Livestock Comments: Dr. Andrew Griffith

FED CATTLE: Fed cattle traded $5-6 higher on a live basis compared to last week. Prices in the South were $215 to $218 while prices in the North were mainly $349 to $350. The 5-area weighted average prices through Thursday were $220.99 live, up $9.94 compared to a week ago and $349.33 dressed with no comparison to last week. A year ago, prices were $186.42 live and $294.63 dressed. Packers and cattle feeders decided to do the bulk of their business on Wednesday and Thursday this week instead of waiting until Friday afternoon to come to terms. With significantly higher prices, it has become clear that time is not the only thing that marches on. Cattle prices have the ability to continue marching higher as well. Maybe the most amazing part of all of this is that as record cattle weights continue to roll in so do record prices. Can prices continue to push higher next week? It is doubtful many people thought they would make such a jump this week compared to last week, but they did. The question that comes to mind is if cattle prices can make similar price jumps in any of the next few weeks? Not likely, but certainly possible.

BEEF CUTOUT: At midday Friday, the Choice cutout was $342.94 down $0.23 from Thursday and up $7.78 from a week ago. The Select cutout was $325.64 up $1.36 from Thursday and up $6.25 from a week ago. The Choice Select spread was $17.30 compared to $15.77 a week ago. Wholesale beef prices continue to push higher in an attempt to ration beef consumption relative to the quantity of available product. Higher beef prices at retail will certainly result in some consumers consuming lower valued beef products and may even result in some consumers purchasing less beef. This is exactly what higher prices are expected to do as prices tend to increase as the quantity of product supplied declines. On the opposite end of the spectrum, summer grilling season will soon start, which generally leads to strong beef movement from the end of May through early July. The grilling holidays of Memorial Day, Father’s Day, and Independence Day all tend to promote more activity at the beef counter and that is not expected to change this year. The question will just be how much of what products consumers purchase. Most consumers are expected to adjust products purchased as well as quantity purchased to some degree. The one truth remains that there is no good substitute for beef in the marketplace.

OUTLOOK: Based on Tennessee weekly auction reports, steer prices this week were steady to $2 higher compared to last week while heifer prices were steady to $3 higher than the previous week. Slaughter cow prices were steady to $1 higher compared to a week ago while slaughter bull prices were $1 to $2 higher compared to last week. Feeder cattle futures continue to test the $300 per hundredweight price point with the August contract just a little over $2 shy of reaching that mark. There is sure to be some resistance at that price level just as there was resistance at $200 and $250 when those price points were eclipsed. There is a psychological component at play as traders reach new levels that are round numbers. Regardless of what traders are doing in the futures market, the price in the country is what should be noted. The CME feeder cattle index on May 1st was $296.10 per hundredweight. This represents a seven-day weighted rolling average. The single day price was $299.62, which means cattle traders are pushing prices higher. These prices have an 800-pound steer valued right at $2,400. This simply means the cost of placing a calf on feed is $2,400 plus trucking to get it there. On the other end, the cattle feeder sold 1,500-pound steers for $221 per hundredweight this week, which equates to $3,315 per head. That means feedlots are receiving $915 per head more for what they are selling compared to what they are purchasing. There are a few dollars to be made when putting 700 pounds of weight on for $915. There continues to be concern from cattlemen that these prices cannot be sustained. That is all relative to how long they are talking about. These prices may last one more day or they may last two more years. The point of higher prices is to ration the quantity of product that is available. The key for cattle producers is taking advantage of what the market is offering and capitalize on strong cattle prices while they are available. This does not mean selling the calf crop in a hurry before prices decrease!