Annual Fed Cattle Top Already In?

If cash cattle and beef markets are like last year, the annual fed cattle top may already be in.

Rising fed cattle numbers and continued pushback by beef consumers may make cash cattle prices behave more like last year and less like the 2010-2014 average.  If so, the picture isn’t pretty.

Live cattle futures prices dropped sharply Monday with the two nearest delivery months dropping the daily limit of $3.00 per cwt.  Investors were afraid of lower cash prices to come, and historically, they have a point.

Weekly Southern Plains fed steer prices as reported by the USDA’s Agricultural Marketing Service and compiled by the Livestock Marketing Information Center show this year’s weekly price trends through March against last year’s and the previous five-year average.

Over the last two weeks, preliminary average cash steer prices in the Plains have risen about $2 per cwt on a live basis, a move that is counter to last year and the seasonal average.

Normally, and this happened last year as well, cash cattle prices begin to decline in the first week of April as more cattle from increased fall placements into feedlots become available to slaughter.

This year’s counter-seasonal April rally likely was seen as a gift by futures investors who then sought to capitalize on it.

 

WHAT CAN BE EXPECTED

 

Since the seasonal decline appears to be entrenched, a similar move can be expected this year.  If it comes about, Monday’s futures decline would have been correct, even though it may have been a smidge overdone.

Looking ahead, the cash cattle market usually bottoms in late May.  However, the flat bottom may disguise the real bottom through the summer until anticipated fall consumer demand brings in more wholesale beef buying interest that boosts cattle prices.

Last year, the fall cattle rally was short-circuited by rising numbers of fed cattle to slaughter.  Rising beef prices also got in the way of consumer beef demand, and the price interplay of one cut against another became more muddled.

This year, rising numbers of cattle to slaughter and continued pushback by consumers may keep cattle prices on the defensive.  Prices last year dipped below the 2010-2014 average in late September and bounced around the average until January of this year.

This year, with rising numbers of cattle to slaughter, a challenged beef export market, hide and offal values well below average and consumers resisting further product price increases, the dip below average could come sooner and more pronounced.

 

CASH CATTLE MARKET QUIET

 

Cash cattle markets Monday were quiet with feedlot showlists estimated to be larger than last week.

Cattle last week traded at mostly $135 per cwt on a live basis, up $1, and at $214 to $216 dressed, unchanged.

The USDA’s choice cutout price Monday was down $0.25 per cwt at $224.88, and select was up $0.25 at $215.98.  The choice/select spread narrowed to $8.90 from $9.40 as 85 loads of fabricated product were sold into the spot market.

The CME Feeder Cattle Index for the seven days ended Friday was $155.51, down $1.06.  This compares with the Apr CME settlement Monday of $150.57, down $4.50.