By Dr. Andrew P. Griffith
FED CATTLE: Fed cattle trade was not well established at press. Asking prices on a live basis were mainly $115 to $117 while bid prices were mainly $110.
The 5-area weighted average prices thru Thursday were $110.81 live, down $3.44 from last week and $177.94 dressed, down $2.96 from a week ago. A year ago prices were $130.23 live and $210.12 dressed.
Cattle feeders and packers continue to delay finished cattle trade until the end of the week. Packers, who would seem to hold leverage over cattle feeders due to the large number of market ready cattle, have consistently bid $5 to $8 lower than cattle feeder ask prices. However, cattle feeders have consistently refused lower bids with hopes of higher prices. Some packers may not have as much urgency to purchase cattle for next week because they had contracted several cattle for delayed delivery and those cattle will be rolling in this week. Cattle feeders have been successful in supporting the market, but there remains potential for the live cattle market to move to the $103 to $105 area depending on demand and trade issues.
BEEF CUTOUT: At midday Friday, the Choice cutout was $222.06 down $0.02 from Thursday and down $4.53 from last Friday. The Select cutout was $202.68 up $0.71 from Thursday and down $1.93 from last Friday. The Choice Select spread was $19.38 compared to $21.98 a week ago.
The all fresh beef retail price for May was $5.68 per pound which is 7 cents lower than April and 5 cents higher than May one year ago. In the past 24 months, the all fresh beef retail price has averaged $5.66 per pound with a low of $5.49 per pound in January 2017 and a high of $5.85 in June 2016. Retail beef prices are much slower to respond to supply and demand issues in the beef market than are cattle prices. However, beef supply and demand may result in the retail price staying fairly steady. Beef production year to date is 3.7 percent higher than the same time period in 2017 and 8.3 percent greater than the same 23 week period in 2016. Total beef supply includes domestic production plus beef imports minus exports. While domestic production has increased, beef imports in 2018 have declined compared to 2017 while exports have increased. On the demand side, beef demand the first quarter of 2018 is 3.2 percent greater than the first quarter of 2017 and marginally higher than the same quarter in 2016.
OUTLOOK: Based on Tennessee weekly auction market price averages, steer prices were steady to $3 lower compared to last week while heifer prices were $1 to $5 lower compared to a week ago. This price decline is very much in line with the August feeder cattle contract that declined $3.60 from last Friday’s close to Thursday’s close, but the decline was short lived with an increase of $4.30 to close the week. As the market moves through the summer, the seasonal trend is for calf prices to soften while heavier feeder cattle prices strengthen. Not only are calf prices expected to soften thru the summer, but prices will be pressured more moving into the fall marketing time period. Given the expectation that calf prices are going to continue to decline through the fall, what can producers do to improve revenue? Extension specialists at the University of Tennessee and across this nation have been trying to teach producers the value of castration for decades. There have been many producers who have benefited from this management practice. Based on Tennessee market reports from Market News in 2017, there were 11,179 steers weighing 500 to 600 pounds marketed through USDA reported Tennessee auction markets while there were 12,351 bulls of the same weight. The annual average price discount for 500 to 600 pound bulls compared to same weight steers was $10.35 per hundredweight which is $57 per head for a 550 pound animal. There are several reasons producers provide for not castrating such as “bull calves grow better,” “can’t tell a difference in the price,” “3 calves died last year,” “don’t have a way to restrain them,” and the list goes on. Research, price data, and simple accounting debunk every excuse that has ever been shared. The only two acceptable answers to not castrating bull calves are “will start castrating now” and “providing charity to the humble stocker producer.” There are several high quality bull calves purchased by stocker producers in Tennessee who castrate the calf and turn the calf into a profitable calf. However, cow-calf producers need to realize the lost value of selling bull calves.
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