Fed cattle prices last week traded as much as $9 per cwt higher to their highest levels since August 2015, prompting University of Tennessee Extension Economist Andrew Griffith to ask, “how can the price escalation be maintained?”
“There is always the possibility for fed cattle prices to hold this week’s prices or push further, but history would suggest prices will soon soften,” Griffith added in his weekly newsletter.
The market is being supported by strong meat demand, which means packers act as if they are short bought pretty much all the time. They may even be short by the time the meat orders come in each week. Many of the meat orders are to satisfy retail demand for grilling fare.
Additionally, slaughter weights are down significantly from a year ago, offsetting the effect higher slaughter rates might have on the US meat supply.
STEER PRICES ABOVE AVERAGE
The average price for fed cattle in the Southern Plains last week was $136.79 per cwt, up $6.01, or 4.60%, above $130.78 a week earlier.
Last week also was $12.95, or 10.5%, above $123.84 a year earlier and $2.82, or 2.10%, above the 2011-2015 average of $133.97.
By going up the last three weeks, the Southern Plains fed cattle price already is bucking the seasonals. And with strong seasonal tendencies in place, some investors may be betting on a decline into early summer, market sources said.
BEEF PRICES NOT MUCH OUT OF LINE
But while many analysts are touting strong beef demand for the strength in live cattle prices (and they appear to be the principal reason) the USDA’s choice 600- to 900-pound boxed beef cutout value isn’t terribly out of line with previous years.
Last week’s average price of $219.56 per cwt was up $3.93, or 1.82%, from a week earlier. It also was $4.05, or 1.88%, above last year’s 215.51. Last week’s price was, however, $8.55, or 4.05%, above the previous five-year average of $211.01.
The five-year average would suggest a more-or-less steady pattern into early July when prices soften for about four to six weeks before strengthening into September. This pattern would lend support to cattle markets through the period
STEER SLAUGHTER MATCHES LAST YEAR
Federally inspected steer slaughter in the latest reporting week was at 332,297 head, almost matching the 332,600 head of a year earlier. Additionally, higher slaughter rates can be expected into late June when they tend to make their annual peak.
Those rising slaughter rates can add pressure to fed cattle prices, especially if boxed beef demand fades in the dog days of summer as it usually does.
CASH CATTLE QUIET
After trading on the livestock exchange Wednesday at an average of $140.15 per cwt on a live basis, up $9.01 from $131.14 a week earlier, fed cattle began to trade in the Plains.
Cash cattle traded at $140 to $142 per cwt live, but the volume came at $145 to $147, up $9 to $10. Dressed-basis trade also was noted at $230 to $231, up $12 to $15.
The USDA’s choice cutout Monday was up $2.57 per cwt at $241.44, while select was up $3.32 at $222.89. The choice/select spread narrowed to $18.55 from $19.30 with 61 loads of fabricated product sold into the spot market.
The CME Feeder Cattle Index for the seven days ended Friday was $148.08 per cwt, up $2.33. This compares with Monday’s May settlement at $148.30, up $4.52.