– Dr. Andrew Griffith, Assistant Professor, Livestock Marketing Specialist, Department of Agricultural and Resource Economics, University of Tennessee
At midday Friday, the Choice Select spread was $14.68 compared to $16.86 a week ago.
FED CATTLE
Fed cattle traded $1 to $2 lower in the South compared to last week. Price in the South were mainly $186 to $187 and $193 in the North on a live basis. Dressed trade was mainly $304 to $305.
The 5-area weighted average prices thru Thursday were $191.43 live, down $3.25 compared to last week and $304.60 dressed, down $5.11 from a week ago. A year ago, prices were $188.41 live and $297.06 dressed.
Cattle feeders are sure to be upset with the anchor that live cattle futures have become as they have not only brought the higher price movement to a halt, but rather the ship appears to be taking on water. There is not much that can be done in the near term other than hope and pray the higher live cattle futures trade today will have follow through next week and will translate to higher prices in coming weeks. Unfortunately, there is no way of knowing the direction prices are headed, and it may be that prices do not have a direction at all. They could be stagnant the next couple of months and stay range bound. There is a lot to be sorted out along the supply chain, and there are no guarantees.
BEEF CUTOUT
At midday Friday, the Choice cutout was $313.55 up $1.43 from Thursday and unchanged from a week ago. The Select cutout was $298.87 up $0.84 from Thursday and up $2.18 from last week. The Choice Select spread was $14.68 compared to $16.86 a week ago.
Wholesale boxed beef prices represent what packers can sell beef for on a carcass weight basis to retailers, restaurants and the food service industry. However, the retail price represents the price consumers pay for beef. In June, the Choice retail price of beef was $8.12 per pound which is two cents lower than June 2023. The all fresh retail price of beef was $8.00 per pound, which is 42 cents more than June 2023. It is clear consumers want and demand beef, but competing meat prices also play a role in what consumers do. The retail price of pork in June was $4.88 per pound, which is 20 cents higher than June 2023. Given price relativity, the all fresh retail price of beef is up 5.6 percent while pork price only increased 4.2 percent over the same time period. On the poultry side, the broiler retail price is $2.01 per pound for June 2024, which is an increase of 5 cents compared to one year ago. Consumers will consider this price relativity when making purchasing decisions, but it is clear beef is the preferred meat protein.
OUTLOOK
Based on weekly auction market averages, steer prices were $4 to $9 lower compared to last week while heifer prices were $3 to $8 lower compared to the previous week. Slaughter cow prices were $1 to $3 higher compared to the previous week’s weighted average price while bull prices were steady to $2 higher compared to the prior week. The storyline has been how feeder cattle futures have been on a rapid decline, which has certainly influenced cash prices to some degree. However, the impact on cash prices has not been as great as what has been seen in the futures market. For instance, the August feeder cattle contract declined about $15 per hundredweight from July 31 through August 8. Over the same time period, the CME feeder cattle index only declined $6 per hundredweight. It is important to remember the CME feeder cattle index is a seven-day weighted rolling average so the decline in August feeder cattle futures has not been fully realized in the index. Despite the delay of the CME feeder cattle index value relative to futures, it is not likely the index will lose $9 more over the next few days. What is important to note is the strength that remains in the August feeder cattle contract relative to all of the deferred contract months. September feeder cattle futures are discounted more than $5 to the August contract while the January 2025 contract is discounted $11 when compared to the August contract. Whether one believes cash prices will move as low as futures are predicting is irrelevant. What is relevant is what decisions producers make given this information. The one thing recent history tells market participants is that futures tend to make large swings one way and then over corrects the other way. It often looks like a pendulum swinging back and forth with momentum gradually slowing. Catching the market on the upswing is a blessing and catching it on the downside is poor planning from the seller’s standpoint. The opposite is true for those buying.