The cattle markets are starting to tail off from their summer highs as spring calves are being weaned.
By: Andrew P. Griffith, University of Tennessee
FED CATTLE: Fed cattle traded $2 higher in the South compared to last week. Prices on a live basis were mainly $154 to $155 while dressed trade occurred between $243 and $245. The 5-area weighted average prices thru Thursday were $154.56 live, up $1.74 from last week and $242.98 dressed, up $1.13 from a week ago. A year ago prices were $123.52 live and $196.01 dressed.
The fed cattle market is about the only market in the cattle complex that was able to push prices higher. Short bought packers were forced to pay up to cover short term slaughter needs as feedlot managers stood their ground on asking prices.
The live cattle market found a way to support prices through the summer which was likely due to limited numbers. However, as marketings become less current and as cattle backup in the yard, feedlot managers will likely have to move cattle at lower prices in future weeks.
It is doubtful a catastrophic price decline looms before the industry but some correction in the market is to be expected after record prices exhilarated the market.
BEEF CUTOUT: At midday Friday, the Choice cutout was $245.99 down $0.90 from Thursday and down $4.21 from last Friday. The Select cutout was $234.78 down $0.49 from Thursday and down $5.29 from last Friday. The Choice Select spread was $11.20 compared to $10.12 a week ago.
After prices peaked the last week of July, the beef cutout prices have struggled to maintain record prices through the month of August. The Choice cutout price declined $17.78 since the first day of August while the Select cutout price has declined $23.93 over the same time period.
Even the last grilling holiday of the summer could not provide enough support for wholesale beef prices to maintain this new found apex. It will be tough for packers to push higher prices the next couple of months and it may be just as difficult to maintain current prices as short term slaughter rates are expected to increase and the fall time period is generally a time of reduced beef demand.
Grinding product continues to be the big seller as cow slaughter has been significantly reduced due to short cattle numbers and many producers’ intentions of growing the herd. Similarly, there has been a reduction in the amount of trim available for grinding since steer and heifer slaughter rates have declined. These factors have supported ground beef prices which tend to be the least expensive beef option.
TENNESSEE AUCTIONS: On Tennessee auctions this week compared to a week ago steers and bulls were $1 to $8 lower. Heifers were $3 to $9 lower. Slaughter cows were steady to $1 higher while bulls were $2 to $3 higher. Average receipts per sale were 642 head on 12 sales compared to 750 head on 12 sales last week and 667 head on 9 sales last year.
OUTLOOK: The feeder cattle market is starting to experience some softening in prices. Seasonally speaking, prices generally tail off heading into the fall especially when producers begin weaning calves and setting wheels underneath them. Producers should not expect prices to increase this fall like they did one year ago.
In 2013, the average price in Tennessee for 500 to 600 pound steers in August, October, November and December exceeded the 2013 spring price peak which is an exception rather than a rule. December prices were the highest at $160 per hundredweight. Similarly, 700 to 800 pound steer prices for 2013 peaked in the November and December time period at $144 per hundredweight. The price strength in 2013 was fueled by cheaper grain prices and greater expected profits in the feedlot sector. Though many producers marketed calves earlier in 2014 than is traditional, a more seasonal tendency is expected this fall because there are still a large number of calves that will run through the auction market arena resulting in some price pressure.