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Market comments

published: July 27th 2020
by: Dr. Andrew Griffith
source: University of Tennessee


FED CATTLE: Fed cattle traded steady compared to last week on a live basis. Prices on a live basis were primarily $95 to $97 while dressed prices mainly $157 to $158.

The 5-area weighted average prices thru Thursday were $96.32 live, up $0.35 com-pared to last week and $157.58 dressed, down $0.09 from a week ago. A year ago, prices were $113.02 live and $182.97 dressed.

The cash market and the futures market are providing a little optimism for the fall finished cattle market. The October live cattle futures contract has gained $6 since the beginning of July while the December live cattle contract has gained about $5.50 over that same time frame. These prices still do not put finished cattle where cattle feeders want them, but there is a lot of time between now and the fall marketing time period for cattle to keep creeping higher. Another point of optimism is the fact that current cash prices have found a steady state instead of continuing to decline. The steep decline through the spring did not bode well for summer market prices, but they are holding their ground well given seasonal pressure.

BEEF CUTOUT: At midday Friday, the Choice cutout was $200.74 down $0.06 from Thursday and down $4.80 from last week. The Select cutout was $193.92 down $0.87 from Thursday and down $3.49 from a week ago. The Choice Select spread was $10.31 compared to $10.84 a week ago.

Wholesale boxed beef values continue to decline as cattle supply is ample and slaughter rates are running at or near pre-COVID-19 levels. However, the retail price of beef and other meats are not declining at the same rapid pace as the wholesale values. The Choice retail value of beef for June was nearly $7.56 per pound. This price level is nearly $0.03 per pound less than May but is $1.05 per pound higher than January. The all-fresh beef retail value for June was just over $7.38 per pound, which is $0.34 higher than May and $1.46 higher than January. Retailers were forced to push prices higher rather rapidly in April and May due to reduced supply of beef from lower cattle slaughter. Though prices escalated quickly at the retail level, it is doubtful they will decline as quickly. Retailers are looking to make up for the losses they likely incurred during late March and April. Therefore, it will be a long slow march through the rest of the year as retail beef prices soften. There is no guarantee the prices will be back to pre-COVID-19 levels by the end of the year.

OUTLOOK: Based on Tennessee weekly auction market price averages, steer and heifer prices were unevenly steady com-pared to last week. Slaughter cow prices were steady to $3 lower with bull prices steady to $3 lower compared to week ago prices. The market trends are very indicative of the typical seasonal pattern for light-er weight cattle. The market did not experience its seasonal peak in late winter and early spring, which resulted in lighter weight cattle prices remaining fairly steady through the first month of summer. However, the summer heat is beginning to take its toll on the market as lighter weight steer and heifer prices are beginning to be pushed lower. There are several reasons for the lower prices, but the main reason is the risk of receiving high risk cattle during extremely hot weather. The prices will continue to be pushed lower in the fall as the run of spring born calves make their way to market. It sure looks like the fall calf market is setting itself up to be extremely disappointing for most producers. On the other side of the coin is the yearling cattle market. The market for heavier feeder cattle is beginning to gain some steam which is also a typical seasonal pattern. The August feeder cattle contract traded to its highest level since March 4th and has gained more than $6 since the Independence Day holiday. The August feeder cattle contract is still $14 per hundredweight lower than its contract high set in early January, but it is also $26 higher than its contract low set in early April. It is probably not feasible for the market to move back above the $150 mark for the August contract, but it could still have some upside potential given its slow and steady ascent back to its current level. The stronger futures market has result-ed in a stronger cash market which is a positive sign for the industry. Though the signs are positive, it does not mean wind-fall profits are on the horizon. This market still has a lot of uncertainty.

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