Livestock Comments:  Finished cattle prices took a hit this week

FED CATTLE: Fed cattle traded $2 to $3 lower compared to last week on a live basis. Prices on a live basis were primarily $104 to $106 while dressed prices were mainly $163 to $165.  The 5-area weighted average prices thru Thursday were $105.11 live, down $2.50 compared to last week and $163.97 dressed, down $4.43 from a week ago. A year ago, prices were $109.95 live and $174.88 dressed.

Finished cattle prices took a hit this week with no apparent driver for the price decline. All that can be said is that October live cattle futures declined more than $3 per hundredweight on Monday and then floundered at that level the rest of the week. Maybe the price decline on the futures market which was followed by cash trade was due to expectations associated with the monthly cattle on feed report. It is sometimes difficult to know what is driving prices one way or the other, because many of the changes in prices is based on expectations and incomplete information. Information is constantly flowing and futures traders and those buying and selling cattle are evaluating this information in real time, which influences how they value animals.

BEEF CUTOUT: At midday Friday, the Choice cutout was $208.97 up $0.11 from Thursday and down $1.69 from last week. The Select cutout was $192.10 up $1.02 from Thursday and down $2.50 from a week ago. The Choice Select spread was $16.87 compared to $16.06 a week ago.

Commercial beef production for the first nine months of 2020 declined 60 million pounds (0.3 percent) compared to the same nine months in 2019, which is strong production given the reduced slaughter rates during the peak of COVID-19. Packers continue to work through cattle at a fairly quick clip as they have adjusted to more product going through retail outlets. Given the similar production to a year ago, beef in cold storage at the end of September was 1.5 percent lower than the same month in 2019. The quantity of beef in cold storage is an indicator that beef continues to move rapidly and that consumers continue to demand beef. The latest beef export data further supports the demand statement in that U.S. beef and veal exports have recovered nicely from the pandemic with August 2020 export quantities exceeding year ago levels. Another supporter of beef movement could be the international pull for pork as China continues to demand large quantities of pork as they continue their recovery from African Swine Fever.

OUTLOOK: Based on Tennessee weekly auction market price averages, steer prices were $3 to $5 lower compared to last week while heifer prices were unevenly steady with instances of $4 lower to $4 higher compared to a week ago. Slaughter cow prices were steady to $1 lower while bull prices were steady to $2 higher compared to last week’s prices. Calf prices continue to come under pressure as fall calf marketing hits full stride as the market heads into the last week of October. Calf prices will continue to be pressured as more and more producers set wheels under the spring calf crop. The only thing that may disrupt cattle movement is precipitation, but that will be a short-lived impact that will just result in a larger run of animals the following week. Preconditioned cattle continue to have strong demand for fall and winter grazing programs. 

The demand for preconditioned calves is reflected in the $9 to $11 per hundredweight higher price for 500 to 600 pound steers and heifers compared to calves that have not been weaned. The higher price for these animals reflects the reduced morbidity and mortality compared to calves coming straight off the cow that are struggling with respiratory issues. Looking at heavier feeder cattle, they appear to be in a state of flux as feedlots look to place some animals at the same time the finished cattle market is coming under undue pressure. Similarly, slaughter cows and bulls will continue to be pressured as large quantities of these animals continue coming to market. The calf, feeder cattle, and slaughter cow market will likely be stagnant the next couple of months, which means disappointing paychecks for those marketing animals. The hope and expectation is that markets will slowly gain momentum moving into January and February for most classes of calves, feeder cattle, and slaughter cows. How they will compare to this year’s prices is also optimistic.

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, 2020 totaled 11.72 million head, up 3.8% compared to a year ago, with the pre-report estimate average expecting an increase of 3.2%. September placements in feedlots totaled 2.23 million head, up 5.9% from a year ago with the pre-report estimate average expecting placements up 2.4%. September marketing’s totaled 1.85 million head up 6.2% from 2019 with pre-report estimates expecting a 5.8% increase in marketings. Placements on feed by weight: under 700 pounds up 2.5%, 700 to 899 pounds up 8.8%, 900 pounds and over up 5.7%.