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Spring optimism stymies cattle producers this summer

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Cattle producers have been struggling to find prices that work for them, says University of Tennessee Extension ag economist Andrew Griffith.

“Most cattle producers in the business of marketing cattle recently have not been satisfied with current price levels,” he says. “Many of them have found it difficult to make money at the cow-calf level as well as the stocker margins being extremely thin if not negative in many instances.”

The optimism this spring turned into a source of frustration as prices have declined.

“The angst on this matter stems from the summer feeder cattle futures market contracts trading as high as $160 in the March and April time period and now trading closer to $140,” Griffith says in his weekly market outlook. “Thus, there was significant optimism in the spring for the summer marketing time frame.”

Griffith says the thought process this spring on backgrounding cattle did not come to fruition.

“It appeared that producers with fall-calving cows would benefit from backgrounding cattle through the summer, which was the same thought process many of the stocker producers had when purchasing calves in the spring,” he says. “However, the market plummeted nearly $30 per hundredweight before recapturing $10.”

One upside to the recent developments has been fairly steady trade recently, which has provided some time to evaluate the situation.

“Maybe one bright side is that the summer feeder cattle contracts have been trading in a tight range for about a month, which has provided another opportunity to reevaluate marketing alternatives,” Griffith says.

Looking ahead, Griffith says he expects slaughter numbers to be above last year for the remainder of the year, although it is hard to say for certain.

“Federally inspected cattle slaughter in 2019 through the end of July is 1.7 percent higher than the same time period in 2018,” he says. “Much of that increase comes from heifer slaughter, which is 7.2 percent higher than year-ago levels, while steer slaughter actually mutes the slaughter increase with 1.5 percent fewer steers beings slaughtered the first seven months of the year.”

This article originally ran on agupdate.com.

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