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Weekly Livestock Comments for August 21, 2020

By Andrew Griffith
Fed cattle traded $2 higher compared to last week on a live basis. Pric-es on a live basis were primarily $106 to $108 while dressed prices were mainly $168 to $170.
The 5-area weighted average prices thru Thursday were $106.62 live, up $2.13 com-pared to last week and $169.11 dressed, up $1.05 from a week ago. A year ago, prices were $108.81 live and $175.02 dressed.
Fed cattle prices garnered a couple more dollars this week which should put some cattle feeders back into black ink. Positive returns are welcome, but suffering through the long period of depressed prices with a lot of red ink to show for it means cattle feeders have a hole to fill in over the next several months. They should be able to recoup some of those losses now that fin-ished cattle prices have rebounded a little and many of the cattle coming off feed the next couple of months will have been purchased at much lower prices. A $20 to $30 per head profit will not do much to fill in the hole left the past several months, but it sure beats losing on every animal and watching the equity line shrink.
BEEF CUTOUT: At midday Friday, the Choice cutout was $225.99 up $0.61 from Thursday and up $11.95 from last week. The Select cutout was $209.23 up $2.92 from Thursday and up $9.99 from a week ago. The Choice Select spread was $16.76 compared to $14.80 a week ago.
From January through the first week of April (14 weeks), federally inspected beef production was 6.6 percent higher than the same time period in 2019. The next nine weeks had year over year declines in beef production to the tune of 17.9 percent. Each of the past ten weeks has had year over year increases in beef production with a total increase of 1.8 percent over that time period. This has resulted in 2020 beef production being down 1.7 percent year to date. These supply dynamics have led to the unprecedented swings in the boxed beef cutout value, which has once again swung to the high side. Much of this week’s higher price is coming from late purchases for the last summer holiday. It seems rather late to continue making Labor Day beef purchases, but Labor Day is as late as it can be with two full weeks before the holiday weekend starts. There is a high probability that boxed beef prices will soften moving through late summer and the early fall months, but there is no sign of a collapse in prices as consumers continue to purchase beef products.
OUTLOOK: Based on Tennessee weekly auction market price averages, steer prices were $2 to $5 higher compared to a week ago while heifer prices were steady to $4 higher compared to last week. Slaughter cow prices were $2 to $4 lower while slaughter bull prices were mostly steady compared to week ago prices. The calf and feeder cattle market enjoyed another week of strong prices at local auctions. The strong local cash prices are simply following the lead of feeder cattle futures. The summer and fall feeder cattle futures contracts have been trading above the $140 per hundredweight mark since the middle of July with only a few instances of prices being below that level. This price level has provided some stability to the market and has provided cattle producers an opportunity to either market cattle at favorable prices or use a price risk management strategy to hedge a strong price for a future sell. The stronger feeder cattle prices have helped support the calf market as well. Based on Tennessee weekly auction prices, a freshly weaned steer weighing 525 pounds was valued at $750 while the same weight heifer was valued at $675 per head this week. These prices will be profitable for some producers and not profitable for others. However, stocker producers could lock in a value of gain on the purchase of 525 pound steers today of $1.31 per pound with an expected sell of an 800 pound steer in January assuming a sell price of $6 per hundredweight under the feeder cattle futures price. The cattle market is definitely offering cattle producers an opportunity that would have seemed more like a dream two months ago, but it has turned into a reality that should be taken advantage of. The slaughter cow market has also been a dream as prices for these animals have remained elevated relative to the time of year. Prices will soften on these animals but strong lean beef demand will help support prices.
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