Livestock Comments

by Andrew Griffith, Livestock Marketing Specialist

June 21, 2024

FED CATTLE

Fed cattle trade was not well established at press. Asking prices in the South $189 to $190 while bids were $184 to $188.

The 5-area weighted average prices thru Thursday were $195.11 live, up $3.46 compared to last week and $308.19 dressed, up $2.79 from a week ago. A year ago, prices were $182.67 live and $289.85 dressed.

Packers and cattle feeders were at a stalemate this week with cattle slow to trade. The specifics of why both parties were slow to make a deal is not certain, but it could be the market is likely nearing the typical summer slowdown for beef movement. This likely has packers concerned about wholesale beef prices beginning to slip, which means margins could potentially narrow from the input and output side. Cattle feeders are simply looking to hold or push prices higher, because feeder cattle prices are still strong. The most likely next move for finished cattle is a slight softening in prices, but prices are not expected to experience the full seasonal decline as the limited supply should support prices.

BEEF CUTOUT

At midday Friday, the Choice cutout was $322.35 down $0.52 from Thursday and up $2.54 from a week ago. The Select cutout was $302.66 down $1.74 from Thursday and down $0.39 from last week. The Choice Select spread was $19.69 compared to $16.76 a week ago.

The all fresh retail price of beef is around $8 per pound. This price represents all of the beef items from a carcass. Most market analysts want to focus on middle meats during the grilling and holiday season, due to the high value these cuts have on a per unit basis. However, the ground beef market needs some attention occasionally. The reason ground beef needs attention is the tremendous quantity that is consumed domestically and the fact low- and high-income consumers purchase ground beef. High-income consumers can trade down from higher valued beef products to lower valued beef products. What can low-income consumers do who primarily purchase ground beef? The answer is purchase less or something else. The retail price of 80 percent lean and 20 percent fat ground beef is around $5.25 per pound at the local grocery store. If a person divides that number by four to make a quarter pound hamburger then the beef itself costs $1.31 per burger. This can leave a bad taste in the mouths of many consumers and no taste of beef.

OUTLOOK

Based on weekly auction market averages, steer prices were unevenly steady compared to last week while heifer prices were steady $3 higher compared to the previous week. Slaughter cow prices were steady to $2 higher compared to the previous week’s weighted average price while bull prices were steady compared to the prior week. This may be a good time to consider some cowboy math as it relates to the cattle industry given today’s price of cattle and expectations moving through the remainder of the year. The current market has 525 pound steers in Tennessee valued at $300 per hundredweight, which is a total of $1,575 per head. Assuming this animal was purchased today and grown in a stocker operation up to a weight of 825 pounds then the expected value if sold as part of a 50,000 pound truck load in Tennessee in November would be nearly $2,100 per head given historical basis values. Making further assumptions, if the animal enters the feedlot and comes off feed in April weighing 1,400 pounds, the value of such an animal based on the futures market is $2,660. This math may work for some producers, but this math does not work for all producers. In other words, some may find a way to be profitable at these price levels while many will not find it worth the risk. The point of this math exercise is to demonstrate there are two sides to every coin. High calf prices are really good for the cow-calf producer while others in the industry are feeling the squeeze of narrow margins with increased capital investment. It is important folks up and down the supply chain realize the risk others in the industry are taking to better understand the decision making process. There is no reason to think cattle prices will decline, much less collapse, in the near term. Interest in bred heifers is gaining momentum, but there are not many in the country due to the drought issues in 2023. Thus, significant cattle herd growth decisions will not occur until this fall when producers begin retaining a larger quantity of young females.

The June cattle on feed report for feedlots with a 1000 head or more capacity indicated cattle and calves on feed as of June 1, 2024 totaled 11.59 million head, no change compared to a year ago, with the pre-report estimate average expecting a 1.1% decrease. May placements in feedlots totaled 2.05 million head, up 4.3% from a year ago with the pre-report estimate average expecting placements down 1.7%. May marketing’s totaled 1.96 million head up 0.1% from 2023 with pre-report estimates expecting marketings up 0.3%. Placements on feed by weight: under 700 pounds up 4.4%, 700 to 899 pounds up 2.9%, 900 pounds and over up 8.5%.

ASK ANDREW, TN THINK TANK

A question was received this week asking what the correlation was between presidential election years and cattle prices. With little to no basis to answer this question based on prior knowledge, it was necessary to run a quick correlation of cattle prices with presidential election years and non-presidential election years. Using finished cattle prices to represent the cattle market, a back of the feed sack correlation calculation showed there was a weak negative correlation between cattle price and presidential election years. In other words, cattle prices tend to be a little lower in presidential election years than they are in other years. With that thought in mind, it was also appropriate to consider the correlation of corn price and presidential election years. The correlation coefficient was slightly positive in presidential election years, which means corn prices tend to be slightly higher in presidential election years than other years. Given this quick analysis, it appears there is little impact on commodity prices from a presidential election.

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 –June $187.60 +0.53; August $183.15 +0.60; October $183.63 -0.20; Feeder cattle –August $258.38 -1.45; September $259.90 -1.28; October $260.63 -1.25; November $260.50 -1.20; July corn closed at $4.35 down 5 cents from Thursday.