June’s cash fed cattle market was something of a slow burn after being hit hard in May, said Nevil Speer, agricultural industry consultant of Bowling Green, KY, in a market analysis on the “Beef” website. It’s all a part of the seasonality of cattle prices.
Last year, the cattle market found an extra shot of support and remained fairly solid through May, but this year, the pressure began even earlier, and by June much of the support had been drained away.
Fed steers and heifers gave up only about $3 per cwt during June, compared with $15 in just three weeks in May, Speer said. Even better, cattle feeders were able to score a couple of weeks with higher prices after the Memorial Day holiday, despite pressure from wholesale beef prices.
The fed cattle market now is in the midst of the summer doldrums, a seasonal period when beef sales lag. What’s more, Speer said, this summer could prove to be an especially long, tough grind.
“There will be a string of negative closeouts along the way,” Speer said.
Market action through September will be especially important as the seasons transition into Fall, he said. The challenge will be that each of the major market drivers seems to be more important now than a month ago, and all will be critical to cattle markets in coming months.
ENDURING SUPPLY PRESSURE
First among those major drivers is the enduring supply pressure, Speer said. The USDA’s monthly Cattle on Feed report recorded the largest June 1 feedlot inventory in the series’ history with 11.553 million head on feed, nearly 300,000 more than the previous record established in 2007.
The biggest surprise from the June report came in the form of May placements, he said. Feed yards received 2.124 million head, which was in line with last year but well above pre-report expectations. It also was the largest May placement number since 2005.
There will be feedlot marketing work ahead as the market transitions beyond summer, maintaining pressure on the deferred futures contracts, Speer said.
DEMAND REMAINS STRONG
More favorably for cattle feeders is that beef demand remains strong, he said. Robust domestic demand continues as consumer perception remains favorable, and the economy remains in good shape.
Most important, consumers still feel good about the overall direction of their economic prospects, Speer said.
However, the international scene remains more complex, he said. Demand continues to burn brightly in Japan and South Korea, according to the US Meat Export Federation.
But nothing is certain, and overseas demand could dry up, and markets hate uncertainty, making it hard to add to deferred futures prices, Speer said.
CATTLE, BEEF RECAP
No Livestock Exchange Video Auction took place Wednesday. Fed cattle sold the previous Wednesday on the Livestock Exchange Video Auction at $106 per cwt, down $4 from the prior Wednesday.
Cash trade was reported Friday at $112 to $114 per cwt on a live basis, up about $6 from the previous week. Dressed-basis sales in the Plains were mostly $173 to $175 per cwt, up about $5.
The USDA choice cutout Friday was down $0.40 per cwt at $208.03, while select was up $0.01 at $198.71. The choice/select spread narrowed to $9.32 from $9.73 with 98 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Thursday, was $145.15 per cwt, up $0.42. This compares with Friday’s Aug settlement of $152.20, down $0.37.