Choice grade wholesale beef prices are bumping against all-time record highs near $160 per cwt but lack the push to get and stay above the resistance.
It can be argued that it’s too soon in the year to expect prices to make a serious run at the record, but statistics show that average prices (2009-2013) tend to hit a seasonal high in late May or early June with another top in early December. Last year, the annual high occurred in August at $262.26.
A graph from the Livestock Marketing Information Center and the USDA shows the weekly choice boxed beef price and how it’s bumping against the $160 barrier.
A summer high might be anticipated again this year, but resistance seems clear. Even last year, when prices got above $160 per cwt, they only stayed there for two weeks.
Long-time futures traders also know that round numbers tend to be points of resistance or support. This also is shown in the LMIC graph with the five-year average price struggling to get above $180.
CHOICE/SELECT SPREAD WIDENING
The difference between wholesale prices for choice and select beef as it comes from the packing plant is widening, although the timing is more closely aligned to last year than to the previous five-year average.
It’s possible buyers are lining up summer grilling fare earlier than they have in the past because of tight supplies of fed cattle and beef. Once herds grow enough to provide more and cheaper beef, this seasonal widening may move back toward a June peak from last year’s May top.
But if the choice cutout value continues below the $160-per-cwt level, the choice/select spread widening could stall soon. Last year, the spread peaked the second week of May at $13.17 per cwt, compared with last week’s $11.08.
The subsequent dip in the choice/select spread into the dog days of summer seems pretty well entrenched. Last year’s summer low came in the first week of August, the same week as the average.
CASH CATTLE QUIET
Cash cattle markets Wednesday remained quiet. No trades were reported with packer bids at $157 per cwt on a dressed basis and asking prices holding at $163. In Nebraska’s dressed markets, bids were scarce with asking prices around $260.
Last week, cattle traded at mostly $160 per cwt on a live basis and mostly $255 dressed.
With feedlot losses hovering around $206 a head, many analysts figure cattle owners will hold out for higher prices this week. However, some say with nearby futures prices declining, hedged feeders may see an opportunity to make up some ground with steady cash prices and a cheaper buy-back on their hedges.
The USDA’s afternoon beef cutout value was modestly higher Wednesday but down from the midday quotes. The choice cutout was pegged at $256.15 per cwt, up $0.59 and select at $244.27, up $0.67. Volume was very active, with 177 loads of fabricated product sold into the spot market.
The CME Feeder Cattle Index for the seven days ended Tuesday was unchanged at $216.03 per cwt, compared with Wednesday’s settlement of the May contract at $214.50, down $0.87.