Weekly Livestock Comments for December 1, 2023

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

Fed cattle traded $2 to $3 lower on a live basis compared to last week with live prices mainly between $173 and $175 while dressed prices were mainly $273 to $275.

The 5-area weighted average prices thru Thursday were $174.60 live, down $2.39 compared to last week and $274.74 dressed, down $5.35 from a week ago. A year ago, prices were $156.08 live and $248.70 dressed.

Cattle are worth absolutely nothing! They cannot even be given away! Feedlots may as well give them their pink slip and send them packing to get them off the payroll! I apologize for digressing, but some feel as if finished cattle prices are pointing toward the end of time. Despite finished cattle prices failing to push higher and even hold par leading up to end of the year holidays, prices are not terrible. The only reason they seem terrible is because of how much cattle feeders paid for the cattle when they were placed on feed. This is exactly the reason cattle feeders are bidding less on feeder cattle today. Strong profits will come back around sooner rather than later. The key is not losing the farm on those being marketed today.

At midday Friday, the Choice cutout was $298.02 down $1.00 from Thursday and down $0.57 from a week ago. The Select cutout was $265.91 up $1.16 from Thursday and down $3.14 from last week. The Choice Select spread was $32.11 compared to $29.54 a week ago.

It would appear the holiday meat market has not kicked in just yet. It may not shift into high gear at all. Choice boxed beef prices have been stale or declining since the middle of September with a $10 difference in the high and low during the two months. Over that same time period, the Prime boxed beef cutout value declined from $345 to $325 per hundredweight. The branded boxed beef cutout price also slid $10 lower, which is in line with Choice boxes, but branded boxes hold a $5 to $7 premium to Choice grade boxes. If the holiday market does catch fire or even smolders a little then Prime and Branded boxes should demonstrate the greatest strength. Choice boxes should not be far behind, but Prime grade should be the leader. As has been mentioned before, middle meats will be the leader during the holiday system with the rib being preferred over the loin. What consumers are willing to purchase over the holiday season will be a strong indicator of how beef prices will perform most of 2024.

Based on weekly auction market average, steer prices were $10 to $20 lower compared to two weeks ago while heifer prices were $5 to $15 lower compared the week before Thanksgiving. Slaughter cow prices were steady to $1 higher than the weighted average price from two weeks ago while bull prices were $1 lower compared to the previous week.

Calf and feeder cattle prices are reeling in the current environment. The futures market has been in an utter free fall for two and a half months, and market participants do not know what to do given the expectations for cattle in the future based on the futures market. Thus, feedlots are bidding less for cattle ready to be placed on feed, which means everyone down the line has to bid lower for lighter weight cattle.

It is difficult to say this is surprising given that market participants spent eight and a half months pushing cattle prices higher and to levels that were astronomical. Typically, there is an equal and opposite reaction when such force is placed on something. An equal and opposite reaction may not be what is in store, because it is unlikely cattle prices will decline to beginning of the year levels, but they have declined much faster than they increased.

This is an extremely similar price reaction as the market experienced from 2014 through 2016. The primary difference is that cattle producers have not started retaining heifers and growing the beef cattle herd. This means there has been no work on the pipeline to supply feeder cattle in the coming years. Thus, the market has likely overreacted to pushing prices too low just as the market pushed prices too high earlier this year.

The hope would be that buyers and sellers could moderate their reactions and respond to actual supply and demand signals. The market has been responding to speculative supply and demand signals for ten months and it has brought feast and famine. There will be more feasting as the market moves into 2024. Hopefully, it will be at a more conservative pace and level than 2023.