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Beef Cattle Markets: Year In Review
DR. ANDREW P. GRIFFITH
KNOXVILLE, TENN.
Most companies compile annual reports for their business, and they then provide that information to investors and decision makers in the company. Essentially, the annual report provides the company a method of benchmarking successes and failures for their fiscal year. Cattle producers should be doing the same thing as it relates to production data and financial health of the operation.
As for the year 2020, most companies, farmers, and government agencies could title their annual report “The Year of Coronavirus,” because much of the revenues and expenses will have been impacted by the COVID-19 pandemic. Despite this fact, it is still useful to take a few minutes to review the 2020 cattle market. The purpose of reviewing the cattle market for a cattle producer is to quickly analyze the successes and failures of the year with the hope of trying to improve next year’s decision making and marketing plan.
Probably the best place to start from a cattle producer standpoint is the finished cattle market and then work back to the calf market since prices feed backwards through the supply chain. The finished cattle market has been everything but seasonal in 2020. The highest prices for finished cattle during a year tend to occur during the spring months when grilling season is beginning and when finished cattle weights are near their annual lows. However, the peak price for 2020 through the first ten months of the year occurred during January when the 5-area weekly weighted average price traded between $124 and $125 per hundredweight the entire month. Prices then declined into the middle of March and were below $109 before bouncing back to $119 and then quickly collapsing under $97. This seesaw pattern has persisted through October.
The feeder cattle market (700 pounds and heavier) has been equally tough to predict. Tennessee weekly auction average prices had 700 to 800-pound steers trading over $130 in January, but prices dipped below $110 per hundredweight during the onset of the pandemic. The price of 700 to 800-pound steers in Tennessee has slowly crept back near the $130 mark. The calf market has not been as sporadic, but it has definitely been a disappointment in 2020. Calf prices (500 to 600- pound steers) started the year with a $10 per hundredweight increase from January to late February as grass cattle buying started, but they peaked at $150 per hundredweight, which was $10 lower than expectations at the beginning of the year. The market then dropped below $130 in just a few weeks before recovering and trading on either side of $140 per hundredweight for most of the spring, summer, and early fall.
The one other market that was important for most cattle producers in Tennessee and across cow-calf country was the slaughter cow market. The slaughter cow market, similar to the other markets discussed, has not been a seasonal market either. However, it has actually been strong compared to the other markets. Slaughter cow prices in Tennessee have been above 2019 prices every week of the year. The market has offered producers several weeks of trade over $60 per hundredweight. It is tough to beat selling a 1,200-pound slaughter cow for more than $700 per head. She was probably worth more than her weanling heifer this year.
What is there to learn from this other than COVID-19 threw a monkey wrench into the best laid plans. There are likely several lessons. One lesson is that flexibility is a must in the cattle business. Having the flexibility to move cattle early or hold them longer can benefit a producer. A second key lesson is that price risk management can be a useful tool to cattle producers. Even if futures and options are not the tool of choice, there have been several changes to Livestock Risk Protection insurance that could be useful. A third lesson to learn is that sometimes one part of the market is better than another which was the case for slaughter cows. One has to pay attention to all of the markets they are participants in, because it should influence decision making. For instance, it may have been wise to cull more cows and retain heifers this year. ∆
DR. ANDREW P. GRIFFITH: Assistant Professor, Department of Agricultural and Resource Economics, University of Tennessee
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