– Dr. Andrew Griffith, Assistant Professor, Department of Agricultural and Resource Economics, University of Tennessee
FED CATTLE: Fed cattle traded steady com-pared to last week on a live basis. Prices on a live basis were mainly $105 while dressed prices were not well established.
The 5-area weighted average prices thru Thursday were $96.77 live, down $8.23 compared to last week and $154.33 dressed, down $13.67 from a week ago. A year ago, prices were $128.37 live and $207.77 dressed.
Cash trade continues to be light this week as many processing facilities have slowed production in several different fashions. The reduction in production means there is not as much need for cash cattle purchases to fill in production holes throughout the week as many of these facilities are trying to make sure they get all of their contracted cattle processed with a limited labor resource in many instances. What few cattle trade in the cash market will mean lower prices week-over-week which will play into lower formula prices as well. The dynamics of the market are extremely interesting to say the least, and probably considered frustrating to most cattle producers who feel as if they have been taken ad-vantage of. This too shall end.
BEEF CUTOUT: At midday Friday, the Choice cutout was $238.07 up $2.20 from Thursday and up $14.42 from last week. The Select cutout was $229.60 up $3.62 from Thursday and up $21.17 from a week ago. The Choice Select spread was $8.47 compared to $15.22 a week ago.
Most of the talk on the meat side of the business has been the shuttering of slaughter facilities and the reduced production at other facilities for both beef and pork. From a consumer perspective, there is concern about meat availability at the local grocery store while slaughter facilities are trying to manage around employee health and the agricultural producers who are supplying live animals to the facility. When slaughter levels are reduced then animals will start backing up in the feedlot or finishing barn.
This action means that cattle feeders and hog finishers have to decide what to do with these animals. Most cattle feeders will feed cattle to heavier weights until they can physically move these animals to the slaughter facility. This means pen space is not opening up which backs up feeder cattle and calves. From the hog side, hogs have to move off the finishing floor to make way for the next group or an alternative destination has to be found for the next group of hogs. There are a lot of tough decisions ahead and hopefully American ingenuity can overcome some of the barriers.
OUTLOOK: Based on Tennessee weekly auction market price averages, steer and heifer prices were unevenly steady com-pared to last week with instances of prices being $5 lower to $5 higher. Slaughter cow prices were $3 to $5 higher than last week while slaughter bull prices were $4 to $5 higher compared to the previous week. Feeder cattle futures have had similar price action as the local cash markets. They both have the volatility of an elephant with irritable bowel syndrome who cannot find one single square of toilet paper. For clarification, one cannot guess from day to day if prices will be hitting the fan or splattering on the floor, and in either case, the person is mad because there is little recourse to clean up the mess. There is plenty that could be said here that would throw salt on the wound of every cattle producer who has to market cattle when prices are depressed and while the market appears to be suffering from Jekyll and Hyde disorder. However, such salt would probably be more valuable curing ham or bacon in today’s market. The recommendation for most producers has been to hold onto cattle and try to lengthen the potential marketing window and that recommendation holds today. Unfortunately, there are producers that can no longer hold onto cattle which limits their flexibility. One alternative some producers could consider is shipping cattle to the feedlot. This is a potential solution for producers who can afford to hold onto cattle and do not need the cash flow to sustain business operations. Several producers will need the cash flow given they have been purchasing feed all winter and fertilizer bills will be due sooner rather than later. These are the producers who are in the toughest position be-cause there are very few alternatives. Many producers will simply have to make the best decision for today given the avail-able information. There is no reason to look back a month from now and wish the decision was different.