Weekly Livestock Comments for July 26, 2019
By: Dr. Andrew Griffith, Assistant Professor, Department of Agricultural and Resource Economics, University of Tennessee
FED CATTLE: Fed cattle trade was not well established at press. Asking prices in the South were mainly $113 to $114 while ask-ing prices in the North were $186 to $187.
The 5-area weighted average prices thru Thursday were $115.43 live, up $2.41 from last week and $183.77 dressed, up $0.80 from a week ago. A year ago prices were $110.10 live and $176.09 dressed.
Packers and feedlot managers reverted to their usual tactics of battling it out to get cash deals done. Feedlot managers may have a little leverage in that packers are making an extremely strong margin in today’s market. It is doubtful packers are willing to pass those dollars on to cattle feeders, but the decline of beef in cold storage may point to the need for beef by retailers which is the packers’ job. Thus, packers likely need cattle to hang on the rail in order to meet the demand which is where a small amount of feedlot leverage may come into play. Cattle feeders are likely to hold tight to cattle unless they get their desired price because feeding closeouts have been negative for far too long.
BEEF CUTOUT: At midday Friday, the Choice cutout was $212.41 down $0.16 from Thursday and down $1.01 from last Friday. The Select cutout was $188.85 down $0.33 from Thursday and down $0.39 from last Friday. The Choice Select spread was $23.56 compared to $24.18 a week ago.
The monthly cold storage report for June was released by USDA this week. The quantity of beef in cold storage at the end of June totaled 394.5 million pounds which only represents 78 percent of the average weekly beef production in 2019. Thus, less than a week’s worth of beef production is in a freezer which is an indicator that beef is moving at a decent pace. The June value is the lowest quantity of beef in cold storage since October 2014 which corresponds to a time period when fewer animals were being harvested due to rapid expansion in the beef cattle herd. Contrary to beef, the quantity of pork in cold storage at the end of June remained elevated. Pork in cold storage at the end of June totaled 622.4 million pounds compared to 559.0 million pounds one year ago. The elevated level of pork in cold storage is not as perplexing as the fact that it only marginally declined from the May value. Pork in cold storage generally declines in June and July due to reduced hog slaughter and lighter weight hogs going to slaughter.
OUTLOOK: Based on Tennessee weekly auction market averages, steer prices were mostly $3 to $4 higher compared to last week while heifer prices were unevenly steady compared to a week ago. Heifer prices ranged from $5 lower to $5 higher moving through the week. Slaughter cow prices were $2 to $4 higher compared to a week ago while slaughter bull prices were steady to $3 higher. The August feeder cattle contract is $11 per hundredweight higher than its contract low and $18 off of its contract high. The recent upswing in cash and futures prices is keeping purvey-ors on their toes as the market is trying to follow its seasonal tendency. There has been good demand for yearling cattle the past few weeks and the demand for weaned and vaccinated cattle remains strong. It is always difficult to project what the market is going to do, but the best guess on yearling cattle is for the market to remain steady or gain a few dollars over the next four to five weeks. The one thing that could stop a feeder cattle price rally in the next couple of weeks is a bullish crop re-port that sends corn prices closer to $5. Weaned and vaccinated cattle will continue to be in strong demand moving through the fall marketing time period as winter stocker programs look for inventory to put on pasture. The strong demand for those cattle today is associated with favorable forage conditions, good moisture, and the desire to receive lower risk cattle when the temperature and humidity reach “suffocation” level. A surprising aspect of the market is the strength in slaughter cow prices. Slaughter cow prices in Tennessee this week represent the highest price for slaughter cows since March of 2018. Producers who have cows that need to be removed from the breeding herd should consider marketing those animals in the near term. There is no expectation for slaughter cow prices to make a price run, but they are likely to head south when fall weaning begins.