– Dr. Andrew Griffith, Assistant Professor, Livestock Marketing Specialist, Department of Agricultural and Resource Economics, University of Tennessee
FED CATTLE
Fed cattle traded $2 higher compared to last week on a live basis. Prices were largely $185 to $186 on a live basis and $292 to $294 on a dressed basis.
The 5-area weighted average prices thru Thursday were $185.15 live, up $1.84 compared to last week and $293.22 dressed, up $2.82. A year ago, prices were $165.22 live and $265.43 dressed.
Could $200 live cattle prices be in the markets near future? It depends on what a person considers to be “near future”. It is unlikely the $200 price level will be achieved this spring when the grilling season kicks off. Additionally, the futures market is not pricing in anything near that level through August 2025, which is the furthest out live cattle contract being traded. Though such a level is possible, the likelihood is slim unless wholesale beef prices push higher. Here is why. A 1,430 pound animal at $200 is $2,860 per head. That animal would produce a 900 pound carcass that would have to sell for nearly $318 per hundredweight as wholesale beef to pay for the animal. It will take higher beef prices to push finished cattle prices higher.
BEEF CUTOUT
At midday Friday, the Choice cutout was $306.96 up $0.35 from Thursday and up $0.85 from a week ago. The Select cutout was $296.89 up $0.63 from Thursday and up $0.90 from last week. The Choice Select spread was $10.07 compared to $10.12 a week ago.
Compared to year ago weekly boxed beef prices, Choice boxed beef prices have been above year ago prices most weeks to start the year. However, this is putting a squeeze on packers as the small increase in beef price year-over-year does not compare to the increase in cattle prices compared to a year ago. Most of the year-over-year increase in beef prices is coming from end meats such as the chuck and round while middle meats from the loin and rib are slightly softer than year ago prices. This pattern will not persist as grilling season nears. There should be a spark for middle meats, but it is unlikely the spark will be much more than that given beef price levels. One expectation is for lean beef prices to escalate with both 90 percent lean and 50 percent lean prices pushing higher. Lean trim from finished cattle will certainly gain strength as cow slaughter continues to decline. It could easily double in price the next few months, which would contribute significantly to increasing the total value of the carcass. The consumer will be the final authority.
OUTLOOK
Based on weekly auction market averages, steer prices were $4 to $10 higher compared to last week while heifer prices were $1 to $5 higher compared to the previous week. Slaughter cow prices were $2 to $4 higher compared to the previous week’s weighted average price while bull prices were also $2 higher compared to the previous week. The two questions that weigh on the mind of cattle marketers is how high will prices reach and how long will they stay there. The easy and generic answer on the “how long” portion of the question is for sure two years of strong market prices and most likely three years before much weakness presents weighs on feeder cattle prices. There are several factors influencing the length of time in which cattle producers must manage through elevated prices in this cycle, but the expectation is three years. The tougher question to answer is how high prices will run before faltering. From a business standpoint, cattle prices can only increase so much before there is pushback from consumers, which then influences packers, feedlots, backgrounders, stocker producers, and cow-calf operators decision making. The idea or maybe the hope is for cattle prices to find a plateau as opposed to a peak price. The plateau idea means strong prices stick around for a while compared to a price peak, which means prices hit their top and then decline. The concern with a price peak is experiencing a precipitous price decline like cattle market participants did from 2015 through 2017. In order to have meaningful cattle herd expansion with high quality females entering the breeding herd, it will take three years of strong cattle prices. Current calf and feeder cattle price levels are spurring heifer retention or at least the idea of heifer retention in 2024. Climatic conditions will have the final say. If calf and feeder cattle prices stay elevated the next 18 months then further expansion of the beef cow herd will occur. However, adequate cow culling should also persist given the strong salvage value for slaughter cows, which means moderate herd growth.