by Andrew Griffith, Livestock Marketing Specialist
September 24, 2021
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Fed cattle traded steady compared to last week on a live basis. Prices on a live basis primarily ranged from $123 to $124 while dressed prices were mainly from $193 to $198.
The 5-area weighted average prices thru Thursday were $123.64 live, down $0.26 compared to last week and $196.46 dressed, down $2.19 from a week ago. A year ago, prices were $105.03 live and $164.87 dressed.
Cattle feeders are probably content with little to no change in prices when compared to last week, but that has been the same story for six months. Since the beginning of April, the 5-area weekly weighted average price of finished cattle has ranged from $118 to nearly $126 with the past two months trading in a $2 range on the top side of the six-month range. The issue that persists is in the packing industry, which has kept cattle feeders from gaining the much leverage. As the quantity of cattle on feed tightens, leverage should shift to the cattle feeder, but when that occurs is unknown. If gaining leverage coincides with seasonal finished cattle strength in December then finished cattle prices have an opportunity at the $130 price point.
At midday Friday, the Choice cutout was $304.29 down $1.31 from Thursday and down $11.79 from a week ago. The Select cutout was $276.35 up $1.36 from Thursday and down $6.19 from last week. The Choice Select spread was $27.94 compared to $33.54 a week ago.
The retail price of Choice beef for August was $7.64 per pound, which represents a $1.23 per pound increase since January 2021. That means the price of Choice beef has increased 19 percent since January. That brings the conversation to the wholesale price or Choice beef cutout price. Choice boxed beef prices peaked just under $350, which means the peak price was nearly 68 percent higher than where it was the first week of January. This week’s price is still about 45 percent higher than the first week of the year. This likely means retail beef prices will continue to increase in order to capture some of the lost margin the past several months. As wholesale beef prices increased, the quantity of beef in cold storage was on the decline as there was reason to pull inventory out of cold storage and little to no reason to add to it. Beef in cold storage at the end of August was nearly 415 million pounds, representing an increase of 14 million pounds from the previous month but more than 34 million pounds less than August of the previous year.
Based on Tennessee weekly auction market data, steer prices were unevenly steady compared to last week while heifer prices were $2 to $4 lower compared to a week ago. Slaughter cow prices were steady to $1 higher while bull prices were steady compared to the previous week. The cattle market has made its way to the fall calf marketing time period. September is not typically thought of as the start to calf marketing, but the last half of the month generally sees producers starting the fall run of calves. Feeder cattle receipts are on a national basis are reported based on how they are marketed including auctions, direct, and video/internet. Video and internet tend to be the method for heavier feeder cattle and load lots of cattle while auctions tend to pull a higher percentage of the lighter weight cattle. For the week ending September 18, national feeder and stocker receipts through auction totaled 182,400 head, which was 43,800 head higher than the previous week and the largest total receipts dating back to the middle of April. Approximately 52 percent of those cattle were marketed weighing less than 600 pounds. One can expect total receipts at auctions to continue increasing through October and November with several weeks seeing 250,000 to 350,000 head. As total auction receipts increase so will the percentage of cattle weighing less than 600 pounds at time of marketing. Thus, that percentage of calves marketed weighing less than 600 pounds will likely swell to 60 to 65 percent in October and November. This is one of the primary reasons lightweight cattle prices typically decline in the fall. The one factor that may temper calf marketings this fall is if several of those cattle were marketed early out of states influenced by drought. There were likely some calves marketed early in those states, but that occurrence is not likely to have a huge impact on cattle prices in other regions of the United States.
The September cattle on feed report for feedlots with a 1000 head or more capacity indicated cattle and calves on feed as of September 1, 2021 totaled 11.23 million head, down 1.4% compared to a year ago, with the pre-report estimate average expecting a decrease of 1.9%. August placements in feedlots totaled 2.10 million head, up 2.3% from a year ago with the pre-report estimate average expecting placements down 0.7%. August marketing’s totaled 1.89 million head down 0.4% from 2020 with pre-report estimates expecting a 0.2% decrease in marketings. Placements on feed by weight: under 700 pounds down 3.4%, 700 to 899 pounds up 2.2%, 900 pounds and over up 15.4%.
ASK ANDREW, TN THINK TANK
What sector of the cattle business is most profitable? This is a fairly common question I receive, and it was presented again this week. Generally, the question is asked as a cattle producer or potential cattle producer wants to know how they can make more money. The answer to the question is “it depends.” However, most any sector can be profitable if a particular operation understands utilizing their resources efficiently. Based on observation and through conversation with producers, one can quickly find out that the primary goal of many operations is not profitability. The producer may think their goal is profitability, but their efforts are focused on some production goal. For instance, many producers try to wean the heaviest calves possible, or they want their cattle to look fat and smooth. There is nothing wrong with these goals, but they do not always align with maximizing profitability. Producers should not take anything off the table in production, and stepping outside the traditional lines may be a profitable move.
Please send questions and comments to firstname.lastname@example.org.
FRIDAY’S FUTURES MARKET CLOSING PRICES
Friday’s closing prices were as follows: Live/fed cattle –October $122.93 -0.30; December $128.15 -0.48; February $132.63 -0.33; Feeder cattle –September $154.63 -0.28; October $157.35 +0.50; November $158.58 +0.48; January $159.60 +0.40; December corn closed at $5.27 down 3 cents from Thursday.