SPRING HILL, Tenn. – According to a University of Tennessee agricultural economist, the big story for the second full week of June is the softening of cattle futures, resulting in lower prices.

Andrew P. Griffith, UT associate professor of agricultural and resource economics, said, based on Tennessee weekly auction price averages, steer prices were steady to $2 lower the previous week, compared to last week, while heifer prices were steady to $4 higher, compared to two weeks ago.

“Following five months of what has seemed like steadily higher futures prices, traders have slowed the push for higher prices, and have allowed prices to decline,” he said.

He said, however, the question among analysts is if this is simply a minor correction, or if the market is going to trade significantly lower in the coming weeks.

“From the fundamental perspective, cattle supply is unchanged from expectations, but drought concerns across the Plains and much of the Midwest is resulting in higher corn prices, which means a higher cost of gain in the feedlot,” he said.

“At the same time, there appears to be continued inflationary concern as consumers are still paying more at the grocery store,” he added. “Thus, there are some real concerns that could drive the cattle market lower than its current mark.”

He said, “The two main factors contributing to the softening of cattle futures are increasing corn prices, which is due to drought concerns in major corn-growing regions, and the general economic situation where inflation is still not under control, and interest rates are high. Increased cost of living eats away at disposable income, which means less to spend on high-priced beef.”

He said cattle prices received will still be strong if they decline on the futures market.

“The ability to sell an 800-pound steer for $200 per hundredweight, or better, is still a good price,” he said. “If the drought conditions persist in the Corn Belt and the Plains, then there may be much tougher decisions ahead than when to sell a group of calves.”

That’s why he said producers should maintain good culling practices in the cow herd.

“Just as calf prices are strong, so are slaughter cows,” he said. “Calf prices will never be high enough to retain a cow that should be culled, based on the typical culling criteria. The death of one cow when attempting to get one more calf can wipe out the profits of several calves.”

He said the primary reasons for culling cows is if they are “open, old, or ornery, with the fourth ‘o’ being other.”

“Open cows are sure losers, and wasting capital and forage resources on those animals have a negative return,” he said. “Old cows tend to begin having bad feet, udders, eyes, and thus, wean lighter calves, and again not an efficient use of resources.

“That does not mean other cattle do not have those same problems, but any animal that is not structurally sound is likely to be less efficient at converting input into output,” he added. “Ornery has to do with the mean and crazy ones, which again hurt efficiency, and could end up with a hurt person.”

He said, “Maintaining appropriate culling practices results in better decisions when forage resources are limited. Another benefit is simple pride. Every cattle producer wants to produce the best cattle. The average of most things are improved with proper and timely culling.”

Looking ahead for the next three to four weeks, he said the National Oceanic and Atmospheric Administration is expecting extended dryness for a while longer.

“The longer corn-producing regions go without moisture, the more it cuts into yield,” he said. “This will keep corn prices elevated, which should temper feeder cattle prices. I thought feeder cattle futures were overpriced to begin with. I expect the price of most classes of cattle to soften the next several weeks if status quo is maintained.

“Producers should be taking advantage of livestock risk protection, and futures and options as far as managing price risk,” he added. “From a production standpoint, they should stay on top of their forage and feed resources to determine what is feasible, but marketing is the bigger issue at this time.”

He said Tennessee, however, is in a good situation from a forage standpoint right now, relative to those in drought.

“From a cattle production standpoint, most of our producers have off-farm income, so their decisions are not always completely hinged on cattle prices and input prices.”