Livestock Comments: Dr. Andrew Griffith

FED CATTLE: Fed cattle traded $4 to $5 higher in the South and steady in the North compared to last week. Prices in the South were mainly $233 to $235 while dressed prices were mainly $379 to $381. The 5-area weighted average prices thru Thursday were $237.50 live, up $3.34 compared to a week ago and $380.14 dressed, up $0.37 from last week. A year ago, prices were $191.65 live and $305.40 dressed. Southern prices made up a little ground this week when compared to Northern cattle prices. It is common for prices in the North to exceed those in the South, especially during grilling season. However, the price difference the past several months has been a little wider than typically expected. Regardless of marketing location, feedlot managers rarely complain when prices are increasing and at record levels. The continued strength in finished cattle prices has resulted in feedlots’ willingness to continue paying higher prices for feeder cattle. The margins have remained positive up to this point, but the only way for that to continue is for prices to continue escalating. Ever-increasing prices are probably not sustainable.

BEEF CUTOUT: At midday Friday, the Choice cutout was $377.07 up $0.35 from Thursday and up $11.58 from a week ago. The Select cutout was $363.85 up $0.78 from Thursday and up $7.14 from a week ago. The Choice-Select spread was $13.22 compared to $8.78 a week ago. It would appear beef buying for Father’s Day and Independence Day are driving the market higher. The Choice boxed beef cutout has advanced nearly $34 per hundredweight since the beginning of May and is more than $66 per hundredweight higher than the daily low of 2025, which occurred the third week of February. Similarly, the Choice boxed beef price is nearly $60 per hundredweight higher than the same time one year ago. This comparison removes the seasonality component and demonstrates how the wholesale beef market has changed over the past year. Packers have been forced to keep pushing wholesale beef prices higher, but the consumer has not demonstrated much resistance to such price increases despite beef production remaining similar to year-ago levels. There will come a day when beef production declines relative to the previous year, which should push beef prices higher from a theoretical standpoint. The question is if prices will actually push higher, and if so, how high will they go when beef production declines?

OUTLOOK: Based on Tennessee weekly auction reports, steer prices this week were $2 to $5 higher compared to last week while heifer prices were $2 to $8 higher than the previous week. Slaughter cow prices were steady to $1 lower compared to a week ago while slaughter bull prices were $3 to $5 higher compared to last week. It should be noted lightweight steers and heifers across many Tennessee markets were much lower than the previous week, which may be an early indicator of a softening in prices of these high-risk cattle. The summer heat and decline in forage quality typically puts a damper on lightweight calf prices that continues through the fall marketing time period. With only one week of lower prices on these lightweight calves, it is difficult to draw many conclusions or speak towards a trend. The only thing that can be said is that buyers had less interest in these lightweight calves this week than they did last week. Will buyer interest continue to decline for lightweight cattle as the market moves through the summer and fall months? What weight classes will be supported or lose support from a price standpoint moving forward? There is a plethora of questions that could be asked with no answer until the market reveals them. Despite prices being softer for some weight classes of cattle, prices remain strong for all cattle from a historical perspective. One of the primary markets to pay attention to is the slaughter cow market. Breaking and boning grade slaughter cow prices in Tennessee are near $160 per hundredweight. Thus, a 1,200-pound slaughter cow would be valued at $1,920 while a 1,400-pound cow would have a salvage value of $2,240. These are extremely strong salvage values for females that have reached the end of their reproductive life or for females that are marginal producers. Producers who are considering expanding their cow herd should put pencil to paper to evaluate selling older cows and retaining heifers for development. It would also be wise to consider purchasing females to enter the breeding herd.