It will take specific and repeated “good” news to push cattle and beef markets higher from this point, said Stephen Koontz, professor of agricultural and resource economics at Colorado State University in an Extension publication “In The Cattle Markets.”
It will take very strong marketings and a bullish USDA Cattle on Feed report this week, he said. The absence of good news will push these markets lower into August.
HOLIDAY BUYING NEARLY DONE
The Memorial Day holiday will soon pass and the effect of the holiday on cattle and beef markets will be complete soon, if it isn’t already, he said. The effect on prices was bullish, especially the choice/select spread, but the fundamentals going forward look to be a very mixed bag.
Through the haze of bullish and bearish information, there likely will be a lot of beef and other protein produced through the summer, Koontz. This is weighing on, and will continue to weigh on, cattle markets.
BULLLISH NEWS
Beef packer margins are strong, as are net beef exports, Koontz said. Saturday and total slaughter volumes remain strong, and slaughter weights continue their seasonal decline. Boxed beef composite values are relatively high as well.
The strong choice/select spread indicates excellent demand going into summer, he said.
All of those indicate strong beef movement and good demand in the face of high production.
BEARISH NEWS
But the bearish news is equally present, Koontz said. Seasonal declines in slaughter weights can be expected to stop and reverse soon; byproduct markets are very weak, and the volume of market-ready cattle is very high no matter how the measure is constructed.
And retail beef prices are high enough to limit movement, although they don’t seem to have done so just yet.
SUMMER DOLDRUMS COMING?
This market easily could enter to the normal summer doldrums with heavy production and soft prices, Koontz said.
What are the key factors to watch?
Strong margins incentivize the packer to buy aggressively and continue to move large volumes of beef, he said. The cattle market needs to see continued heavy marketings, slaughter and a pull-down in the number of market-ready cattle.
Aggressive marketings also will limit the seasonal growth in slaughter weights, and it sure wouldn’t hurt to see continued strong exports and some softening of retail beef prices, Koontz said.
But the market has very limited upside potential based on fundamental supply and demand, he said. A lot has to happen to see a market similar to that of 2017.
One or two things going wrong have the potential to weaken fed and feeder cattle prices significantly, Koontz said. Almost everything lined up so that 2017 had very good marketing opportunities.
Last year is not, and will not, play out this year, Koontz said.
CATTLE, BEEF RECAP
No cattle sold Wednesday on the Livestock Exchange Video Auction, compared with sales three weeks previous at $122.40 per cwt.
Cash cattle trading started last week at $117 per cwt on a live basis on Tuesday and then dipped to $115 to $116 on Wednesday, down $5 to $7 from the previous week. Thursday, sales were reported at $115 to $116. Dressed-basis trades were reported at $184 to $185 per cwt, down $8.50 to $9.50.
The USDA choice cutout Wednesday was up $0.73 per cwt at $230.08, while select was off $0.82 at $205.04. The choice/select spread widened to $25.04 from $23.49 with 96 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Tuesday, was $133.43 per cwt, up $0.02. This compares with Wednesday’s May close of $134.90, up $0.95.