– Dr. Andrew Griffith, Assistant Professor, Livestock Marketing Specialist, Department of Agricultural and Resource Economics, University of Tennessee
The Choice cutout price increased $15 per hundredweight in the month of June
FED CATTLE
Fed cattle traded steady higher compared to last week. Price in the South were around $190 and $198 in the North on a live basis. Dressed trade was thin with bids at $312 to $313.
The 5-area weighted average prices thru Thursday were $195.37 live, up $1.45 compared to last week and $313.84 dressed, down $1.01 from a week ago. A year ago, prices were $180.70 live and $289.81 dressed.
There remains a considerable difference in Northern cattle prices and Southern cattle prices. Given the difference this week, cattle value is more than $100 lower per head in the South than the North. It is common for prices in the North to be higher than the South, but the market is reaching to the extremes at this point. Cash prices on a live basis are pushing toward the proverbial $200 mark in the North, which could be what the market needs to push higher. However, there is thought to be a considerable resistance at this level. The cattle feeder likely needs the price of finished cattle to push higher given the $60 per hundredweight price difference between purchase and sell price.
BEEF CUTOUT
At midday Friday, the Choice cutout was $330.86 up $1.02 from Thursday and up $5.13 from a week ago. The Select cutout was $306.00 up $1.62 from Thursday and up $1.19 from last week. The Choice Select spread was $24.86 compared to $20.92 a week ago.
The Choice beef cutout has made tremendous strides the past several weeks and months. The Choice cutout price increased $15 per hundredweight in the month of June and is $37 higher than where it was the first day of May. The market fully expected wholesale beef prices to increase entering the grilling season, but prices were expected to increase more so in May than in June. With the passing of the Independence Day holiday, there is only one more traditional summer grilling holiday left in 2024. This does not mean consumers will not continue grilling throughout the summer months, but there will not be a coordinated grilling time in which a large quantity of consumers are contributing to beef disappearance. There has been repeated concern from analysts that consumers may slow beef purchases due to price. However, beef demand remains strong based on the most recent data. There is always a supply side and a demand side to the equation. Right now, consumers seem to be keeping up their end of the equation.
OUTLOOK
Many of the livestock auction markets were closed this week, which means there are no trends to compare week-to-week changes in prices. Thus, this is a good time to look at the broader picture of change in feeder cattle prices the first six months of the year. The latest CME feeder cattle index as of this writing was $256.44 per hundredweight, which is down slightly from the record high of $259.04 on June 26. Despite the slight decline in the index the past week, current prices are well above where they started the year. The CME feeder cattle index was $228.19 per hundredweight on January 1, which means the market is $28 per hundredweight higher than six months ago. This price increase equates to a $224 increase in value for an 800 pound steer from January to the beginning of July. Similarly, the price one year ago was around $231 per hundredweight, which means today’s value of an 800 pound steer is about $200 per head higher than July 2023. There have certainly been price fluctuations the past six months and even more so over the past year. The CME feeder cattle index has been as low as $215 per hundredweight as recently as December 2023, which means there has been a $44 per hundredweight swing in less than seven months. Given the record setting price just above $259, feeder cattle futures for the fall months are predicting prices to move north of $263. This is not an outlandish expectation and can certainly be achieved. This expectation is certainly more reasonable than when the futures market was predicting $270 or higher. Market participants should still be cognizant of potential market fluctuations. The simple fact that cattle prices are at record levels does not give license to ignore managing price risk. Actually, it is probably more important to manage price risk at record high prices than any other time. Prices can decline much more when they are at record highs than they can when they are extremely low, but who needs someone to state the obvious?