of 2017 and have held fairly steady throughout the heart of summer. Alternatively, calf and feeder cattle prices reached their apex in early spring of 2016 before steadily eroding the last eight months of the year. Calf prices will continue to soften as producers increase cattle marketings in the next two to three months, but the probability of a price collapse similar to a year ago is smaller rather than larger. What may be a bigger story at this time is the decline in slaughter cow prices. Slaughter cow prices, similar to calf prices, have been able to hold their ground all summer which is not typical. However, slaughter cow prices were $4 to $6 lower this week compared to a week ago. Inevitably, slaughter cow prices will also continue to decline as fall cattle marketing increases. The price decline this week represents a decline of $48 to $72 per head for a 1,200 pound cow. These animals could easily lose an additional $120 per head between now and the October and November time period. With the expectation of declining prices, some producers should consider early weaning calves and marketing cows in the near term that will not be over wintered. Such a management decision may provide producers the opportunity to stockpile forage for winter grazing as well as an opportunity to grow the calves in a preconditioning program. Markets can be fickle sometimes and difficult to predict, but odds are prices will be on the decline this fall which means revenues will also be declining.

ASK ANDREW, TN THINK TANK: People make decisions each and every day. Some decisions influence life more than other decisions. Cattle operations are no different. Cattle producers are presented decisions every day. Some decisions are easier to make than others. The frequency with which a certain decision is made impacts the view of how easy or difficult the decision is. For instance, most producers have already made the decision to feed hay for 120 days this winter. Those same producers will make the decision to feed hay 120 days each winter for the next ten years even if there could be methods of reducing hay usage. Alternatively, many producers place more effort on purchasing a bull because this may only occur once every three or four years. Regardless of the decision being faced, producers should start early with the evaluation process and attempt to evaluate the decision from every foreseeable angle.

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 –August $106.38 -0.75; October $105.90 -0.33; December $107.85 -0.43; Feeder cattle –August $140.50 +0.03; September $140.03 -0.70; October $139.93 -0.55; November $140.73 -0.03; September corn closed at $3.52 up $0.02 from Thursday.