FED CATTLE: Fed cattle traded $2 higher compared to last week on a live basis. Live prices were mainly $100 to $102 while dressed prices were mainly $160 to $165.
The 5-area weighted average prices thru Thursday were $101.28 live, up $1.79 from last week and $162.47 dressed, up $3.97 from a week ago. A year ago prices were $110.65 live and $174.81 dressed.
Any sign of hope is a welcome sign to cattle feeders. This has been a tough year for many cattle feeders especially if they were unhedged on cattle sales. It has been even worse the past six weeks with the bottom falling out of finished cattle prices. Many cattle feeders took advantage of favorable hedging opportunities which most likely helped them achieve a positive margin. However, those same cattle feeders would like to see cattle prices heading north into the fourth quarter of 2019. The December live cattle contract does not hold much promise and even the February and April contracts leave a lot to be desired. This is definitely one of the valleys in cattle feeding. There is always hope to find a peak.
BEEF CUTOUT: At midday Friday, the Choice cutout was $217.27 down $0.90 from Thursday and down $3.87 from last Friday. The Select cutout was $192.69 up $0.53 from Thursday and down $7.24 from last Friday. The Choice Select spread was $24.58 compared to $21.21 a week ago.
The August 9th fire at a beef cattle slaughter facility in Kansas remains the story line which factors in to boxed beef prices. During the two weeks following the fire, Choice boxed beef prices increased 11 percent which was nearly a $16 per hundredweight price increase from pre-fire prices. In the four weeks since that price increase, Choice boxed beef prices have declined about 9 percent which has erased about $14 of the gain. When all is said and done, the slaughter facility fire has done very little to negatively influence beef production. The only thing that can be said is that beef buyers were panicked by the news which resulted in a firestorm of beef buying to meet immediate needs and potentially future needs. Boxed beef prices should continue to be tempered through October before any beef buyers begin to aggressively purchase for holiday needs. The Choice Select spread should narrow over the next several weeks during seasonally soft beef demand, but no prediction or expectation is guaranteed as has been shown by this market.
OUTLOOK: Based on Tennessee weekly auction market averages, steer prices were unevenly steady compared to last week while heifer prices were mostly steady to $5 higher compared to a week ago. Slaughter cow prices were $1 to $3 lower while bull prices were steady to $2 lower compared to last week. The fall run of freshly weaned calves and slaughter cows is on top of the market. Spring born calves have begun making their way to town and the trend will continue for the next eight to ten weeks as producers find the time and appropriate conditions to get cattle out of the pasture. Tennessee producers may move cattle earlier than normal given the extremely dry weather that has encapsulated the state the past couple of months. The dry conditions has led to producers starting to feed hay when they are typically grazing the last of the summer forage and attempting to stockpile cool-season perennials for late fall and early winter grazing. When it becomes necessary to feed hay early, it generally results in marketing cattle earlier than is planned due to the fear that hay availability will diminish. With that said, the expectation is for strong runs of freshly weaned calves the next several weeks. This will pressure prices to some extent, but it does provide opportunities on the purchasing side of the equation. Producers who can hold on to calves through the fall run may do well to add weight and market calves in December or January. The same producers marketing calves in the fall will likely be looking to market a few cows that have reached the end of their useful life in the breeding herd. Slaughter cow prices have maintained strength much later into the year than is typical, but they will begin their seasonal decline. Marketing slaughter cows now may be the best advice when comparing it to a potential $10 to $15 per hundredweight price decline that is expected over the next couple of months.
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, 2019 totaled 10.98 million head, down 1.3% compared to a year ago, with the pre-report estimate average expecting a decrease of 0.6%. August placements in feedlots totaled 1.88 million head, down 9.0% from a year ago with the pre-report estimate average expecting placements down 5.7%. August marketing’s totaled 1.95 million head down 1.5% from 2018 with pre-report estimates expecting a 1.7% decrease in marketings. Placements on feed by weight: under 800 pounds down 9.5%, 800 pounds and over down 8.3%.
ASK ANDREW, TN THINK TANK: A question was asked this week if I knew of any cow-calf producers who were making money in the cow-calf business. Answering that question is impossible without looking at the financial situation of individual producers, but one can make an assertion that a lot of people are losing money in the cow-calf business in today’s environment. Low cattle prices would be the primary evidence that many producers are losing money, but there are many factors that influence profitability. The only producers likely to be making money are extremely low cost producers. Higher cost producers may be making some money, but it is likely they are making money in the backgrounding phase, finishing phase, or is some type of value added market. The current environment is a tough one for many cattle producers. Unfortunately, it does not look like it is going to improve very soon.
FRIDAY’S FUTURES MARKET CLOSING PRICES: Friday’s closing prices were as follows: Live/fed cattle – October $99.35 -0.45; December $105.15 -0.68; February $112.08 -0.45; Feeder cattle – September $140.33 +0.38; October $139.20 +0.28; November $137.03 -0.23; January $133.85 -0.45; September corn closed at $3.71 down $0.02 from Thursday.