Live cattle futures are declining in part because of investor fears of a seasonal summer decline in beef demand, but the seasonality isn’t great, and last year’s market defied the odds when it went up.
The USDA’s boxed beef cutout value fell again Tuesday for the fifth straight day, with the choice cutout falling $2.98 per cwt to $244.67 and the select cutout dipping $2.82 to $241.09, so traders may be on to something. On a weekly basis, the boxed beef cutout value for 600- to 900-pound carcasses last week declined $2.22 per cwt, or 0.09%, to $252.09 from $254.31 the previous week.
A Livestock Marketing Information Center graph shows that weekly choice beef cutout values remain above year ago levels and far above the previous five-year average. It also shows a seasonal summer decline that begins in the second week of May and continues almost uninterrupted into the first week of August.
That timeframe is being discussed among futures traders as a more-than-likely scenario again this year, with supplies of competing meats on the upswing.
TO WHAT DEGREE WILL PRICES SLIDE?
Using the previous five-year average as normal, the summer slide can be expected to dip $12.92 per cwt, or 7.22%. Subtracting $12.92 from this year’s mid-May high of $263.19 yields a possible bottom of $250.27. If this is to be the summer low, last week’s weekly average price of $252.09 is only $1.82 away.
It may also be said that the summer low was reached in the first week of June when the weekly choice cutout averaged $246.38.
On a percentage basis, though, the summer low may be yet to come. Subtracting the seasonal percentage decline from the May peak yields a projected low of $244.19 per cwt. So far, this season, the weekly price has only approached this level during the first week of June when it was $246.38. Then it rose to a near-term peak of $254.31 the third week of June before falling back again last week.
So it seems, then, that beef prices could decline more through the summer, or not, depending on which bottom provides the most support. What seems more certain is the concept that beef prices are within the summer bottom range, and as such, they may be jittery, giving the cattle markets a series of head fakes and ending up just moving sideways through July.
CASH CATTLE QUIET
Cash cattle markets were quiet Tuesday, lacking the information needed to give traders a good sense of market direction. Feedlot showlists were down across the Plains, but no bids were reported. Asking prices were expected near $155 per cwt on a live basis and $245 in Nebraska’s dressed market.
Cattle traded last week at mostly $150 per cwt on a live basis, up from mostly $148 last week. In Nebraska’s dressed market, cattle traded from $235 up to mostly $240, compared with the bulk of last week’s sales at $237 to $238.
Cash feeder markets continue to stagger with the CME Feeder Cattle Index for the seven days ended Monday at $220.22 per cwt, down $3.07. This still is above the Aug settlement of $217.12 per cwt, however.