By Andrew Griffith
FED CATTLE
Fed cattle trade was slow to be established with expectations of $1 to $2 higher on a live basis. Bid prices in the South and North had a wide range.
The 5-area weighted average prices thru Thursday were $187.55 live, up $0.98 compared to last week and $294.99 dressed, up $2.94 from a week ago. A year ago, prices were $140.52 live and $227.85 dressed.
The stalemate that ended July continued into August as packers and cattle feeders simply do not want to play together. It is somewhat understandable in that feeder cattle futures and live cattle futures have been unpredictable and hedging has not always worked perfectly in this environment. Thus, unpredictability may be part of why cattle trade is slow develop. However, the primary reason for packers holding out on purchasing cattle is because they are bleeding red on every animal they push through the system. It is difficult to get excited about purchasing cattle that will lead to larger losses than the cattle purchased the previous week. On the other side of the coin, cattle feeders feel it is necessary to hold out, because they are paying more for feeder cattle.
BEEF CUTOUT
At midday Friday, the Choice cutout was $301.88 down $0.13 from Thursday and down $0.74 from a week ago. The Select cutout was $277.29 down $1.02 from Thursday and up $0.62 from last week. The Choice Select spread was $24.59 compared to $25.95 a week ago.
Since the middle of April, the weekly comprehensive boxed beef cutout price has only traded outside of an $8 range for a four week period in June and early July. The cutout has spent most of its time trading on either side of $300 and there are no signs it will deviate in the near term. This type of price action is positive for the beef industry in that packers have been able to consistently move beef products at these elevated price levels. The loin and rib primal were the price driver in June with the brisket also demonstrating strength in late June and early July. Middle meat prices softened through July, which is the primary reason the cutout fell off its June highs. However, the brisket and short plate also contributed to some of the boxed beef cutout price decline. Alternatively, the chuck, round and flank primal prices have held their own the past month and continue to offer support for the comprehensive cutout. Middle meats may garner some interest heading towards Labor Day, but will likely soften again heading into late summer and the fall months.
OUTLOOK
Based on Tennessee weekly auction price averages, steers prices were steady to $4 higher compared to last week while heifer prices were $4 to $6 higher compared to a week ago. Slaughter cow prices were $4 to $6 higher than last week’s weighted average price while bull prices were $2 to $3 higher compared to the previous week. August feeder cattle futures have been stuck between $240 and $250 since the end of June. They have seemed to find a range that traders are comfortable with, but the market continues to bounce around on its pogo stick. The August contract is trading at the top end of the range to finish the week, which has resulted in a fairly strong cash feeder cattle market. Based on local 50,000 pound loads of feeder steers weighing between 760 pounds and 950 pounds, prices ranged from $228 to $255. The range in prices was largely associated with quality with fairly normal price slides on weight. There is no doubt sellers were mostly satisfied with prices, but sellers who have to replace those cattle will spend most of their profits on the purchase of cattle to fill pastures and pens. The fundamentals of supply continue to support strong prices, but the concern of beef demand will hang over the market as long as inflation persist and as interest rates remain strong. As the cattle market heads deeper into summer, the seasonal trend for slaughter cows and bulls is price softening. There is little doubt that movement of slaughter cows will increase as the spring calf crop is weaned, but it is unlikely slaughter cow prices will decline as much as is typical due to fewer animals moving through the market compared to the past few years. This will provide producers an opportunity to market these slaughter animals a little later in the year than is normal. Despite this statement, there is no reason to put off the marketing of these females with the hopes of prices holding.
ASK ANDREW, TN THINK TANK
The Tri-State Beef Conference was held this week in Northeast Tennessee. It was a really good conference with several educational sessions that received many compliments. The opportunity to attend this event reminded me of how diversified cattle producers are across the three-state region this conference serves. At the same time, it reminded me that we can learn a lot from operations that have few similarities to our own. Thus, the challenge for each person in this business is to consider what can be learned from others in the business and how they can implement some of those strategies in their own operations. At the same time, there are things to be learned outside the cattle business that can be useful in the cattle business. Change is almost always difficult, but small changes can have large returns if thoughtfully applied.
Source : tennessee.edu