By : Dr. Andrew P. Griffith
FED CATTLE: Fed cattle trade was not established at time of press. Asking prices were $108 on a live basis and $170 on a dressed basis while bids were $101 to $103 live and $164 dressed. The 5-area weighted average prices thru Thursday were $103.14 live, down $1.53 from last week and $163.00 dressed, down $2.65 from a week ago. A year ago prices were $105.04 live and $166.28 dressed. Cattle feeders and packers had a difficult time coming to terms this week which put the brakes on cattle trade. Packers have held leverage over cattle feeders for several weeks now and have been able to push prices lower. However, live cattle futures made a turn towards the higher side late this week which had cattle feeders asking for bigger money. Packers could have increased concern because it is usually the fourth quarter before cattle prices begin to come off the seasonal low. If prices turned this week then that could put them paying higher prices much earlier than expected. Alternatively, packers cannot be sure of the availability of cattle moving forward which may force their hand and result in higher bids.
BEEF CUTOUT: At midday Friday, the Choice cutout was $192.22 up $0.09 from Thursday and up $0.65 from last Friday. The Select cutout was $190.18 up $0.02 from Thursday and down $0.85 from last Friday. The Choice Select spread was $2.04 com-pared to $0.54 a week ago. The plugs used last week to patch the dam holding wholesale beef prices appear to be working. Packers were not able to turn prices around, but they were able to hold them steady compared to last week. No particular primal is supportive or destructive of cutout prices at this time. It is important to note July beef and veal trade data. July beef and veal imports exceeded 301 million pounds which is 11 percent higher than July 2016. Imports from Australia, Canada and New Zealand all exceeded 70 million pounds with imports from Mexico exceeding 53 million pounds. This is about par for the course as we primarily import lean beef from Australia and New Zealand and our neighboring countries are large trade partners. One aspect to note is that the U.S. has not imported more than 70 million pounds of beef from Australia in one month’s time since July 2016 and the largest monthly quantity in 2017 had only reached 57.7 million pounds. On the export side, beef and veal exports totaled 239 million pounds which is 10 percent higher than exports in July 2016 and marginally higher than June 2017.
OUTLOOK: Several weeks ago there seemed to be a dichotomy between feeder cattle prices and finished cattle prices as feeder cattle prices remained relatively strong while finished cattle prices were taking a nose dive. This dichotomy appears to have ceased as both feeder cattle future and live cattle future contracts have begun to move to the upside. A point that further points to the contrast between prices a few weeks ago is that the live cattle contracts have gained nearly as many dollars per hundredweight as the feeder cattle con-tracts. Another point of interest in the feed-er cattle market is the narrow price spread among the eight actively traded contracts from September 2017 to August 2018. The eight contracts are all within a $5 per hundredweight price range with the remaining 2017 contracts all trading within a $1 range. Similarly, the 2018 contracts are all within $2 of each other. The information from the narrow spreads across months can be difficult to decipher. In the near term, it likely means traders are not sure how many cattle are still on pasture and that they may question some of the information reported earlier in the year. As the fall contracts reach maturity, there is a good chance the market will not have experienced flat trading from September through the end of November. The best guess at this time is for softer prices in October and November. Looking into 2018, traders are expecting prices to be lower in 2018 than in 2017. This would make sense considering the expectations of a larger cattle herd and larger calf crop. However, there is a possibility the spring 2018 prices are undervalued relative to fall 2017 prices. Time will have to pass before further insight can be gleaned. In relation to Tennessee markets, light-weight calf prices are slowly slipping with steers $1 to $4 lower compared to last week and heifers steady to $6 lower compared to one week ago. Producers should ready themselves for declining prices on calves and slaughter cows, but prices are not expected to dip as low as the fall of 2016 when many cow-calf producers failed to recover all cash costs.