– Dr. Andrew Griffith, Assistant Professor, Department of Agricultural and Resource Economics, University of Tennessee
FED CATTLE
Fed cattle traded $2 higher on a live basis compared to last week with live prices mainly between $170 and $171 while dressed prices were mainly $269 to $271.
The 5-area weighted average prices thru Wednesday were $170.07 live, up $2.26 compared to last week and $270.09 dressed, up $2.30 from a week ago. A year ago, prices were $155.90 live and $247.00 dressed.
This week’s gains offset last week’s losses in the finished cattle market, but it would be a stretch to say there was a lot of positive momentum in the market. Cattle feeders are struggling with negative margins at this juncture, which is largely due to the price paid for those cattle during the summer months. Fundamentals certainly support higher cattle prices in 2024, but feedlot managers have recency bias that may keep them from pushing feeder cattle prices extremely high to start the year. The finished cattle market will likely drag a little to start off the new year, but it will catch some fire as the spring and summer grilling season near. This is a fluid market, and it is sloshing in the tank.
BEEF CUTOUT
At midday Thursday, the Choice cutout was $291.41 up $2.28 from Wednesday and down $0.67 from a week ago. The Select cutout was $262.30 up $0.70 from Thursday and up $0.77 from last week. The Choice Select spread was $29.11 compared to $30.55 a week ago.
This may be the time to say Merry Christmas and to say I hope each person who reads this has a blessed Christmas season. Christmas is not always a fun time of year for folks for a multitude of reasons, but that does not mean we do not have something to look forward to. The same can be said for wholesale beef prices. They have done nothing to bring optimism to the cattle market during the holiday purchasing season. There has been no dancing. There has been no prancing. They have actually looked more like an elephant on a pogo stick made for a ten year old child. However, there is something to look forward to and that is the spring grilling season. Spring beef prices will reveal the direction of this market and if consumers will continue to be willing buyers of beef at higher retail beef prices. If the consumer balks at higher retail beef prices then the market may stagnate for a while. Consumers should consume less beef with higher prices, but that does not mean demand has softened. It is simply the rationing effect of higher prices.
OUTLOOK
Based on weekly auction market averages, steer prices were $7 to $15 higher compared to last week while heifer prices were $8 to $14 higher compared to the previous week. Slaughter cow prices were $1 to $3 higher than the weighted average price from a week ago while bull prices were steady to $1 higher compared to the previous week.
Most livestock auctions closed out the sales book for 2023 this week as many auctions will take a break from the weekly routine the week of Christmas and several also being closed the first week of January. This means producers who were planning on marketing cattle before the end of the year may have to find a private treaty opportunity if selling is a must over the next two weeks. Those opportunities do exist, and it may be as easy as calling the local auction barn management to see if there are any opportunities to move a few head. Most of the auctions in Tennessee saw reduced marketings this week, which is very typical leading up to Christmas, but the few cattle that were traded were in strong demand as cattle buyers pushed the price of many classes of calves and feeder cattle higher compared to the past several weeks.
Optimism is going to return to the cattle markets as the books are opened on 2024. There certainly was considerable pessimism the past couple of months, which sent calf and feeder cattle prices lower. However, this way of thinking will not persist, because market participants will be reminded in January just how tight cattle supplies will be the next few years. Producers waiting to market cattle after the first of the year should be able to bear witness to a strengthening market, while buyers of those same cattle will be fussing about how expensive cattle are. The hope is there will be a slow and gradual price escalation for most classes of cattle, but if recent history is an indicator of future happenings then one could expect prices to move sharply higher in the first quarter of 2024. This could lead to another time period of declining prices, but the market should level throughout the year.