– Dr. Andrew Griffith, Assistant Professor, Livestock Marketing Specialist, Department of Agricultural and Resource Economics, University of Tennessee
Beef prices found support last week as retailers prepared for the holiday weekend.
FED CATTLE
Fed cattle traded $3 higher compared to last week on a live basis. Prices were largely $189 to $191 on a live basis and mostly $303 to $304 on a dressed basis.
The 5-area weighted average prices thru Thursday were $190.12 live, up $3.09 compared to last week and $303.48 dressed, up $3.95 from a week ago. A year ago, prices were $177.71 live and $284.36 dressed.
It is a little easier for packers to pay higher prices for finished cattle when wholesale beef prices increase. This does not mean they want to pay more, but they do have more wiggle room. They also know cattle feeders are aware of wholesale beef prices, which in a time of reduced cattle numbers provides the cattle feeder with further leverage. Cattle feeders should be making a profit on these animals given cash prices. However, the premium in cash relative to live cattle futures is disheartening in that futures have failed to follow cash prices. Feedlot managers are glad to experience a positive basis, but the futures market is not offering much of an opportunity to hedge cattle currently being placed.
BEEF CUTOUT
At midday Friday, the Choice cutout was $311.56 up $1.72 from Thursday and down $1.97 from a week ago. The Select cutout was $301.78 up $1.70 from Thursday and up $3.69 from last week. The Choice Select spread was $9.78 compared to $15.44 a week ago.
Wholesale beef prices found support last week as retailers were making final beef purchases for the holiday weekend. The follow through of wholesale prices this week is largely to restock meat counters following the first grilling holiday of the summer. Thus, retailers had expectations of beef to do well and by now they know if they made good or bad decisions by paying up for beef. If wholesale beef prices remain elevated the next week or two as buying for Father’s Day and Independence Day should be the focal point, it will be clear if domestic demand is remaining strong or not. The market should clearly see less beef move due to reduced supply and higher prices, but that does not mean anything is hampering demand. At this stage in the game, it would appear all is well from the beef front. For cattle producers to garner higher prices, all will have to remain well on the beef front. The need for concern is marginal at this point, but all beef market participants should prepare for tough times should they arise.
OUTLOOK
Based on weekly auction market averages, steer prices were steady to $4 higher compared to last week while heifer prices were $2 to $5 higher compared to the previous week. Slaughter cow prices were $3 to $5 higher compared to the previous week’s weighted average price while bull prices were $3 higher compared to the previous week. There has been considerable attention given to feeder cattle futures this week as the roller coaster ride continues. August now becomes the nearby feeder cattle contract with three months until expiration. This means traders and hedgers alike will be attempting to reach an equilibrium price based on supply and demand for something three months in the future. They have successfully done a poor job of achieving such a price when it was only 30 days in the future, which means everyone should have high expectations for a longer trading horizon! I feel as if I am writing as Paul in the Bible asking the Corinthians to put up with his foolishness, but what can cattle market participants expect over the next three months on the futures market front? There will likely be more uncertainty with continued volatility. Since that subject is so difficult, it may be appropriate to discuss more concrete information. The West Kentucky Select Bred Heifer Sale was held May 18th at the Kentucky-Tennessee Livestock Market in Guthrie, KY. Kevin Laurent with the University of Kentucky was gracious enough to share the sale results of the 221 bred heifers sold that day. Prices ranged from $2,300, to $4,300 per head with an average price of $3,061 per head with strong buyer interest. Despite some regions of the country remaining hesitant as it relates to cattle herd expansion, it appears there is interest among some producers in growing the herd and capitalizing on strong calf prices the next few years. The primary concern is if the females will return a profit, which is unknown. What is known is there will not be many bred females available in the near term, and no cows means no profit from cows.
The May cattle on feed report for feedlots with a 1000 head or more capacity indicated cattle and calves on feed as of May 1, 2024 totaled 11.55 million head, down 0.9% compared to a year ago, with the pre-report estimate average expecting a 0.9% decrease. April placements in feedlots totaled 1.76 million head, down 5.8% from a year ago with the pre-report estimate average expecting placements down 5.6%. April marketing’s totaled 1.87 million head up 10.1% from 2023 with pre-report estimates expecting marketings up 9.8%. Placements on feed by weight: under 700 pounds down 8.3%, 700 to 899 pounds down 5.9%, 900 pounds and over unchanged.