University of Tennessee ag economist Andrew Griffith says cattle markets continue to work through a large supply of heavier cattle.
“The price range remains extremely wide this week as the market continues to move through heavy cattle,” he says. “The available supply of market ready cattle is high and the demand for cattle cannot physically exceed slaughter capacity.
“Thus, prices for finished cattle are softening and will remain soft until packers can work through the glut of market ready cattle.”
Griffith says it is still unknown how long it will take to work through the backlog of supply.
“This comes at a time when finished cattle prices are seasonally softening as the market moves toward the dog days of summer,” he says. “How long the backup of cattle can hang over the market is not exactly known. It will depend on how well beef prices are doing and how many Saturdays are utilized. It may take until the fourth quarter of the year before cattle marketings are current.”
Consumers are still dealing with higher beef prices.
“There have been many conversations focused on wholesale beef prices since the beginning of the coronavirus situation,” Griffith says. “Those high wholesale prices have led to major changes in retail prices.”
Wholesale beef prices have been coming back down, but Griffith says it will take time, and their are other factors that could effect demand as the prices gradually moderate.
“There is no doubt wholesale beef prices have moderated the past several weeks and will continue to do so,” he says. “However, this does not mean retail prices will decline quickly. Retailers will be looking to recapture some of their losses from April and May which means retail beef prices will remain elevated.”
Feedlots also have more demand for somewhat smaller cattle they can keep on feed while working through the rest of their supply, Griffith says.
“The market dynamics have feedlots needing cattle that can spend a significant amount of time on feed in order to allow the feedlot to work through the backlog of cattle currently on hand,” he says.
“Thus, heavy cattle are not seeing the same demand as those 100 to 200 pounds lighter because heavier cattle will come off feed earlier and contribute to the glut of cattle being worked through.”