Weekly Livestock Comments for July 10, 2020

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

FED CATTLE: Fed cattle traded $1 higher compared to last week on a live basis. Prices on a live basis were primarily $95 to $96 while dressed prices mainly $157 to $158.

The 5-area weighted average prices thru Thursday were $95.97 live, up $1.06 com-pared to last week and $157.67 dressed, up $3.84 from a week ago. A year ago, prices were $114.64 live and $183.06 dressed.

Feeding cattle is like being in ankle deep manure, but standing on one’s head would be worse. Finished cattle prices continue to hang around their lows, but the futures market is producing a little optimism. The optimism may not be much, but any is a good thing for cattle feeders. The August live cattle contract is attempting to get back to $100 while the October and December contracts are trading well above that mark. The reason this is optimistic is because there is nothing in the cattle feeders favor right now. Coronavirus hit the market hard. Now the seasonal tendencies of finished cattle prices are weighing on the market. On top of what is going on in the cattle market, corn futures prices have increased even though they are beginning to ease a little.

BEEF CUTOUT: At midday Friday, the Choice cutout was $205.54 up $1.17 from Thursday and down $0.78 from last week. The Select cutout was $193.92 down $0.91 from Thursday and down $4.38 from a week ago. The Choice Select spread was $10.84 compared to $7.24 a week ago.

Boxed beef prices continue to slowly decline as summer heat settles in across most of the country. The increased coronavirus cases in many states the past several weeks has resulted in many states and local municipalities reverting back to more strict social distancing as well as adding new precautions. This reversion is sure to negatively influence restaurants again as fewer customers can walk through the doors and because many consumers will revert back to more at home meals. The wholesale beef market is remaining surprisingly strong giv-en the cattle slaughter rate and total beef production. Weekly beef production has consistently exceeded year ago levels for several weeks now and this is expected to continue until all of the backlogged cattle are harvested. Increased beef production is likely to continue even after the backlog is cleared with heavier cattle coming to market. The key to beef and cattle prices strengthening will be the demand side of the market, because the supply side is firm.

OUTLOOK: Based on Tennessee weekly auction market price averages, steer and heifer prices were mostly steady on a limited test compared to last week. Slaughter cow prices were steady to $1 lower with bull prices steady to $1 lower compared to week ago prices. There were a limited number of auctions reported this week due to Independence Day disrupting the Saturday sale schedule. However, several loads of cattle sold this week which provides a de-cent indication of what is going on in the feeder cattle market. The best demand for feeder cattle appears to be steers weighing less than 850 pounds. Based on the loads that sold, steers weighing between 785 and 820 pounds brought between $128.50 and $133 per hundredweight which an $8 to $10 improvement over the past 60 days. Loads with average weights between 875 and 950 pounds were priced between $116.25 and $124.75 per hundredweight which is a price increase of $5 to $7 per hundredweight over the past two months. The strength is definitely in the animals that will be able to spend more time on feed which provides the live cattle market more time to recover from the backlog of finished cattle. The heifer market does not appear to have improved as much as the steer market, but the price of heifers has increased $5 to $6 per hundredweight which is a welcome sign. July cattle are a good indicator of the market, but sales from late July through August will tell everyone where the fall market will be headed. There have been some positive signs of the feeder cattle market recovering which brings optimism to many. However, it is still going to be a long haul before the market is fully recovered. There will be millions more head of feeder cattle marketed in the coming months that will not realize their full value had coronavirus not disrupted the market. The hope is that cattle prices will continue to move back towards their mark.