by Andrew Griffith, Livestock Marketing Specialist
July 26, 2024
FED CATTLE
Fed cattle traded steady in the South compared to last week. Price in the South were mainly $190 and $196 in the North on a live basis. Dressed trade was mainly $308 to $309.
The 5-area weighted average prices thru Thursday were $193.12 live, down $0.01 compared to last week and $308.11 dressed, down $2.00 from a week ago. A year ago, prices were $186.57 live and $292.05 dressed.
As has become commonplace in the finished cattle world, cattle feeders and packers have found it difficult to come to terms when trading cattle. Both parties consistently cannot get deals done until the eleventh hour or maybe the last minute. Despite this back and forth between the two parties, both have incentive to keep cattle moving. It may not appear at this time that cattle supplies are tight as the quantity of cattle on feed remains strong. However, there will be a tightening of cattle going on feed, which means packers will be competing for fewer cattle. This tightening may come through heifer retention or due to continued declines in the quantity of breeding cattle.
BEEF CUTOUT
At midday Friday, the Choice cutout was $314.47 up $2.01 from Thursday and down $0.34 from a week ago. The Select cutout was $299.01 up $2.99 from Thursday and up $0.91 from last week. The Choice Select spread was $16.37 compared to $15.12 a week ago.
Quality grade of beef does matter when talking beef. This statement seems clear when discussing Choice beef compared to Select grade beef. However, it is even more important when talking about Prime grade beef. This point has been demonstrated and made evident the past couple of months when Prime grade beef prices have increased week-over-week when other quality grades of beef declined the same week or when Prime grade beef price only experienced a small price decline when other grades of beef experienced larger price declines. To some degree, packers purchasing higher grading cattle tends to be a natural insulation or insurance to price changes in wholesale beef prices. Prime beef prices will still tend to move in the same direction as other beef prices, but they do not appear to have the same downside risk as other grades in the current market. As a reference point, the Prime beef cutout has averaged trading $22 per hundredweight higher than the Choice cutout the past three months.
OUTLOOK
Based on weekly auction market averages, steer prices were $1 to $5 lower compared to last week while heifer prices were $2 to $8 lower compared to the previous week. Slaughter cow prices were $3 to $6 lower compared to the previous week’s weighted average price while bull prices were $3 to $4 lower compared to the prior week. Cash prices at local auctions mirrored that of feeder cattle futures from the prior week as feeder cattle futures had a softer undertone to end last week and then traded sideways for the current week. The slightly softer undertone in prices this week may not be completely unexpected for calves typically entering the stocker system. A wide swath of the state and surrounding region received much needed precipitation this week. The lack of pasture and some producers already being forced to feed hay may have some buyers slowing purchases to ensure there is adequate forage to carry the cattle that are currently owned. If adequate moisture persists then drought should not play a significant role in cattle prices moving forward, but it will take more than one week of rain to rejuvenate pastures and spur more hay production. The release of the cattle on feed report last week demonstrated heifer retention has yet to take center stage in the domestic cattle industry. One would think heifer retention would begin this fall as the spring calf crop is weaned, but drought could certainly throw a wrench in that way of thinking. Speaking of the spring calf crop, the price of freshly weaned calves tends to seasonally decline in the fall months as a glut of calves comes to market in a time period when sickness becomes more prevalent due to large temperature swings from day to night. However, the decline may not be as drastic this fall due to fewer calves making their way to market due to a smaller calf crop and heifer retention. The other market to keep an eye on is the slaughter cow market. Strong demand should remain for slaughter cows given the need for lean grinding beef. Thin slaughter cows may even be in demand by producers for weight gain.
ASK ANDREW, TN THINK TANK
Instead of responding to a question this week, it is appropriate to bring something to the attention of people using the daily USDA Market News reports for feeder cattle in Tennessee. Many readers likely look at prices on the market reports either online or through some phone app. For those who do, it is necessary to share that feeder cattle prices were formerly reported primarily with number 1 and 2 muscling presented together. However, market reporters are now differentiating these muscle groups to a greater extent. In other words, instead of most of the cattle being reported as Medium and Large 1 and 2, most cattle will fall in the category of Medium and Large 1 or Medium and Large 2. The Medium and Large 1 and 2 designation will not completely disappear, but there will be fewer animals represented in this category. Some people do not like change, but this slight change in reporting will help producers understand the difference in pricing based on muscle score of feeder cattle.
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 $188.58 -0.33; October $188.55 -0.05; December $189.30 +0.40; Feeder cattle –August $259.70 +1.08; September $259.60 +1.70; October $258.30 +1.23; November $257.20 +0.98; July corn closed at $3.94 down 12 cents from Thursday.