KNOXVILLE, Tenn. – Feedlots have been increasing the number of cattle being marketed and are moving them as quickly as possible.

“Live cattle futures are going to have to chase down cash prices as they have accelerated the past couple of weeks, while the June live cattle contract is stagnant, comparatively speaking,” Andrew Griffith, University of Tennessee agricultural economist, said late last month.

Griffith said the June contract traded below $100 the week of May 17, while some cattle were traded as high as $120 on a live basis last month. He said it is understandable for there to be a gap in cash prices and the futures market since it wasn’t yet June at the time, “but the basis is just too large right now.”

Griffith said feedlots will continue to market as many cattle as possible.

“There are still a lot of skeptics that think finished cattle prices will continue to falter, but the market is demanding meat protein,” he said. “There is no way to guess what will happen to finished cattle prices, but feedlots will continue to market as many cattle as possible, with the strong basis and backed-up cattle.”

Although cattle slaughter numbers started out higher this year, he said they have rapidly declined. “The main story from a meat perspective is the daily and weekly slaughter levels,” he said. “Cattle slaughter the first quarter of the year exceeded 621,000 head every week except the first week of the year.

“There was even a week when cattle slaughter nearly reached 685,000 head just prior to April,” Griffith added. “Slaughter levels then declined rapidly as facilities closed or reduced harvest levels in the middle of April.”

Cattle slaughter levels on a weekly basis fell to about 425,000 head the last week of April and starting into May, he said. “The rapid decline in cattle slaughter is primarily due to reduced fed cattle slaughter, which is why finished cattle and feeder cattle prices plummeted. Alternatively, slaughter cow and bull prices have remained relatively strong in that the slaughter level of this class of animal has not declined to the same extent as finished cattle. The slow increase is a positive sign, but it means cattle continue to back up in the feedlot.”

As of June 1, he said fed cattle traded $1 to $2 lower, compared to last week on a live basis, with prices on a live basis ranging from $110-$120, while dressed prices ranged from $174- $190.  

He said the price of finished cattle slipped slightly the week of June 1, but most of the issues people will have will be more about “getting cattle moved off the yard as opposed to the price received. Cattle feeders know packers are still doing well from a margin standpoint which would make anyone want to hold out for higher prices. However, any backlog of cattle can put a strain on an operation and cost money. 

“Thus, many cattle feeders are glad to see more loads of cattle being shipped than the slow movement just a few weeks prior,” he added. “Packers and cattle feeders will not be able to work through all of the backed-up cattle overnight, but they will be able to work through a large portion of them this summer if they continue to run at a decent capacity.”He said the outlook in price trends compared to the previous week of June 1 could not be established due to limited cattle receipts.

“The limited marketing receipts stem from the observance of Memorial Day,” Griffith said. “However, a stronger undertone was evident in feeder and slaughter cow prices as the national economy works to fire up the steam engine. Speaking of the steam engine, this would be a good time to discuss what prices have done the first five months of 2020.”

Looking at 500 to 550 pound, medium and large frame, he said number one and two muscled steers are a good base for most producers in Tennessee and across the nation.

“Based on Tennessee prices, this class of steers averaged about $142 per hundredweight the first couple of weeks of 2020 before making a run to $152 per hundredweight by the end of February,” he said. “This price escalation is fairly typical and expected.”

However, what is not typical is what happened next, Griffith said.  

“The price for the same class of animals declined $21 per hundredweight in a three-week span. It has since rebounded and spent the last nine weeks (April and May) trading in a range between $138 and $145. This type of price action is fairly consistent across most classes of lightweight calves.

“Heavier feeder cattle have a similar price trend, but current prices have not rebounded as much as for lighter animals because the heavier animals will be headed to the feedlot, which will spend most of the summer working through the cattle that were backed up due to reduced slaughter levels in April and early May,” he added. “It sure seemed 500-pound steers were headed for $160 this spring in Tennessee, which means anyone marketing cattle in March, April and early May missed out on some dollars.”

Given that prices were depressed during their seasonal peak, Griffith said it’s logical that calf prices will not decline as much moving forward. “Thus, the market may be fairly stable the next several weeks until summer heat begins to take over.”