Quality differences can take a toll on summer feeder cattle prices.
Andrew Griffith, Extension ag economist with the University of Tennessee, says with the August contract as the barometer for sales, a deeper look inside price trends may be necessary.
“Prices at local auction markets last week were unevenly steady compared to a week ago for steers and heifers,” he writes in his weekly market outlook. Using the weekly weighted average prices for Tennessee, some weight classes witnessed higher prices while the weight classes on either side of them may have resulted in lower prices or steady prices compared to the previous week’s weighted average price.
Griffith says while there is information regarding cattle value, sorting criteria could be misleading.
“Simply sorting cattle into weight classes by frame and muscling do not always tell the full story,” he says. “Similarly, the reports provide a method of comment such as thin, fleshy, full, value added, etc. which improves the value of the information.
“However, nearly every spectrum that is used to describe cattle is continuous and not discrete. Thus, a group of hardened calves that need a few groceries but that would not qualify as thin will generally bring a higher price than the same weight calves that just came off the cow and are carrying good flesh, yet they both may fit in the same description on a report.”
The weekly fluctuation in quality, Griffith says, has a big impact on prices.
“This means quality differences from one week to the next can greatly influence the price and that comparing the same weight class from one week to the next is not always as straightforward as it seems,” he says. “Futures contracts, on the other hand, have a consistent description and thus represent the same type and quality of cattle at all times.”
Griffith adds that although the August contract is gaining value, it remains about $12 lower than the contract high set in November.
The five-area weighted average prices through June 7 were $114.25 live, up $4.43 from last week.