Weekly Livestock Comments for December 8, 2023

Dr. Andrew Griffith, Assistant Professor, Department of Agricultural and Resource Economics, University of Tennessee

December 13, 2023

Dr. Andrew Griffith, Assistant Professor, Department of Agricultural and Resource Economics, University of Tennessee

FED CATTLE
Fed cattle traded $4 to $5 lower on a live basis compared to last week with live prices mainly between $169 and $171 while dressed prices were mainly $269 to $270.

The 5-area weighted average prices thru Thursday were $170.17 live, down $4.43 compared to last week and $269.65 dressed, down $5.09 from a week ago. A year ago, prices were $155.60 live and $246.85 dressed.

The red ink continues to bleed through the closeouts of cattle feeders as finished cattle prices have yet to show any signs of slowing their roll to lower levels. Prices appear to be gaining momentum to lower prices and growing in size just like a snowball rolling down a hill. That is a poor analogy, because such a price decline cannot sustain itself very long, because when the price reaches zero then how much lower can it go! I hope the humor does not hit any readers too hard, but a light moment is sometimes needed when losses continue to mount. The only plus side of this equation is feeder cattle are being purchased for lower prices and feed prices have shown a few signs of softening.

BEEF CUTOUT
At midday Friday, the Choice cutout was $288.30 down $1.54 from Thursday and down $9.72 from a week ago. The Select cutout was $258.91 up $0.08 from Thursday and down $7.00 from last week. The Choice Select spread was $29.39 compared to $32.11 a week ago.

There was an article earlier this week quoting one of my contemporaries at another university whom I have a lot of respect for. This person does a great job analyzing beef and cattle markets. However, the article quoted this person as saying the market has seen a very typical seasonal trend for certain primal cuts of the beef carcass. I am not going to disagree or agree with this statement, but I will say that the Choice cutout as a whole has underperformed leading up to the holiday season. Typically, there is some support for the Choice beef cutout that results in higher prices week-to-week before faltering when holiday purchases are complete.

One statement attributed to this analyst that is really important is how wide the Choice Select spread is. It is typical for the spread to be wide when higher quality beef is demanded, but such a wide spread in a declining market is rather amazing. One would think the Choice Select spread will begin to narrow as soon as holiday purchases are completed, but the consumer is shifting away from Select cuts to a large degree.

OUTLOOK
Based on weekly auction market averages, steer prices were $5 to $9 lower compared to last week while heifer prices were $3 to $7 lower compared the previous week. Slaughter cow prices were $3 to $6 lower than the weighted average price from a week ago while bull prices were steady to $1 higher compared to the previous week.

Concern and to some degree fear have begun to fall on local cattle producers as they have watched calf prices decline rapidly the past several weeks. The fear or concern is well founded considering the lofty expectations feeder cattle futures set through the summer and heading into 2024. But, every reader knew there was a “but” coming, producers should not allow fear or concern to overcome them, because the fundamentals of this market have not changed. Cow slaughter and heifer slaughter have continued at a rapid pace, which means the beef cow herd and heifers held for beef cow replacement are going to be extremely low to begin 2024 compared to 2023. Knowing there will be fewer cows and bred heifers means the 2024 calf crop is going to be an anemic number compared to 2023. Where production expectations stand at this point for beef cattle in 2024, it has set the cattle market up to support strong prices through the end of 2026. This may sound ludicrous given the soft market today, but the fundamentals continue to move in the direction of strong cattle prices.

Some people will talk about beef on dairy cattle becoming a larger player in the game. There is no doubt a beef on dairy steer is valued higher than a straight dairy steer, but the dairy herd is not growing in leaps and bounds, which means total beef production from this sector is not going to change beef supply much.

Given the struggles of the calf and feeder cattle market the past several weeks, it may be wise for some producers to hold calves until the first of the year. Doing this will allow the market to find its footing. It is uncertain if it can find its footing in four weeks, but it seems like a better option than selling into a declining market.

Southern Livestock

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