Weekly Livestock Comments
By Dr. Andrew P. Griffith
October 21, 2016
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FED CATTLE: Fed cattle trade was not well established at press. Asking prices on a live basis were mainly $100 to $102 while asking prices on a dressed basis were mostly $158 to $160. The 5-area weighted average prices thru Thursday were $98.24 live, up $0.65 from last week and $154.02 dressed, up $0.09 from a week ago. A year ago prices were $130.00 live and $207.10 dressed. The finished cattle market showed signs of wanting to break out of its summer and early autumn slump. Cattle feeders are eagerly waiting for the market to shift in their favor, but no major shifts were evident this week. Live cattle futures have come off their contract lows that were experienced last week, but signs of reversal have occurred twice in the past month and a half with no follow through. It is hard to imagine another large downward price movement in the finished cattle market, but it is not likely anyone imagined the abrupt price collapse over the past six months. Cattle feeders are doing exactly what the economics say which is to sell what is in the pen and purchase a replacement animal.
BEEF CUTOUT: At midday Friday, the Choice cutout was $179.97 up $2.08 from Thursday and down $2.60 from last Friday. The Select cutout was $167.58 down $0.16 from Thursday and down $4.60 from last Friday. The Choice Select spread was $12.39 compared to $10.39 a week ago. Cutout prices continue to falter as the market moves through October. Middle meats including cuts from the rib and loin have come under severe pressure and appear to be pulling cutout prices lower. The expectation would be for these higher valued cuts to find some support as the market approaches the holiday season, but no support is evident at this time. Alternatively, end cuts including the chuck and round have witnessed a little price strength which is a seasonal tendency as cooler weather arrives. The biggest disappointment may be the fresh 50 percent lean trimmings market because 50 percent lean trimmings are trading for about one-third of the five year average price. There are probably some packers that feel they cannot even give the product away at those prices. Regardless of the cut of beef, beef prices will come under pressure the next several weeks as turkey will take front and center heading into Thanksgiving and ham will do the same heading towards Christmas. It does not help the beef market that poultry and pork prices are extremely low.
OUTLOOK: Since the second week of August, the October feeder cattle futures contract price has declined more than $24 per hundredweight. The price decline over the past two and a half months amounts to a value decrease of $350 to $400 per head. This information means cow-calf producers as well as stocker and backgrounding operations have lost and continue to lose significant value in currently owned animals. These price declines result in cash losses for margin operators while the same price declines result in revenue losses for the cow-calf producer. There has been some glimmer of hope this week in feeder cattle futures markets as the steep price decline has actually leveled and experienced a slight price improvement. Many people in the industry are asking how low these prices are going. The answer is not known as prices could continue to decline the next five or six weeks. However, this week’s price movement may be an indication that prices have met a fairly strong support point. One factor to remind everyone about is that the November contract and the subsequent contracts represent 700 to 899 pound steers whereas previous contracts represented 650 to 849 pound steers. The 50 pound increase in weight will likely result in a feeder cattle futures price that is $3 to $5 lower than what it would be had the contract specifications not been changed. Though feeder cattle futures were fairly steady this week, the weekly weighted auction market prices for cattle in Tennessee showed softer prices. The price declines this week were fairly small relative to previous weeks, but there are still several calves that have yet to make their way to town. The weather conditions have been favorable for transporting cattle from the field to the sale barn, but it is likely many producers are optimistic about cattle prices increasing which has resulted in those animals staying at home. There does appear to be an opportunity for calves to be backgrounded for 90 or more days, but producers need to determine what the marketing method will be for this production scheme.
The October cattle on feed report for feedlots with a 1000 head or more capacity indicated cattle and calves on feed as of October 1, 2016 totaled 10.27 million head, up 0.4% from a year ago, with the pre-report estimate average expecting an increase of 1.1%. September placements in feedlots totaled 1.91 million head, down 1.9% from a year ago with the pre-report estimate average expecting placements up 3.3%. September marketing’s totaled 1.73 million head up 5.5% from 2015 which corresponds with pre-report estimates. Placements on feed by weight: under 600 pounds down 14.8%, 600 to 799 pounds up 7.1%, and 800 pounds and over down 3.0%.
ASK ANDREW, TN THINK TANK: I would like to take this time to make readers aware of the Tennessee-Alabama small ruminant conference that will be hosted at the Middle Tennessee Research and Education Center October 27-29th in Spring Hill, TN. This conference is filled with information and great speakers. It does meet the requirements to become certified as a master small ruminant producer. However, producers who already have that certification are still encouraged to participate because many of the presentations address topics that have not been presented in this state. For more information concerning registration and meeting times, please visit the Small Ruminant Conference site.
Please send questions and comments to email@example.com or send a letter to Andrew P. Griffith, University of Tennessee, 314B Morgan Hall, 2621 Morgan Circle, Knoxville, TN 37996.
FRIDAY’S FUTURES MARKET CLOSING PRICES: Friday’s closing prices were as follows: Live/fed cattle – October $101.15 +2.13; December $101.88 +1.75; February $102.80 +1.55; Feeder cattle –October $121.88 +0.13; November $119.70 +0.85; January $115.50 +1.25; March $113.25 +1.03; December corn closed at $3.53 up $0.02 from Thursday.
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