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Weekly Livestock Comments for August 30, 2019

By Andrew Griffith
 
FED CATTLE: Fed cattle traded $2 to $3 lower compared to last week on a live basis. Live prices were mainly $103 to $107 while dressed prices were mainly $170 to $172.
 
The 5-area weighted average prices thru Thursday were $106.62 live, down $2.19 from last week and $171.62 dressed, down $3.40 from a week ago. A year ago prices were $107.17 live and $169.31 dressed.
 
The headlines are: The market is down one large harvest facility. Cattle feeders cannot feed the same animal for infinity and beyond. Availability of feeder cattle will increase in the near term. All of this information results in packers continuing to put the squeeze on cattle feeders as they appear to be holding all of the leverage. It is difficult to identify any leverage point cattle feeders control in today’s market, but this situation will not last forever. Similar to leverage slipping into the abyss, live cattle basis may or may not be favorable to cattle feeders as regional differences are the story on this subject. The kindest way to summarize the cattle feeder’s situation is that better days have to be on the horizon, but it is difficult to tell how far off the horizon is.
 
BEEF CUTOUT: At midday Friday, the Choice cutout was $231.58 down $0.61 from Thursday and down $6.30 from last Friday. The Select cutout was $212.31 down $0.47 from Thursday and down $1.71 from last Friday. The Choice Select spread was $19.27 compared to $23.86 a week ago.
 
There have been three weeks of cattle slaughter since the Tyson fire was reported on August 9th which means there are two weeks of official slaughter data. Looking at the initial cattle numbers, it is difficult to pick up on the fact that a facility that has the capacity to harvest 30,000 animals a week is out of commission. Federally inspected slaughter the week following the fire was only 5,400 head fewer than the same week one year ago while the second week following the fire showed an 11,500 head increase com-pared to last year. Similarly, slaughter levels those two weeks do not appear to deviate from previous weeks. The picture gets a little fuzzy when looking at steer and heifer slaughter. There is only one week of official steer and heifer slaughter data to compare. That one week looks very similar to previous weeks, but steer slaughter was down 11,700 compared to the same week from a year ago while heifer slaughter increased 6,300 compared to a year ago. The picture will become clearer in a few more weeks, but the question already appears to be answered.
 
OUTLOOK: Based on Tennessee weekly auction market averages, steer prices were mostly steady to $5 higher compared to last week while heifer prices were unevenly steady compared to a week ago. Slaughter cow and bull prices were also unevenly steady compared to last week. The calf and feeder cattle markets have worked their way out of the funk that was the Tyson slaughter facility fire. There was likely some fear and doubt in cattle feeders minds related to where they were going to go with cattle the next few months that knocked the yearling cattle market on its rear end for a week or two. However, that fear appears to have subsided as cattle feeders continue to look for quality cattle. Given the lower placement numbers for July based on the August cattle on feed report, one could probably surmise that there are several feeder cattle that will be coming to market in September and October. If corn prices remain relatively low and beef demand remains steady then yearling type cattle prices should remain steady the next several weeks before succumbing to a downtrend. This postulation (no extra charge for the vocabulary word) stems from fundamentals in the market and the longer term perspective. However, fundamentals do not always control the market as has been evident the past several months. Any type of bad news or good news directed toward cattle and beef markets could send the market in either direction for a short time period. Understanding potential differences in the yearling cattle and calf market, the fall calf market may be one of lower prices and a struggle for the bank account. Based on Tennessee weekly auction averages, 525 pound steers brought $738 per head while their value added brothers averaged $64 more per head. If the calf crop really is as big as what the July cattle inventory report suggested then there could be a lot of soft bawling steer calves sold for less than $700 per head in Tennessee during October and November. Now is the time to start evaluating alternatives to add value to this class of cattle.