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Weekly Livestock Comments for September 21, 2018

By Dr. Andrew Griffith

FED CATTLE: Fed cattle traded steady com-pared to last week. Prices on a live basis were mainly $110 to $111 while prices on a dressed basis were mainly $174 to $175.

The 5-area weighted average prices thru Thursday were $110.65 live, up $2.86 from last week and $174.81 dressed, up $3.29 from a week ago. A year ago prices were $106.75 live and $166.00 dressed.

Despite more cattle on feed, the market price of finished cattle remains strong and continues to outperform year ago prices. Cattle feeders continue to fill pens and the strong feeder cattle prices demonstrates how much cattle feeders want to purchase cattle. It would appear cattle feeders are expecting finished cattle prices to remain strong in the near term and escalate moving into 2019. This thought process may not be as wild as many think it is as beef demand remains strong which supports prices. Does this mean finished cattle prices will only escalate through the end of the year? One should probably not be so bold at this juncture, but the market does appear to be holding its own plus some at this time.

BEEF CUTOUT: At midday Friday, the Choice cutout was $204.98 up $0.46 from Thursday and up $1.10 from last Friday. The Select cutout was $194.71 down $0.20 from Thursday and down $3.15 from last Friday. The Choice Select spread was $10.27 compared to $6.61 a week ago.

The retail value for Choice beef in August was 608.2 cents per pound. The August price was 6.2 cents per pound higher than the previous month and at its highest level since July 2017. The all fresh beef retail value in August was 576.4 cents per pound which is 2.4 cents per pound lower than the previous month. The retail value of pork for August was 381.7 cents per pound which is 8.6 cents per pound higher than the previous month and the highest retail value for pork since October of 2017 when the value
was greater than 390 cents per pound. Many livestock producers attempt to com-pare the direction of live animal prices with the direction of retail meat prices. However, live animal prices and retail meat prices are not perfectly correlated. In the general sense, if animal prices are trending in a direction then meat prices will trend in that direction but generally they are lagged. Additionally, there are times when retailers run specials on meat items and treat them as a loss leader in order to bring customers in the doors to purchase higher margin items.

OUTLOOK: Based on Tennessee weekly auction averages, steer and heifer prices were unevenly steady compared to last week. Unevenly steady in this case simply means some weight classes were steady to $1 higher and some weight classes were steady to $1 lower. The higher and lower prices had nothing to do with lighter or heavier cattle as some heavy and some lighter cattle increased in price while some heavy cattle and some lighter cattle decreased in price. The lack of consistency in the market is likely due to the start of the fall marketing run and a few buyers starting in on fall stocker purchases. As soon as more animals begin to flow into markets in October and as purchase orders begin to flow in more readily, the market will find its price range and then trend in the direction in which supply and demand push it. There are a few factors that will benefit fall market prices. The first is the strength in the futures market. The fall feeder cattle futures contract prices have increased about $9 per hundredweight since the end of Au-gust. The positive price movement in futures has resulted in a $1 per hundred-weight increase in 525 pounds steers in Tennessee and about a $4 increase in 800 pound steers. Some may be asking why cash prices have not moved as much as futures. The increase in futures has kept lightweight cattle from seasonally declining while the heavier cattle are seeing a wider basis. The second factor that looks to benefit calf prices is good moisture conditions in the Southern Plains. Grazing winter wheat is a mainstay in much of the Southern Plains, and producers in that area are seeing some of the best conditions for winter wheat planting that they have seen in several years. If rainfalls continue to hit the area after planting then stocker producers in that area will be on the hunt for stocker cattle. The cow-calf producer looking to market cattle in the next few weeks has benefited from the strength in the market while stocker producers are facing strong purchase prices this fall.

The September cattle on feed report for feedlots with a 1000 head or more capacity indicated cattle and calves on feed as of September 1, 2018 totaled 11.13 million head, up 5.9% com-pared to a year ago, with the pre-report estimate average expecting an increase of 5.5%. August placements in feedlots to-taled 2.07 million head, up 7.3% from a year ago with the pre-report estimate average expecting placements up 4.8%. August marketing’s totaled 1.98 million head up 0.2% from 2017 with pre-report estimates expecting no change in marketings. Placements on feed by weight: under 800 pounds up 15.2%, 800 to 999 pounds down 5.3%, and 1000 pounds and over up 18.2%.
 

Source: osu.edu


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