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Weekly Livestock Comments for September 4, 2020

By Andrew Griffith
FED CATTLE: Fed cattle traded $2 lower compared to last week on a live basis. Prices on a live basis were primarily $101 to $105 while dressed prices were mainly $162 to $164.
The 5-area weighted average prices thru Thursday were $103.18 live, down $1.94 compared to last week and $163.11 dressed, down $3.41 from a week ago. A year ago, prices were $102.31 live and $166.19 dressed.
Finished cattle prices once again declined compared to the previous week. Late summer and early fall are consistently a tough time period for cattle exiting the feedlot as beef demand softens and so does demand for finished cattle. This soft demand will persist for several weeks, but it is hard to imagine cattle prices retesting the lows they have already experienced earlier in the summer. The one thing that should support finished cattle prices is the hole that was created by reduced placements into feedlots during March and April. Many of the animals that would have been placed in March and April would be coming off feed now, but the delay in placing those cattle should result in fewer cattle being marketed the next several weeks.
BEEF CUTOUT: At midday Friday, the Choice cutout was $226.52 down $0.72 from Thursday and down $5.36 from last week. The Select cutout was $210.30 down $2.20 from Thursday and down $5.41 from a week ago. The Choice Select spread was $16.22 compared to $16.17 a week ago.
Given that Labor Day purchases are behind the market, wholesale beef prices are remaining fairly strong. The lower fed cattle prices and the strong boxed beef prices are continuing to offer strong margins for packers who still hold most of the leverage in the marketplace. The expectation is for beef prices to start softening as summer ends and fall begins, but that has not been the case thus far. Middle meats continue to perform well and are on par with year ago prices as it relates to the loin and rib. Similarly, end cuts are on par with year ago prices for the most part and are providing decent support to wholesale beef prices. The trim market is the market that is running into some weakness as 50 percent lean beef is down more than 50 percent com-pared to year ago prices. This is somewhat surprising given that the ground beef market has been on a tear through the pandemic and that 90 percent lean beef is at year ago price levels. The expectation is for beef to soften moving through September and October, but softening prices will not take all the profits out of the business.
OUTLOOK: Based on Tennessee weekly auction market price averages, steer and heifer prices were $2 to $4 lower compared to a week ago. Slaughter cow prices were mostly steady to $2 lower while slaughter bull prices were mostly steady compared to week ago prices. It is evident the calf and feeder cattle market has softened the past couple of weeks which seems rather early. The summer feeder cattle market generally holds strength into the middle of September while the calf market does not begin to come under severe pressure until October. However, factors beyond the control of cattle producers is what is putting pressure on the market. Over 85 percent of the Western United States is experiencing some form of drought with nearly 50 per-cent in severe drought or worse. The High Plains are in a similar situation with 77 per-cent of the region being in some form of drought and 31 percent in severe drought or worse. These same conditions reach down into Texas where things are dry as well. The dry conditions led to many producers marketing calves early this year whether that be from summer grazing pro-grams or having to wean calves early. The evidence of these animals moving early was seen in the August cattle on feed report where July placements were up 11 percent compared to last year with most of that increase coming from the lighter weight categories. Based on the August cattle on feed report, placements of cattle weighing less than 600 pounds was up 16.7 percent (60,000 head) com-pared to the previous year while 600-699 pound placements were up 21.1 percent (55,000 head) compared to last year. The one advantage Southeastern producers have is that moisture has been abundant and adequate forage is available. Thus, these producers do not have to market during this downturn. There is a good chance calf and feeder cattle demand will pick back up in the late fall or early winter which should support prices.
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