​Weekly Livestock Comments by Dr. Andrew P. Griffith                                       September 25, 2020



FED CATTLE: Fed cattle traded $2 higher compared to last week on a live basis. Prices on a live basis were primarily $104 to $106 while dressed prices were mainly $164 to $166.

The 5-area weighted average prices thru Thursday were $105.03 live, up $1.49 compared to last week and $164.87 dressed, up $1.94 from a week ago. A year ago, prices were $103.46 live and $165.27 dressed.

There is more optimism in the fed cattle market than most realize. Prices have increased the past two weeks which is an obvious positive for cattle feeders. However, most casual observers would not consider these prices to be highly profitable because of how low they are relative to recent history. However, current prices have many cattle feeders in triple digit profits, because the cattle coming off feed were purchased at extremely low prices during the spring. These profits will not immediately result in higher feeder cattle prices as many cattle feeders are looking for some reserves. If these profits persist for a little while then it will eventually result in support for the feeder cattle market, and that may not show up until winter.

BEEF CUTOUT: At midday Friday, the Choice cutout was $219.22 up $1.74 from Thursday and up $3.60 from last week. The Select cutout was $207.37 down $0.37 from Thursday and up $3.38 from a week ago. The Choice Select spread was $11.85 compared to $11.63 a week ago.

Steer and heifer slaughter remain well below year ago levels with year-to-date heifer slaughter down 3.7 percent compared to the same weeks in 2019 while steer slaughter is 4.9 percent below year ago levels. Despite the lower slaughter rates, federally inspected beef production year-to-date is only down 1.2 percent, because carcass weights have been well above last year’s carcass weights since the beginning of the year. Given strong beef production and relatively strong boxed beef prices, it would appear that beef demand remains strong despite many consumers having reduced incomes during the coronavirus pandemic. Thus, consumers appear to be willing to spend some of their discretionary dollars on beef even when cash may be a little tight. Cow slaughter does not fit into boxed beef prices, but cow slaughter does contribute to beef production. Beef cow slaughter is up 3.1 percent this year compared to 2019 while dairy cow slaughter is down 4.7 percent compared to 2019. Most of the decrease in dairy cow slaughter has come the past few months as milk prices increased.

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 to $3 lower compared to last week’s prices. Cattle producers have begun setting wheels under calves, and this trend is expected to accelerate the next several weeks as producers begin to wean calves. The issue with this marketing timeframe is that the market tends to be flooded with freshly weaned bawling calves that are at increased risk of respiratory issues due to being highly stressed and the large temperature swings that are common in October. The increased availability of these animals and the risk associated with the animals tend to result in very selective purchases, which result in softer prices. There is no doubt that someone will purchase the animal, but the issue for the seller is that the buyer may pay $30 to $60 less per head than the seller was expecting. These lower calf values result in lower profits and decreased cash flow. Alternatively, cattle buyers tend to show a strong affinity for preconditioned cattle. These cattle generally have lower morbidity and mortality rates which allows the producer to pay more for them over bawling calves. Preconditioned cattle continue to see $9 to $11 per hundredweight higher prices than higher risk cattle. It is difficult to know how low prices will go this fall. Unfortunately, prices appear to be coming under more pressure than was previously expected. It is prudent for producers to consider their forage resources and the opportunity of weaning calves at least 45 days and providing a complete health program. There is generally value in this type program every year, but the profit prospects may be even greater this year than in most. From the stocker perspective, there is an opportunity to purchase low cost calves and profit on the weight gain.

The September cattle on feed report for feedlots with a 1000 head or more capacity indicated cattle and calves on feed as of September 1, 2020 totaled 11.39 million head, up 3.8% compared to a year ago, with the pre-report estimate average expecting an increase of 3.4%. August placements in feedlots totaled 2.06 million head, up 9.2% from a year ago with the pre-report estimate average expecting placements up 5.9%. August marketing’s totaled 1.89 million head down 3.1% from 2019 with pre-report estimates expecting a 3.4% decrease in marketings. Placements on feed by weight: under 700 pounds up 8.0%, 700 to 899 pounds up 14.8%, 900 pounds and over down 3.0%.

ASK ANDREW, TN THINK TANK: If a person wants to get in the cattle business with no previous experience, what sector of the business would be best to start with? Like most questions, the answer is that “it depends” and the reason it depends is because everyone has unique set of resources and objectives. However, most new producers will gravitate toward the commercial cow-calf business, because it is the most prevalent sector of the cattle business. Alternatively, others with a more risk seeking attitude may gravitate toward stocker cattle. Either way, both sectors have their own set of risks and challenges. For instance, cow-calf producers have to focus on getting cows bred and getting healthy calves to market. Cow-calf producers may deal with calving difficulties and a number of calf health issues. The stocker sector is generally challenged with a different set of problems with the largest issues being health and nutrition. Still others may desire to be seedstock producers or to run a feedlot. The key is determining which sector will meet an individual’s goals.

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 $107.58 -0.45; December $111.40 -0.88; February $114.60 -1.05; Feeder cattle –October $140.33 -1.95; November $140.15 -2.20; January $138.83 -2.08; March $138.35 -1.90; December corn closed at $3.65 up 2 cents from Thursday.