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Weekly Livestock Comments by Dr. Andrew P. Griffith

FED CATTLE: Fed cattle traded $5 higher compared to last week. Prices on a live basis were mainly $114 to $115 while dressed prices were mostly $185 to $186.
The 5-area weighted average prices thru Thursday were $115.07 live, down $4.70 compared to last week and $185.45 dressed, down $4.65 from a week ago. A year ago, prices were $128.00 live and $202.51 dressed.
The April live cattle contract is trading at a $6.50 discount compared to this week’s cash price which is contrary to seasonal trends for finished cattle. That same April contract which traded over $124 from the beginning of November until the third week of January and actually exceeded $128 a few times is now trading near $109 per hundredweight. Single handedly, media coverage of coronavirus has resulted in commodity markets sinking to the ocean floor faster than the Titanic while cattle feeders have been left stranded in the middle of the ocean, and the only thing they have to stand on is a piece of loaf bread that someone tossed to the seagulls. This is just another week characterized by panic and a sad country song.
BEEF CUTOUT: At midday Friday, the Choice cutout was $205.30 down $0.24 from Thursday and up $0.55 from last week. The Select cutout was $200.55 up $0.86 from Thursday and down $1.05 from a week ago. The Choice Select spread was $4.75 compared to $3.15 a week ago.
The monthly cold storage report was released this week with little surprise from the meat counter. Beef in cold storage at the end of January totaled 489 million pounds which is an increase of 9 million pounds from December but 21 million pounds less than January 2019. Beef cold storage stocks are of little concern at this time as beef continues to move through the channels efficiently and at strong prices. Pork in cold storage at the end of January totaled 625 million pounds which is an increase of 45 million pounds compared to the previous month and 63 million pounds more than the same month one year ago. Poultry in cold storage totaled 1.26 billion pounds at the end of January which is on par with the elevated levels seen one year ago. The current cold storage stocks are not yet an issue, but if pork and poultry continue to back up due to health issues in China then this could mean a lot of meat on the domestic market and selling meat to other countries at lower prices. The meat has to go somewhere and lower prices could be the method to moving it.
OUTLOOK: Based on Tennessee weekly auction market price averages, steer and heifer prices were unevenly steady compared to last week but lightweight grass cattle continue to garner considerable interest. Slaughter cow and bull prices were steady to $3 higher than last week. Commodity market and equity fund values have essentially been falling through glass ceilings every day this week. About the time one might think the negative information from coronavirus may have made its way through the marketplace and found a floor, the market breaks through another glass ceiling. In the short term, the predictability of the market given today’s environment is essentially null and void. However, longer term predictability of market direction just became easier. With a total collapse in the market, the only direction the market can move with a longer term outlook is in a positive direction. Now may be a good time for producers to use some hedging strategies related to purchasing cattle in the summer and fall months, but it is not the time to be hedging the sale of cattle in the summer and fall. There is a lot of time between March and August for this market to overcome the news of the coronavirus and bounce back to a favorable market price when discussing feeder cattle. The one market that has not been as severely influenced is the slaughter cow and bull market. The market needs lean grinding beef and this need has resulted in strong slaughter cow and bull prices. Prices are expected to continue to increase the next few months, but some producers may find it advantageous to go ahead and move some of these cows who are consuming valuable hay and forage resources. Cattle producers should stay tuned to this market as world happenings continue to shake up the dynamics. Producers must take advantage of the opportunities being offered by the market and buying is the opportunity being offered right now.
ASK ANDREW, TN THINK TANK: Questions abound on when to market calves in this media frenzied driven market. There is no blanket answer with which to answer this question for every producer, but here are the general thoughts. Grass cattle prices continue to hold up well even though they likely should be higher. If a producer was planning on marketing lighter weight calves then now is likely as good of a time as any. For producers who have cattle that are on the line between being grass cattle and needing to go to the feedlot then the general response is to hold onto those animals a little longer and see if the market will rebound in the next four to six weeks. For producers who have heavy yearling cattle, the market has already provided several gut punches and a slap to the face. In the near term, it may be hard to find any advantage to holding on to those animals. There is very little positive information in this analysis and recommendation, but it is as good as it comes from a short planning horizon aspect.
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