Weekly Livestock Comments for June 5, 2020

– Dr. Andrew Griffith, Assistant Professor, Department of Agricultural and Resource Economics, University of Tennessee

FED CATTLE: Fed cattle traded $3 lower compared to last week on a live basis. Prices on a live basis ranged from $105 to $118 while dressed prices ranged from $170 to $187.

The 5-area weighted average prices thru Thursday were $112.68 live, down $2.97 compared to last week and $179.17 dressed, down $4.13 from a week ago. A year ago, prices were $113.51 live and $183.30 dressed.

The aspect of the cash cattle market that should jump out the most is the wide range in prices. This wide range in prices is largely due to regional supply and demand. Regions with a large supply of market ready cattle and limited demand are seeing the lowest prices while regions with strong demand and a relatively smaller supply are seeing higher prices. This may not be the only reason for the disparity in prices as other factors are at play, but supply and demand are generally what push prices one way or the other. It is difficult to predict what prices will be as the market moves through the glut of cattle, but there is sure to be downward pressure throughout the summer and fall. The market is attempting to align itself with supply and demand.

BEEF CUTOUT: At midday Friday, the Choice cutout was $265.84 down $6.42 from Thursday and down $99.73 from last week. The Select cutout was $254.43 down $5.98 from Thursday and down $89.03 from a week ago. The Choice Select spread was $11.41 compared to $22.11 a week ago.

Just as fast as boxed beef prices in-creased, they are now decreasing just as fast. It took five weeks for Choice boxed beef prices to go from $225 to over $450. The past three weeks have seen these same prices fall well under $300. Will boxed beef prices recede to $225 in the next two weeks? Maybe or maybe not. It does not really matter if they do or if they do not. Prices will continue to decline as more and more product is supplied to the market. One can easily surmise given late week prices this week that boxed beef prices can no longer decline at the precipitous rate they have the past few weeks, because the gap has been narrowed tremendously. It is likely boxed beef prices will continue to decline the next several weeks and maybe even the next several months as supplies increase. Coronavirus is a two-edged sword in that cattle producers took the hit when cattle were not being harvested. They will now take the hit when supplies of market ready cattle and beef exceed packer and consumer demand. The good news is the situation will be resolved.

OUTLOOK: Based on Tennessee weekly auction market price averages, steers were $3 to $5 higher compared to last week while heifers were $2 to $5 higher compared to the previous week. Slaughter cow and bull prices were mostly steady compared to week ago prices. The calf and feeder cattle market continue to find support following the price collapse from the coronavirus pandemic. From the lightweight cattle standpoint, it is not as if the market is making great strides with higher prices but the fact they are not softening and demand for weaned cattle appears strong. This means that many of the producers who decided to wean calves and hold onto them instead of selling calves during the depressed prices are likely reaping a small reward from that decision if they are marketing in today’s environment. This is not a recommendation to go market those calves in the near term just because prices rebounded and have found a steady state. One only has to look to yearling cattle prices to see that heavier feeder cattle prices are trying to make a run. Based on Tennessee weekly auction prices, 700 to 800-pound steer prices declined about $19 per hundredweight from the middle of February to their low. Since the price low, 700 to 800-pound steer prices have slowly regained $14 per hundredweight over the past ten weeks. This slow price recovery on the cash market should bring encouragement to feeder cattle producers as the expectation is for these prices to continue their positive price movement the next few months. The market has seen the prices bounce around a few different times the past ten weeks as they have fol-lowed feeder cattle futures, but the volatility in both the futures and cash market has been muted compared to the past several months and years. It is probably not worth putting a target on a certain price at this time for late summer and early fall cattle marketings, but the expectations are positive.