There is little reason to think fed cattle prices will climb in coming months, but there isn’t much information available to think prices will begin a long slide at this time either.
Unless they began that slide last week when cash cattle prices dropped about $3 per cwt.
University of Tennessee Livestock Economist Andrew Griffith said in his weekly market analysis that prices in the near term likely will be supported by seasonal demand increases. The grilling season will begin in southern states shortly and work its way north, culminating in the grill-heavy Memorial Day and Independence Day holidays.
However, retail grocer buying for those holidays eases up before the holidays arrive, so wholesale prices tend to lose upward momentum by late March. Prices still rise slightly into late June, but gains are minimal.
Last year the choice cutout value sagged to an October low before rising into the end-of-the-year holidays as slaughter rose, and beef production rose.
OUTLOOK
Griffith said he thinks the futures market has “severely undervalued” cattle in the third and fourth quarters.
Last week’s modest gains in wholesale beef prices may not have helped the bottom lines of packing houses, but at least the January declines appear to have halted for now. That is unless beef follows the 2011-2015 average and the choice/select spread narrows further to its narrowest weekly position of $1.89 the first week of March.
Retail grocers could run heavy advertisements featuring beef in February, but it’s typically a slow meat month. Many have blown their budgets on Super Bowl festivities or are still recovering from Christmas. Wintry weather in large portions of the contiguous 48 states also hinders big-meal desires.
But Griffith said, “the likelihood of wholesale beef prices receiving much of a boost the next several weeks is slim.”
FEEDER CATTLE
Calf and feeder cattle markets likely are being hurt by the weaker futures market, Griffith said, but larger runs at key auction markets also contributed to the market decline, others said.
The USDA’s Cattle Inventory Report last week showed a total increase of 1.8 million head last year to 93.6 million. This largely was expected by the industry and so had little effect on futures or cash prices. The report only served to reinforce what traders already knew or suspected.
Most analysts felt the herd will continue to grow in 2017, although at a much slower rate. There is evidence of increased cow slaughter as herds reach desirable levels and producers are able to cull the older animals that may not have been as efficient as they once were, but at least they could produce another calf.
CASH CATTLE TRADE LOWER
Average fed cattle exchange auction prices last Wednesday were $3.13 per cwt lower at $118.84, versus $121.97 a week earlier.
Cash cattle then traded at $117 to $120, mostly $119, on a live basis, down $2 to $5. Dressed-basis trades were $3 to $4 lower at $190 per cwt versus $193 to $194 last week.
The USDA’s choice cutout Tuesday was down $1.27 per cwt at $189.96, while select was off $2.87 at $187.78. The choice/select spread widened to $2.87 from $0.72 with 99 loads of fabricated product sold into the spot market.
The CME Feeder Cattle Index for the seven days ended Monday was $127.06 per cwt, up $0.03. This compares with Tuesday’s Mar settlement of $124.72, up $0.70.