– Dr. Andrew Griffith, Assistant Professor, Department of Agricultural and Resource Economics, University of Tennessee
FED CATTLE: Fed cattle traded $2 to $3 higher compared to last week on a live basis. Prices on a live basis were primarily $102 to $106 while dressed prices were mainly $162 to $164.
The 5-area weighted average prices thru Thursday were $103.54 live, up $2.68 com-pared to last week and $162.93 dressed, up $2.37 from a week ago. A year ago, prices were $101.28 live and $162.99 dressed.
Cattle feeders were glad to see last week’s decline in finished cattle prices resurface as gains this week. The finished cattle market appeared to come under undue pressure the past couple of weeks, but the hope is that pressure has passed. Cattle feeders will be looking for the finished cattle market to slowly gain some steam heading toward the holiday marketing timeframe, but this will be a slow process as prices are expected to be stagnant the next couple of weeks. The main determinant of how fed cattle prices move will be associated with consumers’ willingness to pay for beef moving forward. Has the pandemic changed consumption patterns? It is doubtful that it has, but discretionary spending may continue to be altered.
BEEF CUTOUT: At midday Friday, the Choice cutout was $215.62 up $0.57 from Thursday and down $4.46 from last week. The Select cutout was $203.99 up $0.60 from Thursday and down $6.31 from a week ago. The Choice Select spread was $11.63 compared to $12.57 a week ago.
July beef imports totaled 376.8 million pounds, which is the largest monthly import total since June 2005. Thus, the July beef import total is the highest monthly total in 15 years. U.S. beef imports are dominated by lean beef items meant for grinding, which will then end up in a ham-burger, hot dog, or taco meat to name a few. As consumers continue to eat at home and the longer sit-down restaurants are closed or at limited capacity, the longer lean beef imports will remain strong. There is no doubt that more chuck and round roasts are going to grind than prior to coronavirus, but those cuts of meat generally have a higher value than as a ground product. Moving from imports to exports, beef exports in July began to show a recovery from the previous three months. Beef ex-ports began to decline in April and then were abysmal in May and June, but July beef exports were similar to the months leading up to the start of the pandemic. Exports to Japan and South Korea have re-covered nicely, but exports to Mexico continue to flounder due to their economic conditions.
OUTLOOK: Based on Tennessee weekly auction market price averages, steer prices were mostly steady to $4 lower with some lightweight classes $4 to $7 higher, while heifer prices were steady to $3 lower com-pared to a week ago. Slaughter cow prices were $1 to $2 lower, and bull prices were mostly steady compared to last week’s prices. It is evident by cattle marketings this week that the fall run of calves has started in Tennessee. This is likely the case across most of cow-calf country as producers attempt to move the spring born calf crop. The unfortunate part of this is that feeder cattle futures are $6 to $7 lower than their August peak price, which means lower calf prices. Calf prices seasonally soften in the fall with the calf run, but the feeder cattle market has done very little to support calf prices. Based on Tennessee weekly auction price averages, a 525-pound steer was worth $727 per head while the same weight heifer was worth $643 per head this week. These are not highly profitable prices that make a producer want to purchase bred heifers or keep back more heifers for breeding. Nor are these prices low enough to result in cow culling, because a 525-pound steer this time last year was valued about $20 less than this week’s price and few producers culled very hard a year ago. Calf values are always subject to pressure in the fall months as supply is ample and the risk of health problems is high for the purchaser. However, one would have to think that good forage conditions in the Southeast should sup-port calf prices to some degree. Similarly, the fact that calf prices have been soft all year would bring one to prognosticate that prices should not decline as much as the seasonal tendency. Given that calf prices are already low and that forage conditions are good, this could be a year to take the risk of holding calves for a preconditioning period. There are probably not any better conditions than these to try it.