– Andrew P. Griffith, University of Tennessee
FED CATTLE: Fed cattle traded $5 higher on a live basis compared to last week. Prices on a live basis were mainly $136 to $137 while dressed prices were mainly $215 to $216. The 5-area weighted average prices thru Thursday were $136.26 live, up $4.67 from last week and $215.14 dressed, up $6.44 from a week ago. A year ago prices were $122.82 live and $201.32 dressed. Following three weeks of softer finished cattle prices, the market roared back to life in the holiday shortened week as packers look to fill orders. It is difficult to determine at this time if this is a brief shock to the market due to being short bought at the packer level or if retail demand is simply that strong. It is likely a factor of both situations and feedlot managers are happy to take advantage of the situation. Last week’s release of the May cattle on feed report was somewhat bearish but cash trade yesterday was for the bulls in the market. The strong cash trade led to the futures market increasing the limit on Thursday with another strong outing on Friday. The positive futures price movement has done little to close the basis but time remains for narrowing the basis.
BEEF CUTOUT: At midday Friday, the Choice cutout was $245.35 down $0.23 from Thursday and down $0.09 from last Friday. The Select cutout was $217.95 up $0.73 from Thursday and down $0.33 from last Friday. The Choice Select spread was $27.40 compared to $27.16 a week ago. Cutout prices held their own following Memorial Day. The week following a grilling holiday is usually a week to restock shelves which supports prices. On the other side of the coin, it could mean prices for beef slide some next week, but any decline is not expected to be rapid or very large as Father’s Day and Independence Day (July 4th) are just around the corner. The summer grilling season generally results in strong beef demand and that is evident for Choice beef. The Choice Select spread continues to be at record levels demonstrating the demand for high quality beef by domestic consumers. As the summer moves forward, some consumers will shift their focus to hamburgers and hot dogs which are hot items for America’s favorite pastime. The big question now is if consumers will continue to pay strong retail prices for beef. There is no reason to believe consumers will move away from beef items as their appetite for beef products is strong. There should be no fear in the beef market at this time as prices should remain seasonally strong.
OUTLOOK: Based on Tennessee weekly auction market price data, prices on all classes of cattle were fairly steady compared to a week ago. This is not surprising considering the holiday on Monday and futures prices for Tuesday and Wednesday trade, though strengthening, staying in the price range that had been set the past two weeks. Thursday, however, was a different story. Feeder cattle futures on Thursday increased the limit of $4.50 which is a positive direction for producers looking to market cattle. This bodes well for summer feeder cattle prices that generally reach their apex between late July and early September. The concern from producers is not achieving the highest price of the year which may occur on one specific day but rather hitting a period when prices are strong and profitable. The price strength in the market is also a positive sign for producers who decided to wean, precondition, and background fall born calves through the summer. Prices this spring were strong which could have deterred some producers from preconditioning calves and thus marketing fall born calves at weaning. However, the futures market is offering favorable prices to market yearling cattle in August and September. There is no guarantee prices will remain this strong, but there is also no information suggesting prices should decline. Thus, producers who are not willing to take on the risk of declining prices may want to consider price risk management strategies at this time. Alternatively, producers willing to take a few risk may want to sit tight to see what happens the next few days. Cattle markets never cease to be exciting and the summer market seems to be setting participants up for another ride. Looking forward to fall marketing of spring born calves, producers with intentions of marketing calves this fall should consider setting a floor on intended marketings. Again, there is no guarantee of which way the price will move, but prices for the fall look very favorable at this point. Doing nothing is a decision, and it sometimes comes with an expensive price tag.