– Dr. Andrew Griffith, Assistant Professor, Department of Agricultural and Resource Economics, University of Tennessee
FED CATTLE: Fed cattle traded $3 to $4 higher compared to last week on a live basis. Live prices were mainly $106 to $109 while dressed prices were mainly $175 to $176.
The 5-area weighted average prices thru Thursday were $108.81 live, up $3.41 from last week and $175.02 dressed, up $4.56 from a week ago. A year ago prices were $109.08 live and $172.82 dressed.
The finished cattle market experienced a soft rebound this week following last week’s precipitous decline. A few dollars were gained back by cattle feeders, but they are still below where they were prior to the news of the Tyson fire. The story in all of this is what is happening in futures. The August live cattle contract has regained half of its losses but all the deferred con-tracts continue to be bottom feeders. The deferred contracts have failed to have any follow through when compared to the August contract. When the August contract terminates, the October contract is likely to make some type of sudden movement since it will be the nearby contract. The strong basis will keep cattle moving out of feedlots.
BEEF CUTOUT: At midday Friday, the Choice cutout was $237.88 down $1.40 from Thursday and up $0.03 from last Friday. The Select cutout was $214.02 down $1.89 from Thursday and up $1.35 from last Friday. The Choice Select spread was $23.86 compared to $25.18 a week ago.
Two weeks removed from the Tyson fire has done nothing to soften boxed beef prices. The slaughter facility fire set a fire under boxed beef prices as there was concern that the reduced slaughter capacity may influence the short and intermediate term availability of beef items. Using weekly slaughter data, it is too early to tell if slaughter has actually slowed due to the Tyson facility being shut down. However, it appears that other facilities have ramped up chain speed and running on Saturday to fill the gap. One should not be so naïve to think that packers are running faster and harder to help the cattle industry. Packers are attempting to pick up the slack because they are making profits that exceed $400 per head. Thus, there is plenty of incentive for packers to run chain speeds as quickly as possible and keep killing cattle. Paying workers overtime wages is a small price to pay to take advantage of the current beef market. Maybe the one positive for cattle producers to take away from this is that beef demand is strong.
OUTLOOK: Based on Tennessee weekly auction market averages, steer prices were $3 to $8 higher compared to last week while heifer prices were $2 to $7 higher compared to a week ago. Slaughter cow prices were $1 to $3 lower compared to last week while bull prices were mostly steady compared to the previous week. All of the talk last week focused on the Tyson slaughter facility fire and its influence on live cattle markets, beef markets, and feeder cattle markets. Despite it taking all week for feeder cattle futures to climb back into striking distance of where the market was prior to the fire, Tennessee cash markets rebounded nicely compared to last week and traded well all week. The higher price trade at Tennessee weekly auction markets this week resulted in calf and feeder cattle prices resembling pre-fire prices. Despite the resurgence in prices, this week’s price movement should not provide a teaspoon of hope to anyone planning on marketing spring born calves in the fall time period. The fall calf market will succumb to its seasonal tendencies as producers start loading trailers with soft balling calves and hauling them to town. The Tennessee market could feasibly see weekly average prices drop below $135 per hundredweight for 525 pound steers in the next couple of months while 525 pound heifer prices may dip below $115 per hundredweight. Given the strong forage production year that has been witnessed by many producers in Tennessee, there may be an economic incentive to hold calves until December or January with the hopes of marketing them on a stronger market and putting more dollars in the producer’s pocket. Another market to be keeping an eye on is the slaughter cow market. Slaughter cow prices have been strong all summer and have just now started to slip. These cows can still be sold for a strong price and early weaning some calves to move some cows may be worth the effort.
The August cattle on feed report for feedlots with a 1000 head or more capacity indicated cattle and calves on feed as of August 1, 2019 totaled 11.11 million head, up 0.2% compared to a year ago, with the pre-report estimate average expecting an increase of 0.6%. July placements in feedlots totaled 1.71 mil-lion head, down 2.1% from a year ago with the pre-report estimate average expecting placements down 0.5%. July marketing’s totaled 2.00 million head up 6.9% from 2018 with pre-report estimates expecting a 6.8% increase in marketings. Placements on feed by weight: under 800 pounds down 7.6%, 800 to 899 pounds up 4.9%, and 900 pounds and over up 11.5%.