Tennessee Market Highlights
By Dr. Andrew P. Griffith
FED CATTLE: Fed cattle traded steady compared to last week on a live basis. Prices on a live basis were mainly $108 while prices on a dressed basis were mainly $170 to $172. The 5-area weighted average prices thru Thursday were $107.88 live, up $1.13 from last week and $171.13 dressed, up $5.13 from a week ago. A year ago prices were $103.36 live and $161.92 dressed. Finished cattle prices held steady this week which is a positive sign for cattle feeders. This should bring some solace, because cattle feeders do not want to see prices reach into the abyss similar to last year. Again, there is no guarantee prices will not decline over the next couple of months, but the expectation is for prices to have a steadiness and slowly gain ground heading through the fourth quarter of 2017. There remain a large number of cattle on feed, but timely marketing the past 12 months has kept cattle current and the risk of a wall of cattle pushed to the sidelines. Cattle feeders have continued to purchase feeder cattle aggressively with the expectation of prices improving moving forward.
BEEF CUTOUT: At midday Friday, the Choice cutout was $196.72 up $0.31 from Thursday and up $5.21 from last Friday. The Select cutout was $188.96 down $0.15 from Thursday and up $0.46 from last Fri-day. The Choice Select spread was $7.76 compared to $3.01 a week ago. September and October are two months when beef prices do more wallowing than moving in a defined direction. This wallowing is largely due to moving from the grilling holidays of summer to a time period of relatively strong beef supplies and indifference by consumers for beef products prior to the year-end holidays. Another factor impacting beef prices in early fall is competing meats such as pork. Pork production year-to-date is running 2.8 percent higher than last year and further increases in production are expected. The September 1 Hogs and Pigs report was released yesterday which brought a bearish price tone. All hogs and pigs totaled 73.55 million head which is an increase of 2.5 percent com-pared to a year ago. Similarly, breeding hogs increased 1.2 percent compared to a year ago while the pig crop increased 2.2 percent. Additionally, market hogs weighing 120 pounds and over is 3.9 percent higher than last year. This increase in hogs weighing 120 pounds and heavier could push weekly harvest levels to 2.6 million head which will continue to increase 2017 pork production.
OUTLOOK: Based on Tennessee weekly auction market averages, steer prices were $2 to $7 lower compared to last week while heifer prices were $2 to $8 lower. Similarly, slaughter cow prices were $4 to $6 lower while slaughter bull prices were $5 to $6 lower compared to a week ago. It could be debated if the softer prices are more a factor of feeder cattle futures markets or a factor of seasonal price trends. As it relates to feeder cattle futures, prices declined more than $5 at the beginning of this week when compared to where they finished the previous week. However, this week’s prices were very similar to the prices witnessed Monday and Tuesday of the previous week. The safe answer is to say the futures market and seasonal price trends are at play which is probably correct, but they are probably not playing at equal forces. It would appear cattle traders are paying close attention to the futures market, but it seems they are placing slightly more emphasis on the seasonal trend of cattle prices as more animals begin making their way to town. Feeder cattle futures continue to be well supported through the first of 2018 with very few chinks in the armor which means prices for cattle ready to enter the feedlot will be supported the next several months. However, the support in the yearling market does not translate into perfect support in the freshly weaned calf market. It appears strong demand will continue for calves that will be placed on grass in stocker operations, but that will not keep prices from softening in October and November. It is safe to say calf prices are as strong as can be expected for the time of year considering 525 pound steers averaged $750 per head on Tennessee auctions this week. However, as the market moves into October and November, it is possible for 525 pound steer values to drop closer to $700 per head. Given the declining market, producers should sharpen the pencil and start calculating cost of gain versus value of gain to see if a few more dollars can be squeezed out of each head. Additionally, producers should consider alternative marketing opportunities.