Livestock Comments: Dr. Andrew Griffith

Livestock Comments

FED CATTLE: Fed cattle traded $3 to $4 higher on a live basis compared to last week. Prices were mainly $185 to $187 on a live basis. Dressed trade was mainly $292 to $295.   The 5-area weighted average prices through Thursday were $186.09 live, up $3.31 compared to last week, and $293.49 dressed, up $5.49 from a week ago. A year ago, prices were $183.59 live and $290.28 dressed.

Packers may have shown their hand this week as they found themselves in need of cattle and were willing to pay asking prices on Thursday. One thing is certain: packers have a maximum capacity at each facility. They do not have to utilize 100% of that capacity, but they must utilize a certain percentage before it costs too much to operate. It has been difficult to state when packers will feel the squeeze of fewer cattle, and that squeeze has yet to be fully felt. However, it sure seems as if there was some sense of it this week. Supplies will tighten at some point, which will further have packers competing for the lower quantity of cattle available. In the words of Bachman-Turner, "B-b-b-baby, you ain’t seen n-n-n-nothing yet."

BEEF CUTOUT:  At midday Friday, the Choice cutout was $296.87, up $0.50 from Thursday, and down $3.80 from a week ago. The Select cutout was $282.26, down $0.11 from Thursday, and down $7.33 from last week. The Choice/Select spread was $14.61 compared to $11.08 a week ago.

The all-fresh retail beef price for August set a new record at $8.155 per pound, while the Choice beef price for August also set a new record at $8.515 per pound. Several factors are driving beef prices higher, including strong demand, reduced production, and inflation. Consumers have been resilient in beef demand since the coronavirus in 2020. Similarly, inflation has been running like a three-day-old calf with scours, continuing to push the price of all goods higher. Fewer animals will eventually mean much less beef, even though that has not been the storyline up to this point. It wouldn’t be surprising to see these prices soften moving into the fall months. Similar to beef, poultry and pork prices remain elevated. The retail price of pork for August was $4.899 per pound compared to its record high of $5.047 in October 2022. The retail broiler price for August was $1.988 compared to its record high price of $2.013 in May of this year. One positive for beef is that most competing meat prices are elevated.

OUTLOOK:   Based on weekly auction market averages, steer prices were unevenly steady compared to last week, while heifer prices were $1 to $5 lower. Slaughter cow prices were $4 to $8 lower compared to last week’s average, while bull prices were $8 to $9 lower. Was the break in prices this week the start of a softer fall price period, or was it just another short-term blip on the radar? It seems more substantial than a random fluctuation. There will likely be a softening of prices this fall. Much of this softness may be due to reduced demand for calves, resulting from reduced forage production. There's little reason to purchase calves if feed isn’t available. Alternatively, cattle buyers could purchase feed or take the risk that forage production will improve in the next couple of months. Either way, buyers must bid less on cattle to increase their margin. The market is also putting pressure on slaughter cow and bull prices. Typically, these prices begin to decline when producers heavily cull cow herds during weaning. However, with strong marketing of slaughter cows over the past 18 to 24 months, how many more cows can be culled?   We may never know the answers to many questions, as the market presents more uncertainties than certainties. For instance, why have feeder cattle futures prices increased by $16 per hundredweight (October) over the past three weeks? This has not been reflected in feeder cattle prices in the country. One thing seems certain: there is strong resistance at $250 for feeder cattle, but resistance is made to be broken.