Farmers Report
FED CATTLE
Fed cattle traded $2 higher on a live basis compared to last week with live prices mainly between $185 and $187 while dressed prices were mainly $293 to $294. The 5-area weighted average prices thru Thursday were $186.11 live, up $1.97 compared to last week and $293.79 dressed, up $2.12 from a week ago. A year ago, prices were $150.06 live and $235.26 dressed. The past two weeks may be the start of the jump that is typical of the fall fi nished cattle market. The question is how much of a jump can the market make and how long can it be sustained? Nothing would be all that surprising at this point, but infi nitely higher prices will not be the fi nal answer. From the market standpoint, it will probably be easier to sustain prices at these levels for a longer period than to see prices continue increasing. However, market participants have historically run prices to extremes just to result in the market moving to extremes in the oppo-site direction. A sustained strong price would be far better than new record prices for a short period. Human psychology will dominate decision making.
BEEF CUTOUT
At midday Friday, the Choice cutout was $305.14 up $1.02 from Thursday and up 3.93$ from a week ago. The Select cutout was $275.45 up $0.76 from Thursday and up $2.79 from last week. The Choice Select spread was $26.90 com-pared to $25.76 a week ago. Where does the consumer go from here? As the calendar moves towards end of the year holidays, retailers and food service entities will be purchasing beef along with other meat protein. They will not ignore beef due to the price relationship it has with pork and poultry, which was discussed one week ago. Beef remains competitively priced compared to both pork and poultry so retailers and food service will be sure to have it available. It is well established at this point that many consumers are willing to pay for beef, because it is the preferred meat protein by the majority of meat consumers. There is no doubt consumers will pay the one time price for the holiday season, because it is a purchase that happens once per year. What is less certain is how consumers change consumption pat-terns following the holiday festivities. There will contin-ue to be more trading down from higher valued beef to lower valued beef if prices remain elevated. The real test will be if beef continues to capture a similar percent-age of consumer disposable income.
OUTLOOK:
Based on Tennessee weekly auction price averages, steers prices were un-evenly steady compared to last week while heifer prices were mostly steady compared to a week ago. Slaughter cow prices were $1 to $3 lower than last week’s weighted average price while bull prices were steady compared to the previous week. Since the middle of September, the October feeder cattle futures contract price has declined more than $21 per hundred-weight. Similarly, the March feeder cattle futures contract price has declined about $23 per hundredweight over that same time period while the August contract has only declined about $18. During this entire decline on the futures market, the CME feeder cattle index price has declined a little over $9 per hundredweight. In this particular case, October feeder cattle futures chased the feeder cattle index lower and fi nally caught it. With both the cash market and the futures market showing signs of struggles, there may be support for lower cattle prices in a hurry. This is not meant to say the bottom will fall out of the market and return to year ago prices, but it has been mentioned mul-tiple times in this column that cattle were over-valued given the current economic environment and all the government is trying to do to slow the economy. A discussion could easily go in wrong direction based on that statement. Thus, it is best to keep a focus on the cattle markets. Calf prices at local auctions have not appeared to slip like feeder cattle prices, but this would not be unheard of when margins are squeezed. The issue for many local calf buyers right now is the lack of moisture and fall forage production. The need to purchase feedstuffs because of drought could weigh on the market in coming weeks. In a simple statement, every-thing said here brings more questions than answers, but that seems to be par for the course.The October cattle on feed report for feedlots with a 1000 head or more capacity indicated cattle and calves on feed as of October 1, 2023 totaled 11.58 million head, up 0.6% compared to a year ago, with the pre-report estimate average expecting a 0.2% decline. September placements in feedlots totaled 2.21 million head, up 6.1% from a year ago with the pre-report estimate average expecting placements down 1.6%. September marketing’s totaled 1.66 million head down 10.6% from 2022 with pre-report estimates expecting a 9.8% decrease in marketings. Placements on feed by weight: under 700 pounds up 5.2%, 700 to 899 pounds up 9.3%, 900 pounds and over no change.
