by Andrew Griffith, Livestock Marketing Specialist
July 12, 2024
FED CATTLE
Fed cattle traded $2 to $4 lower in the South compared to last week. Price in the South were mainly $188 and $198 in the North on a live basis. Dressed trade was mainly $312 to $313.
The 5-area weighted average prices thru Thursday were $194.11 live, down $1.26 compared to last week and $312.86 dressed, down $0.98 from a week ago. A year ago, prices were $182.99 live and $291.25 dressed.
The price gap between cattle in the South and the North may be a little wider this week than the previous week with larger week-over-week price declines in the South. The market may see further softening in finished cattle prices moving through the remainder of the summer and will not find support to push higher through the fall. Alternatively, the market is not expected to evaporate during this time period either. Cattle feeders have continued to pay strong prices for cattle being placed in June and the first couple of weeks in July. If they keep up this pace then it will be necessary for finished cattle prices to exceed current levels. Though feed prices have declined, cattle feeders are paying record prices for feeder cattle.
BEEF CUTOUT
At midday Friday, the Choice cutout was $322.16 up $0.51 from Thursday and down $8.70 from a week ago. The Select cutout was $303.17 down $0.21 from Thursday and down $2.83 from last week. The Choice Select spread was $18.99 compared to $24.86 a week ago.
Understanding this section is generally centered on the wholesale Choice and Select beef cutout, it is also pertinent to discuss other beef prices. In this case, it is appropriate to touch on grass fed beef prices. The wholesale price of a grass-fed ribeye in June was $32.10 per pound, which is $2.81 higher than the previous month and $0.38 per pound higher than June the previous year. Similar price increases were common among other cuts of grass-fed beef. However, there were some cuts where the wholesale price declined. For instance, the whole tenderloin price was $46.14 per pound in June, which was $1.26 lower than May and $3.82 per pound lower than June 2023. The price changes across individual cuts results in little to no change in whole carcass value, which has been stagnant the past 18 months at $4.31 per pound on a dressed basis. It is important to note, grass fed beef purchasers are willing to pay more for grass fed beef and their sensitivity to price changes does not tend to be as great as those purchasing “commodity” beef.
OUTLOOK
Many of the livestock auction markets were closed the week of Independence Day, which means there are no trends to compare week-to-week changes in prices. Despite this lack of data, calf prices appear to remain strong despite the hot and dry conditions that are dominating Tennessee and much of the Southeast United States. There is actually no reason to expect a softening of calf prices anytime soon when strictly considering market fundamentals. Some may argue the consumer will stop purchasing beef with what has seemed to be ever increasing retail beef prices. Despite these arguments, if the retail beef price will just maintain its current level and consumers continue to clear the meat counter then there is no reason to expect cattle prices to decline the next couple of years. This statement is not meant to give a false impression that cattle prices will remain strong indefinitely. On the contrary, cattle prices will soften at some point, but that point is likely a few years down the road. Anyone who has been in this business very long or anyone who has studied market tendencies know there are ebbs and flows. Those ebbs and flows have different lengths and magnitudes. The magnitude of this price run is rather large, but the length of the price run is yet to be determined. There is a good chance the market will run hard the opposite direction at some point, but as was previously noted, it should be a few years before producers experience this price decline. One word of advice for cattle producers and other market participants is to not act rashly when someone is preaching doom and gloom or when they are preaching high prices forever. Producers should certainly take advantage of the current market as profits will likely be strong for cow-calf operations. However, producers should also be storing some of those profits for when the market makes a turn for the worse. The good times is the best time to make long-term plans, because plans during this time are rarely forced and tend to not be rushed.
ASK ANDREW, TN THINK TANK
Following last week’s discussion on slaughter cow prices, a question was asked concerning the different classes of slaughter cows. Slaughter cow grades are based on fat cover. A breaking utility cow is in a body condition score (BCS) of 7-9 which means she is fat/obese. A boning utility cow is in a BCS of 4-6. Most producers will want their breeding herd in a 5-6 BCS. Lean/light are in a BCS of 1-3, which means they are extremely thin. This is a very generalized explanation of slaughter cow grades, and there are more specifics that determine the final price. For instance, if an animal is expected to produce more lean beef than another animal relative to their total weight then it will receive a higher price. Some things to look for include looking at the fat over the ribs, hooks and pins. If the ribs are well covered then it is good to look at the fat cover on the hooks and pins to get an idea of the quality of animal. In today’s market, there is a strong demand for lean grinding beef, which is what is supporting slaughter cow prices.
Please send questions and comments to agriff14@utk.edu.
FRIDAY’S FUTURES MARKET CLOSING PRICES
Friday’s closing prices were as follows: Live/fed cattle –August $186.43 +0.50; October $187.18 +0.33; December $188.78 -0.08; Feeder cattle –August $258.65 +2.50; September $258.10 +1.75; October $257.55 +1.45; November $257.00 +1.35; July corn closed at $4.00 down 7 cents from Thursday.