– Dr. Andrew Griffith, Assistant Professor, Department of Agricultural and Resource Economics, University of Tennessee
FED CATTLE: Fed cattle trade was steady compared to last week. Prices on a live basis were mainly $110 to $111 while dressed prices were mainly $177 to $178.
The 5-area weighted average prices thru Thursday were $109.82 live, down $2.70 from last week and $177.63 dressed, down $2.72 from a week ago. A year ago prices were $136.26 live and $215.14 dressed.
Cattle feeders are less than thrilled with packer bid prices on finished cattle which likely stems from the precipitous decline in prices. In three weeks, live cattle prices declined $14 to $15 per hundredweight which goes without mentioning that prices this week are $26 per hundredweight lower than the same week one year ago. Adding insult to injury, basis for fed cattle was near $20 per hundredweight and now sits near $5 with nearly all of the narrowing resulting from lower cash prices. The narrowing of the basis means that most hedging strategies did little to nothing to protect against the expected price decline. It may be several weeks before cattle feeders escape red closeouts.
BEEF CUTOUT: At midday Friday, the Choice cutout was $228.02 down $0.18 from Thursday and up $0.61 from last Fri-day. The Select cutout was $205.09 up $0.62 from Thursday and up $0.20 from last Friday. The Choice Select spread was $22.93 compared to $22.52 a week ago.
Now that Memorial weekend has passed, many retailers will focus on Father’s Day grilling items. Father’s Day continues to be a key holiday for middle meat movement which generally helps the loin and rib primal to maintain value. A good portion of the support leading up to Father’s Day is restocking the meat counter following Memorial weekend. Looking at individual wholesale cut prices, beef ribeye prices outperformed year ago prices every week through the middle of April. However, the last five weeks have seen year-over-year declines as this week’s price ($8-$9 per pound) is about $1.50 per pound lower than the same week one year ago. Such a price difference may catch some by surprise, but ribeye prices were extremely strong in May and June of 2017. Loin strip prices on a weekly basis have been in line with year ago prices while considerable support has been provided by the chuck roll. Also notable, fresh 90 percent lean beef has traded in a $10 range in 2018 compared to a $30 range the same weeks last year.
OUTLOOK: It was once said that a person cannot lose something they never had. This is a true statement, but a person can miss out on opportunities and sometimes this means missing out on dollars when marketing cattle. An example of missing out on dollars that will hit home with many producers is making a decision to market calves next week instead of this week and then the price declines several dollars per hundredweight. The alternative situation can be true where a person takes ad-vantage of an opportunity not knowing what the future holds and the decision results in the most positive outcome possible. Most producers would either claim their superior marketing savvy or chalk it up as good luck to be so fortunate. Regardless of which side of the coin one is on, perfectly deciphering the cattle market is difficult and some may say impossible. This is not to say that one cannot make a good living in the cattle business, because there have been many cattle producers who have developed systems that consistently result in positive return. However, producers who consistently generate positive returns still experience variability in their returns. A lot of variability can exist in week to week changes in cattle prices. Based on Tennessee weekly auction average prices, steers were steady to $3 higher compared to a week ago while heifer prices were $3 to $5 higher than last week. Similarly, slaughter cow prices were steady while slaughter bull prices were $2 to $5 higher. The higher cash prices at the local sale barn mimic the gains in feed-er cattle futures contracts. It is unlikely the summer and fall cattle markets will experience the extreme volatility that has been a mainstay the past few years. However, volatility is sure to exist as the market hears of trade wars and rumors of trade wars. The unsettled political climate will impact agricultural markets and the cattle and beef markets are not immune to the impacts as trade agreements are restructured.