KNOXVILLE, Tenn. – The finished cattle market held steady the week of Jan. 4-8, which is a disappointment for most, but it could also be considered a win, given the live cattle futures movement earlier in the week, according to Andrew P. Griffith, University of Tennessee agricultural economist.

“The futures market started the week off on a rocky note, but it quickly corrected with the market, finishing where it started,” he said. “Current cash prices are trading $2 to $3 lower than the February contract. This negative basis can be a blessing and a curse, depending on what position a person holds.

“Given that prices held steady in the South and were $1 higher in the North compared to last week bodes well for an increasing market,” he added. “The key to a strengthening market is probably in beef consumers’ hands. Will consumers demand beef, or will they eat something else?”

At midday Friday, the Choice cutout was $206.55, up $0.74 from last Thursday, and down $2.70 from the week prior. The Select cutout was $196.92, up $0.33 from last Thursday, and up $0.05 from the previous week. The Choice Select spread was $9.63, compared to $12.38 a week ago.

Griffith said the Choice Select spread provides information on relative demand for Choice grade beef, compared to Select grade beef, given the quantity supplied. 

He said many consumers desire paying less for a Select grade roast than a Choice grade roast because they know the method of preparation will result in a quality eating experience. 

“Additionally, supply of each grade is important to note,” he said. “(Over) the past few years, more cattle have been grading Choice, which means more Choice beef on the market, and less Select beef. This dynamic narrows the spread during the winter months, and it may approach $1 at some point.”

He said fed cattle traded steady, compared to last week on a live basis. Prices on a live basis were primarily $111 to $112, while dressed prices were mainly $175 to $177.

In addition, the five-area weighted average prices through Jan. 7 were $111.48 live, down $0.01, compared to the previous week, and $176.02 dressed, up $0.47 from a week prior. A year ago, prices were $124.00 live, and $198.64 dressed.

Jan. 8’s futures market closing prices were as follows: Live/fed cattle – February $114.48 -0.50; April $119.30 -0.20; June $115.28 -0.10; feeder cattle – January $135.83 -0.88; March $136.83 -0.75; April $139.08 -0.60; May $140.63 -0.63; March corn closed at $4.96, up 2 cents from last Thursday.

He said trends could not be established last week due to the two-week layoff from the regular sales prior to Christmas. 

“However, marketings were a mixed bag, depending on the auction,” he said. “Some of the auctions had a large run of cattle (last) week, while other auctions had a lighter run than is typical for the respective market. 

“Regardless of the physical marketings, most years start with optimism, but that has not been reflected in the feeder cattle futures market the first week of the year,” he added. “In actuality, feeder cattle futures began to slip following the Christmas holiday, and that slide has continued into the first week of 2021.” 

He said January feeder cattle futures prices have declined about $5 per hundredweight since Christmas, with most of the other contract months following its lead. 

“This decline has definitely put a damper on local cattle prices (last) week,” he said. “Those that will be impacted the most are producers who wait until the New Year to market cattle. 

“The downward price action in the futures market the past two weeks undoubtedly resulted in negative price reaction for producers who marketed cattle (last) week,” he added. “Unfortunately, this situation will likely bleed over into next week, which means more producers negatively impacted by lower cattle prices.” 

Despite corn prices moving higher and live cattle prices stagnating, Griffith said there is still optimism in the calf and feeder cattle market. 

“Thus, any producer who is bullish about the cattle market may view buying calves or feeder cattle today as a prime opportunity,” he said. “There is no one who can perfectly predict the market all of the time, so today’s purchase of cattle should be based on what the market is offering today, and not the possibility that it will improve. 

“As of right now, there appears to be more pressure on the cattle market than information to support higher prices,” he added, “but odder things have happened. Prices in 2021 are expected to exceed prices in 2020 for most classes of cattle.”