KNOXVILLE, Tenn. — While beef prices declined in early summer, demand for feeder cattle is expected to increase by the end of this month, according to University of Tennessee agricultural economist Andrew Griffith.

“In a bit of a surprise, the fed cattle market found support as meatpackers were willing to pay a little more for fed cattle (the week of July 5),” he said, compared to the week earlier. “The expectation was for live cattle prices to be steady to slightly softer, compared to (the previous week), considering the market is heading into the largest supplies of fed cattle. “It is common for lightweight calves to lose ground during the summer months, as there are fewer willing buyers for high-risk cattle during periods that experience extreme temperatures and weather conditions.”

On the other hand, Griffith said supply of live cattle tends to peak in July, which depresses prices, resulting in the summer plunge. “The price (the week of July 5) is more than $6 per cwt. lower than the price the same week last year,” he said. “The fed cattle market will be tested the next several weeks as cattle continue to roll off feed, but it appears packers may be willing to pay fairly steady money.”

He said fed cattle traded $2-$3 higher on a live basis, compared to early July. Live prices were mainly $150-$152, while dressed trade was mainly $240.

The 5-area weighted average prices through July 1 were $151.28 live, up $2.60 from late May, he added, and $239.45 dressed, up $1.44 from the week of July 5. “A year ago, prices were $157.40 live and $249.45 dressed,” he said, adding the market would likely establish a fairly narrow trading range before any significant changes in market conditions, which would occur late summer and early fall.

According to Griffith, at midday (July 9), Choice cutout values were $254.53, down $2.02 from that Wednesday and down $4.26 per cwt. from the previous Friday. The Select cutout was $248.42, down 84 cents from that Wednesday and down $1.26 from (July 3). The Choice Select spread was $1.85, compared to $4.85 the previous week.

“Independence Day has passed and the beef market is heading into the dismal dog days of summer,” he said. “Packers did not experience the type of beef sales they were hoping for this summer holiday. Packers will not have any support from any grilling holidays for the next two months until Labor Day rolls around in early September.”

Griffith said “it appears many grocers, restaurants and foodservice providers are purchasing beef hand to mouth” out of expectation that beef prices would continue to decline for the next several weeks. “They appear to be keeping small quantities of beef in supply and willing buyers of poultry and pork products, which are readily available in large quantities.”

He said depressed beef cutout price is likely “as seasonally strong fed cattle supply kicks in and beef supply increases.”

“The price decline may not hurt packer margins too much if they can continue to secure cattle at relatively low prices as they have been able to do the past several weeks,” he said. “The outlook is for the beef cutout price to soften the next several weeks before finding support in late summer. “The summer feeder cattle market is still uncertain, but it is expected to maintain support and result in strong prices. If a producer is feeling uncomfortable about the volatility in the market, then it is advised that the producer participate in some sort of price risk management strategy.”

Griffith said, “If volatility is not a concern, then producers are advised to sit tight because prices are not expected to trend downward the next couple of months.”

On July 16, a Dow Jones report said U.S. cattle futures were narrowly lower, as traders continue to search for signs of demand for livestock and beef after a steep drop in prices: “Investors in the cattle market have scaled back bearish bets in the cattle market, after futures earlier (last) week slid to the lowest levels since last summer because of a recent rally in grain prices. Traders have wagered in recent weeks that higher feed costs would discourage producers from bidding up lightweight animals, a trend that reversed on (July 14) when corn futures prices turned lower. However, analysts said that some are wary of jumping back into the market ahead of clearer signals of demand for meat and cattle, leading futures to drift sideways or narrowly lower early Thursday.”

The CME Group said last week August live-cattle futures are expected to be down 0.25 cent, or 0.2 percent, to $1.46775 a pound.