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Weekly Livestock Comments for June 26, 2020

By Andrew Griffith
 
FED CATTLE: Fed cattle traded $4 to $5 lower compared to last week on a live basis. Prices on a live basis primarily ranged from $93 to $97 while dressed prices ranged from $152 to $156.
 
The 5-area weighted average prices thru Thursday were $96.24 live, down $4.58 compared to last week and $154.78 dressed, down $5.96 from a week ago. A year ago, prices were $110.58 live and $179.36 dressed.
 
Finished cattle prices have converged to live cattle futures with the cash market making the long trek to meet the futures price. The failure of the futures market to bend in the slightest is not a good sign for summer cattle marketing. The June con-tract is rolling off which makes the August contract the next destination and it is trading ever so slightly higher than the June contract. The answer to this market turning around is most likely to show up in finished cattle weights. Once finished cattle weights begin to decline, the price for finished cattle will find support. The reason a decline in finished weight will be the turn-around will be because it will mark when we are finished working through the back-log of cattle.
 
BEEF CUTOUT: At midday Friday, the Choice cutout was $207.58 down $0.68 from Thursday and down $6.75 from last week. The Select cutout was $199.76 down $0.17 from Thursday and down $4.09 from a week ago. The Choice Select spread was $7.82 compared to $10.48 a week ago.
 
Federally inspected beef production is down 2.8 percent year-to-date. This decline in production is all due to coronavirus reducing slaughter rates during April and May. In the first quarter of the year, beef production was 6.9 percent higher than the first quarter of 2019. Then slaughter rates rapidly declined with slaughter facilities closing or reducing chain speed. However, beef production in June is above June 2019, but it will take the last week of data to know how much production increased. The expectation is that production in the third and fourth quarter of 2020 will far exceed beginning of the year projections. The January WASDE Report projected third and fourth quarter beef production to be 6.88 and 6.93 billion pounds respectively. The June report has projected third and fourth quarter beef production at 6.92 and 6.83 billion pounds respectively. Essentially, the WASDE report has little to no change in production over the next six months, but heavier carcasses and maintaining current slaughter rates should result in year-over-year increases in beef production.
 
OUTLOOK: Based on Tennessee weekly auction market price averages, steer prices were unevenly steady with instances of $4 lower to $4 higher compared to last week while heifer prices were $2 to $3 lower compared to a week ago. Slaughter cow prices were mostly steady and bull prices were steady to $2 lower compared to week ago prices. One might say confusion exists in the calf and feeder cattle market and that would probably be an accurate statement. At the same time, someone else may say there is less confusion in the cattle markets than there is in many other aspects of life as we know it right now which may also be an accurate statement. Regardless of one’s viewpoint, cattle producers are navigating rough water in the current environment and unsure if more storms are on the horizon. The one guaranteed aspect is it is the end of June and calf prices will be hard pressed to find support from now through November. At the same time, summer yearling cattle will be coming to market the next eight to ten weeks. Prices for these cattle are generally strong during the summer months which is largely due to cattle supply and when the cattle will be coming off feed, but it is also a factor of generally lower feed costs and good performance through summer and fall. The problem this year is that placements of many cattle were delayed the past several months which most likely means more animals to be placed in July, August, and September. This is further exacerbated by expectations of strong beef production moving through the third and fourth quarter of 2020 as well as the first quarter of 2021. The fundamentals of the feeder cattle market provide little support to expect prices to move much in either direction. The failure of prices to reach beginning of the year expectations will likely result in increased cow marketing and thus reduce the size of the breeding herd. This will result in positive price implications moving forward.
 
Source : osu.edu